Amid interest rate hikes that have put borrowing costs through the roof, residential real estate continued to slump in the third quarter of the year.

This is according to the latest data from Statistics Canada, released today, which put the value of residential real estate at $8,398.8B, down $287.3B, in Q3. This is the figure's second-straight quarter of decline.

Additionally, the value of household residential real estate fell 3.4% or $271.3 billion in Q3, which comes off the heels of an even more substantial decline between the first and second quarters of the year, at -5.1%. That said, Q3’s value is still around 35.4% or $2T more than it was at the end of 2019. The value of residential land also sank 7.1%, while residential structures posted a slight increase of 1.8% in Q3.

These figures are indicative that housing demand and investment are continuing to soften across Canada, and declining mortgage and resale activity agrees.

In Q3, households added $33B of debt, down from $56.8B in the quarter prior, marking the slowest pace of household credit market and mortgage borrowing since Q2 2020. Meanwhile, average resale price (not seasonally adjusted) fell by 3.9%, while home resale inventory remained at a below-average level.

As prices slid in the third quarter, however, real estate as a percentage of household disposable income -- a metric used to gauge housing affordability -- also saw a decline, reflecting the reality that Canadians are spending less income on real estate than in previous months. This metric fell for a second-straight quarter to 525.1% in Q3 from 551.3% in the quarter prior. However, Q3’s percentage is still significantly more than in Q4 2019, when the same metric was down to 452.7%.

Statistics Canada also notes that the national household savings rate reached 5.7% in Q3, up from 5.1% in the quarter prior. This modest growth in disposable income indicates that Canadians are tempering their spending -- including but not limited to shelving those homebuying plans -- as they continue to feel the effects of the high interest rate environment.

Real Estate News