Some owners who used to break even on their condo investments now face a different reality
Article content
As Canada’s real estate market wrapped up in 2022 with price declines, some condo investors are expected to put their properties up for sale within the year as variable mortgage rates continue to rise, a real estate expert said.
Advertisements 2
Article content
Steve Saretsky, a Vancouver realtor, said the market for detached homes has already gone through a “nice” correction in the past months, signaling a similar direction for the condo market.
Article content
“The market seems to be expecting lower prices (this year). I think that’s where buyer sentiment is right now,” he told the Financial Post’s Larysa Harapyn.
Article content
Some owners who used to break even on their condo investments are now facing a different reality. With variable mortgage rates up to 400 basis points, Saretsky said some investors are now losing money as they are not allowed to increase the rent they charge by more than two per cent under rental restriction laws. He added that while interest rates “might have peaked out for the cycle,” they’ll remain elevated in 2023.
Advertisements 3
Article content
“A lot of investors are opting to actually hit the sell button and I think that we’ll see maybe a little bit more pressure on the inventory side in 2023,” he said.
Variable mortgage rates may continue to be part of conversations this year, Saretsky said, adding that Canadians will continue to see some discussions around the central bank’s trigger rates and how this will impact households. There’s been an uptick in court-ordered sales, particularly for private lenders, where people are usually on one-year terms that are renewed at substantially higher rates.
Another thing to keep an eye on in 2023 is the pre-sale market. Those who have entered a pre-sale agreement during the pandemic will have to qualify at a stress test of seven and a half per cent, Saretsky said.
Advertisements 4
Article content
“We’re certainly seeing some stories of (buyers) not being able to qualify to actually complete close on these units … people that are ultimately caught off side with a huge move and rates,” he said.
Benchmark real estate prices in Canada’s major urban centers are off dramatically from highs posted earlier this year.
Figures released this week showed the overall benchmark prices for all categories of properties in Toronto, Vancouver and Calgary were down 21 per cent, 19 per cent and nearly five per cent, respectively, from highs posted earlier in the year.
• Email: dpaglinawan@postmedia.com | Twitter: denisepglnwn
