CONDO Report: Multiple interest rate hikes disrupt market

“In recent months, first-time buyers have been racing against the clock to purchase a home before their pre-approvals with their lender expire,” the columnist says.

Summer is traditionally one of the slowest times for real estate. Many buyers and sellers travel and take time to get outdoors during the warmer months, causing real estate sales to decline or plateau.

This summer, the condominium market in Barrie followed a more traditional trend than in previous years and was very slow.

The main reason for the market slowdown this summer was due to multiple interest rate increases implemented by the Bank of Canada during the third quarter (Q3 2023) in an attempt to control inflation. Many buyers have decided to postpone their search to see how the market will respond, resulting in a lack of urgency for buyers, especially those looking for condos worth more than $600,000.

During July and August, appointments booked for properties decreased and average days on market increased. This has caused many sellers to adjust their expectations.

In August, a total of 26 condos were sold in Barrie, with an average sale price of $483,962. This was the lowest average selling price recorded for this type of apartment since January of this year, but it is nothing to worry about. The reason behind this is that the majority of units sold last month were under $500,000, resulting in a lower average selling price.

This does not come as a huge surprise as demand for entry level properties increased when interest rates started to rise.

In recent months, first-time buyers have been racing against the clock to purchase a home before their pre-approvals with a lender expire. If they do not close before the rate hold period expires, they will have to go through the pre-approval process again.

If interest rates rise again, they will face a higher borrowing rate that could negatively impact their budget.

The condo market in Barrie was little changed from July. The average sales price last month was $498,980 and units took an average of 44 days to sell. Although the average selling price has declined since June, this segment of the condo market was still very active with units selling for 99 percent of their original asking price.

If prices fall in the freehold housing market this fall, there could be a shift in demand for condos as buyers could move their search to the freehold market to avoid paying monthly condo fees.

The Bank of Canada will reportedly keep interest rates at 5 per cent and the key interest rate at 7.2 per cent for the remainder of 2023. If that actually happens, we could see demand start to increase again. Buyers and sellers tend to feel more comfortable trading real estate when market conditions are more predictable.

There are currently a total of 100 residential units for sale in Barrie, including 82 condos and 18 townhomes.

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