Real estate markets across the country have been booming since the Coronavirus pandemic started, from the rural communities of Atlantic Canada to the major urban centers of Ontario and British Columbia. It remains to be seen whether this trend will continue in a rising interest rate environment, but this could be an excellent opportunity for homebuyers and investors.
Where can someone invest in residential property and enjoy a return in this type of market?
Since most segments of Canada’s housing market are still well above their pre-pandemic levels, this is the $711,000 question (the average cost of a home in May 2022, according to the Canadian Real Estate Association). Three notable markets in the Prairies could be bastions of investment opportunity for now as some markets and prices soften.
Here are three hot prairie real estate markets to invest in
Winnipeg is expected to be among the top economic performers in the country this year due to its healthy economy and growing population. What about Winnipeg’s real estate market? Despite slipping numbers, it has already shown signs of bucking the national trend.
There were 1,723 residential property sales in May, a drop of 14 per cent. Nevertheless, May 2021 and May 2022 were two of the best months on record.
In May, the average price for a single-family home rose 1.65 per cent to $454,832 according to the Winnipeg Regional Real Estate Board (WRREB).
Active and new residential listings have risen since last year, although supply continues to lag. It will take time for the Winnipeg real estate market to return to balance, despite the latest improvements.
Could Saskatoon be Canada’s best-kept secret?
For years, Saskatchewan was poised to become a key economic player in Canada. This has finally become possible since the country’s resource-based economy has been gradually diversifying in recent years.
Saskatoon’s housing market remains more affordable than others in the Canadian real estate sector despite its incredible prospects.
The Saskatchewan Realtors Association (SRA) released the following housing data in May:
SRA reported an increase in housing sales of nearly 17 percent to 538 units.
Saskatoon’s real estate market has not left every prospective homebuyer on the sidelines despite rising home prices.
In May, the median sale price was $352,000, an increase of 0.57 percent from the previous month.
Supply is also on the rise, with new listings and total inventory levels climbing to 858 and 1,145, respectively. Homebuyers continue to snap up these listings quickly, as the average number of days on the market has dropped from 45 to 33.
The city of Edmonton is perhaps the most affordable urban center in Canada. As prices continue to rise, this may not be the case for much longer.
Residential property sales in May fell 1.6% month-over-month according to the REALTORS® Association of Edmonton (RAE). Over the past year, this has increased by 4.4%.
In May, the MLS® Home Price Index (HPI) exceeded $417,300, an annualized increase of 9.2 percent. This is how Edmonton real estate performed over the past year on a year-over-year basis for the second quarter:
- Detached Single-Family Homes: +5.7 per cent to $492,037
- The price of duplexes increased by 10.5% to $395,783
- There was a 1.2% decrease in condo prices to $239,011 for condos
Single-family homes spend an average of 23 days on the market, which is consistent from month to month.
Is a rise in interest rates going to slow down housing investment?
In general, housing investment declines when interest rates rise for two reasons. Investing in residential properties becomes more expensive and harder when borrowing costs rise. In addition, investors will usually seek yield-bearing assets that are lower risk, such as bonds and GICs. As prices in these three markets remain modest, perhaps investors will pour into these municipalities and add more supply, which is always welcome in today’s economy.