From buyers who bolt to listings that linger, London’s real estate market has changed — but have home prices bottomed out?
HOUSING HAS BEEN the hot topic in London for the past five years, and much of the market drama has been fuelled by successive macroeconomic factors.
These factors included a slow and cumbersome municipal approval process for new development; labour and material shortages within the construction sector; national immigration policies that expanded new entrants to the country; inter-provincial migration due to the commodity-related economic slowdowns in the west; and migration out of the GTA as families drove until they found affordable housing they could qualify for.
In addition, the rise of remote working has encouraged even further migration away from work centres, and there’s been significant expansion in smaller communities where available land, rapid approvals and more affordable housing options created rocketing growth.
When Covid stopped almost all economic activity, the government worried that the slowdown would push us into a depression and threw money at citizens, organizations and businesses. Most significantly, pandemic-fuelled monetary policy drove borrowing costs down to near zero. Low mortgage rates drove the cost of home ownership down for homeowners and investors alike.
All of these factors helped fuel a boom in housing, driving prices up at a dramatic and unsustainable rate. In a short 42 months, the average price of a home in London doubled! That was unsustainable and led to inflation levels that had risks for our entire economy. Perhaps late to the game, government policy pushed interest rates up to cool the economy and calm inflationary pressures. As a result, housing has now “corrected” ― down about 25 per cent since its height at the beginning of March.
Of course, the question before is now is: Have house prices bottomed out?
Historically, housing corrections (from price peak to trough) tend to take much longer than a half a year. But there is strong evidence and belief among economists that we have hit bottom due to the unprecedented rapid rise in the cost of borrowing. Rising interest expenses have been offset by falling house prices, with little change in the average monthly cost of ownership. Expanded immigration along with continued tightened supply may combine to hold prices at current levels for the foreseeable future.
The current price levels appear to be the new normal. The market in general has levelled off, with the number of listings creating a lot of choice for buyers. We are entering the seasonally slow months of December and January, and with these low-demand months ― along with home sale volumes being down by about 40 per cent on a year-over-year basis ― there will be little pressure to drive prices up.
A lack of willingness among sellers to accept prices below their current levels is holding values steady and keeping houses on the market much longer. All this suggests a steady-as-she-goes market ― with much less drama in the sector.
High- and low-priced real estate listings around town this week
Address: 1101-583 Mornington Avenue
MLS number: 40271297
List price: $199,900
Days on market: 166
Size: 1 bedroom, 1 bathroom, 580 square feet
Listing agent: Justin Van Eck, Sales Representative, Blue Forest Realty Inc.
Address: 1745 Kilally Road
MLS number: 40327717
List price: $3,325,000
Days on market: 53
Size: 3 bedrooms, 4 bathrooms, 4,700 square feet
Listing agent: James Hudson Smith, Sales Representative, Sutton Group-Select Realty Inc. Brokerage
Address: 54-1220 Royal York Road
MLS number: 40326441
List price: $374,900
Days on market: 60
Size: 2 bedroom, 1 bathroom, 1,150 square feet
Listing agent: Jordan Smeltzer, Sales Representative, Davenport Realty Brokerage
Address: 565 Leyton Crescent
MLS number: 40328768
List price: $3,280,000
Days on market: 46
Size: 6 bedrooms, 5 bathrooms, 5,966 square feet
Listing agent: John H. Crosby, Sales Representative, Royal Lepage Triland Realty
London South & West
Address: 32-198 Springbank Drive
MLS number: 40325975
List price: $135,900
Days on market: 54
Size: 2 bedroom, 1 bathroom, 640 square feet
Listing agent: Zahra Khawari, Sales Representative, PC275 Realty Inc.
Address: 1938 Kilgorman Way
MLS number: 40331360
List price: $3,495,000
Days on market: 42
Size: 5 bedrooms, 6 bathrooms, 5,753 square feet
Listing agent: Linda Joan Rice, Sales Representative, Royal LePage Triland Realty
Disclaimer: London Inc. does not guarantee the accuracy of the statistical data on this page. The data does not represent the listings of any one agent or agency but represents the activity of the real estate community in the area. Any real estate agent’s ad appearing is separate from the statistical data provided, which is in no way a part of their advertisement.