Housing prices not expected to drop despite inflation ease

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This article was published 21/08/2024 (647 days ago), so information in it may no longer be current.

Real estate experts say housing prices in Manitoba are not expected to decrease anytime soon despite the reduction in the inflation rate.

Statistics Canada announced Tuesday the nation’s annual inflation rate dipped from 2.7 per cent in June to 2.5 per cent in July. Rents, it added, dropped from 8.8 per cent to 8.5 per cent within the same period.

Kyle Bazylo, a realtor with eXp Realty, said while inflation has been on a downward trend, housing prices in Manitoba may continue to rise due to the population boom.

“I don’t think we will see housing prices drop anytime soon,” he told the Sun in an email. “With the constant population growth and the interest rates dropping, it is adding more homebuyers to the market, which will in turn increase house prices.”

Although the federal agency reported a slight slowdown in shelter price growth, which dropped from 6.2 per cent in June to 5.7 per cent in July, Bazylo said Manitoba remains an attractive option for homebuyers fleeing higher costs in provinces like British Columbia and Ontario.

He said the more expensive those other provinces get, the more appealing Manitoba becomes.

“I have recently helped some first-time homebuyers find their first home. A couple moved from Toronto, and I helped them find a beautiful home in a good neighbourhood in Winnipeg for under $250,000,” he said. “There is no way they would have been able to afford a home anywhere near Toronto where they were previously living.”

If inflation continues to drop, interest rates could go down a little more in coming months, he added. “We have another Bank of Canada rate change in September, and it wouldn’t surprise me if we drop another .25 per cent.”

While lower rates make mortgages more accessible, they also increase the number of buyers in the market, further driving up housing prices, Bazylo said.

“With inflation and interest rates dropping, it is adding more homebuyers to the market, which will in turn increase house prices.”

Manitoba Real Estate Association president Alexander Donald said the sector does not expect the inflation rate reduction to significantly impact the housing market over the coming months.

“While the slight ease in inflation is encouraging, Manitoba remains one of the most affordable markets to buy a home in the entire country — particularly in communities outside of the capital region,” he said in an email. “As it relates to the shelter component of the Consumer Price Index, a significant drop in property prices is unlikely.”

He added while Manitoba still enjoys a relative affordability advantage, the cost of housing is not immune to broader economic pressures.

“Our cost of living isn’t rising at the same rate as many places across Canada,” he said. “Manitoba’s housing market will continue to witness many opportunities, but we can’t take our affordability advantage for granted. As realtors, we will continue to work with the government to advocate for programs that ensure our young people have an affordable place in Manitoba that they can call home.”

Donald said while inflation remains below three per cent and has steadily trended lower since January, the real challenge for many Manitobans lies in saving for a down payment and covering closing costs.

“When it comes to those who wish to progress across the housing continuum from renting to owning, many Manitobans don’t have a cash flow problem with paying their rent, which interestingly for a two-bedroom is about the same as a monthly mortgage payment on a $400,000 house,” he said. “Instead, they face the very real challenge of coming up with the required down payment and closing costs like land transfer taxes.”

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