How low will they go?
The London housing market has been weathering a slowdown for months, and as rate hikes squeeze homeowners, the sentiment is clear: house prices will continue to decline
THE REAL ESTATE market in London is depressed. It is suffering the damaging effects of a lack of demand. Post-pandemic valuations bottomed out last December, and then surged again for five months until May of this year. Average prices bottomed at around $577,000 in December climbing to $670,000 in May. That was an historic runup fueled by buyers and sellers still imagining we would climb back up to pandemic levels of value that exceeded $800,000, but the significant impact of rising mortgage rates hadn’t yet worked its way into the system.
The experience since May is the lesson we need to pay attention to, as mortgage rates and renewals began to take their tole. From May to September, the average price of a home in London fell from $670,000 to $626,000, or 6.5 per cent. Much of that drop was in September (down 4 per cent). As prices fell, market activity slowed dramatically. In May, there were 848 transactions in the London area ― in September that number fell to 476. That’s the lowest number of homes sales going back 15 years! Imagine an industry that fell to volumes so low that you had to go back more than 15 years to find a comparable volume.
“The number of listings has grown 50 per cent since May, and the number of days a house is on the market has doubled since spring and grows monthly as more inventory is added and more houses sit on the market”
The number of listings has grown 50 per cent since May, and the number of days a house is on the market has doubled since spring and grows monthly as more inventory is added and more houses sit on the market.
Over the last month the bond market has forced mortgage rates to climb, even while the bank rate has remained steady. This means affordability has declined even further. And there lies the culprit: Canada has a serious housing affordability problem. Unfortunately, the only way to correct that is a decline in house prices. A decline in mortgage rates won’t fix it, as every rate decline has precipitated a surge in house values.
The truth is the value of real estate has more than doubled since 2017. It is still 8 per cent higher than it was at the beginning of this year, and we really have no justification for that increase in value, given the depressed demand, reduced volume and dramatically higher borrowing costs today as compared to just nine months ago.
Not every home will experience the same effect, but on average we will likely see continued declines in average home prices as the market digests rising mortgage rates and depressed demand.
We’ve had a surge in population growth since the pandemic ended, but these new Canadians are fuelling record low rental vacancy rates ― they’re not fuelling housing purchases at or above the average sale price. Affordable housing is the only sector in which we should expect to experience surging demand.
The general housing market is depressed, but you needn’t fall into a similar funk. Work with a professional, come up with a plan and get ahead of the market.
Market analysis provided by Marcus Plowright, Sales Representative, A Team London. Marcus can be reached at 519-872-8326 or [email protected].
High- and low-priced real estate listings around town this week
London East
Low
Address: 1106-573 Mornington Avenue
MLS number: 40472962
List price: $179,700
Days on market: 43
Size: 1 bedroom, 1 bathroom, 680 square feet
Listing agent: Sean Monteith, Sales Representative, Nu-Vista Premiere Realty Inc.
High
Address: 826 Colborne Street
MLS number: 40473631
List price: $2,199,000
Days on market: 40
Size: 4 bedrooms, 5 bathrooms, 4,300 square feet
Listing agent: Rob Sutherland, Sales Representative, Prime Real Estate Brokerage
London North
Low
Address: 312-600 Grenfell Drive
MLS number: 40480620
List price: $319,900
Days on market: 22
Size: 1 bedroom, 1 bathroom, 859 square feet
Listing agent: Dean Soufan, Broker, Century 21 First Canadian Corp.
High
Address: 15 Denali Terrace
MLS number: 40470666
List price: $4,250,000
Days on market: 46
Size: 6 bedrooms, 5 bathrooms, 7,516 square feet
Listing agent: Mike Sloan, Sales Representative, Royal Lepage Triland Realty
London South & West
Low
Address: 67-198 Springbank Drive
MLS number: 40467265
List price: $209,999
Days on market: 53
Size: 2 bedroom, 1 bathroom, 840 square feet
Listing agent: Karen Greason, Broker, Re/Max Centre City Realty Inc.
High
Address: 75 Woods Edge Close
MLS number: 40445791
List price: $2,989,000
Days on market: 97
Size: 5 bedrooms, 7 bathrooms, 8,308 square feet
Listing agent: Owen Price, Sales Representative, Keller William Lifestyle 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.