On Wednesday March 9th the Bank of Canada announced that it was raising its key overnight lending rate by a quarter of a percentage to 0.5%, as it attempts to fight inflation caused by the COVID-19 pandemic. Homeowners with a variable rate mortgage will immediately feel the effects of the higher rates on their monthly payments, but what does this means for the current detached real estate market?
Owning a detached home in the Hamilton-Burlington area has become increasingly enticing throughout the pandemic. Between travel restrictions and work-from-home orders the appeal of easy condo living has dissipated, and people have been more drawn to the idea of owning a piece of land to call home.
Although the hike of interest rates will make the prospect of homeownership more expensive for some house hunters, we predict that it will not have enough of an impact to cool the detached housing market with incredibly strong demand and a historic supply crunch, especially heading into the busy Spring market.
We predict that the Burlington detached market may see some stabilization as the average sales price for a detached home in February was up at an unprecedented $1,797,704, and while the Hamilton detached market also saw a similar appreciation it remained much more affordable with an average detached sale price of $950,720. With Hamilton being further from the city of Toronto, the price of a detached home is much more budget-friendly, especially for most first-time home buyers. Considering many companies are still offering a more flexible work from home arrangement, we anticipate Hamilton will remain one of the most attractive detached markets within an hour of Toronto.
Sale prices are expected to remain elevated as the Sellers’ market persists. Demand is incredibly strong and potential purchasers continue to believe in the value of homeownership. We’ve now lived through years of substantial home price increases and although interest rates are on the rise, they still remain lower than they were pre-pandemic.