Don’t expect much change in the price of a home in St. Albert this month despite a recent hike to interest rates by the Bank of Canada, says an area analyst.
The Bank of Canada raised its overnight or policy interest rate to five per cent from 4.75 on July 12, raising it to its highest level since 2021. (The overnight rate applies to loans Canadian banks make to each other, which affects the interest rates banks apply to customers.) The Bank of Canada has hiked the overnight rate nine times since March 2022 as part of its effort to rein in inflation — higher interest rates should theoretically encourage people to save more and spend less, slowing the economy.
This rate hike will make it more expensive to buy homes in the St. Albert region, and may force buyers to be more frugal, said Tom Shearer, broker and owner for Royal LePage Noralta Real Estate in Edmonton.
“We’re still in a seller’s market right now,” he said, because of tight housing supply, but he was starting to see sellers cut prices in light of recent interest rate hikes.
St. Albert builders are being squeezed by higher rates and construction costs, both of which are making homes less affordable, said City of St. Albert planning and development director Adryan Slaght.
“It’s definitely probably not as easy to afford a home in 2023 as it was in 2022.”
And the good news?
Shearer said St. Albert home buyers shouldn’t expect to see much of an increase in home prices from this most recent interest rate hike, as it was much smaller than those that happened last year. (The overnight rate went from 0.5 per cent in March 2022 to 2.5 per cent in July 2022.) Homeowners should expect their properties to keep their value this year as prices stay relatively stable.
A July 13 report from Royal LePage said the median price of a single-family detached home in Edmonton dropped 5.5 per cent year-over-year to $471,400 in the second quarter of 2023. The report predicted the price of an Edmonton home would rise four per cent in the fourth quarter of this year compared to the same quarter last year.
St. Albert RE/MAX realtor Brian Cyr said he did not believe the Bank of Canada’s most recent interest rate hike would affect home prices in St. Albert. What it and the previous rate hikes appear to have done is create a shortage of homes for sale, as sellers are holding off on listing their homes out of the belief that the higher rates will discourage buyers.
“The reality is we have a real shortage of listings,” Cyr said, and no shortage of buyers.
Shearer said homes in the Edmonton area still cost much less than those in Ontario or B.C., which, when combined with Alberta’s better job market, could encourage more people to move to this region in the coming months.
Five per cent interest is high compared to two years ago, but is actually quite low compared to the 10 to 15 per cent rates seen a decade ago, Cyr noted. 2022 was also a record year for home sales, which makes this year’s more average sales season seem like a slump.
“The perception that people aren’t buying homes anywhere because the rates are so high is just not the case,” Cyr said.
Cyr said the Bank of Canada’s stated goal behind these rate hikes was to get inflation below three per cent. Inflation was at 2.8 per cent as of July 18, which could signal a pause in further rate hikes.
“Provided the rate of inflation stays in check ... the (interest) rates will stabilize,” he said.
