Canadian real estate prices got a big boost from central bank stimulus, sparking a speculative frenzy. That frenzy is ending fast, with more than half of major markets off peak. A pullback is expected after rapid price increases for real estate markets. What’s unexpected is the pace of the pullback, one of the fastest declines Canada has ever seen. The country’s worst performing markets are now falling an average of thousands per day. However, markets are so frothy, this has only put a dent in the gains made. Oakville, a posh Toronto suburb and Canada’s most expensive market, led the dollar drop. The price of a typical home peaked at $1,645,900 in February 2022, up 65.0% ($648,100) since March 2020.
Falling interest rates provided fuel for speculators, sending prices soaring. Now that rates are rising, the speculative mindset has broken. It’s too early for higher interest rates to have throttled capital so much in these regions. However, seeing some losses has shown people that home prices can’t continue to rise at the rate they did, and market participants are now engaged in price discovery.