London Ontario Home Price Forecast
HIGHLIGHTS
Home values in Metro London declined in 2022, though there are signs of a possible turnaround this year.
In comparison to recent years, London homebuyer demand has greatly decreased.
A multi-factor analysis identifies Metro London as a moderately risky real estate market.
Budgets for home purchases are under strain due to the significant increase in mortgage rates since their historical lows.
This article covers:
What is the state of the London property market?
Where are prices headed?
Should investors sell?
Is this a good time to buy?
1. What is the state of the London property market?
Home Price Overview
The pandemic turbocharged the Metro London housing market, driving up prices at a remarkable pace and causing aspiring homeowners to be pushed further away from their dreams. And just when they thought things couldn't get trickier, rising interest rates now force even more potential buyers to sit on the sidelines.
Yes, prices are rising again, but it’s not a result of more buyers - it’s the result of fewer sellers.
For those contemplating selling their homes, time is of the essence. Home values in many areas of Metro London dropped double digits from the 2022 peak. While prices have been rising so far this Spring, the data has mixed messages, and the recovery might stall in the summer. Current conditions are leaving everyone uncertain about when markets will stabilise.
On the other hand, prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high. Unfortunately, patience will be needed because rates are anticipated to remain high until 2024.
The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be a volatile and unreliable predictor of future price trends.
The real estate statistics for Metro London include St. Thomas, Middlesex, and Elgin Counties.
Metro London Detached House Prices
Since the peak in Spring 2022, house prices in London have fallen significantly. Government intervention successfully shielded the real estate market from the pandemic-induced recession, but now higher interest rates are weighing on the market.
We believe politicians are hoping to guide the market toward a typical annual real estate cycle with price growth of 1 to 3% annually – in line with income growth.
Whereas many people want to buy a home, affordability is very low, and this is reflected in the number of successful purchases. Significantly fewer people can realise their homeownership dream in these market conditions.
At the same time, supply is trending steeply upward. Inventory is growing in late summer when typically supply begins to taper off.
Metro London New Construction Home Prices
Prices of new homes have begun to drop, and some homebuyers might find they will have paid much more than the most recent buyers in their development. Based on economic fundamentals, they will likely continue to drop.
Does this concern you? Read the Pros and Cons of Buying Pre-sale Homes
Even though the market is softening, the number of homes under construction is near the record high.
London Homes Under Construction July 2023
Market Risk
Mortgage Sandbox Analysis shows London is at moderate risk of a significant market correction.
London Property Market Risk Assessment July 2023
Metro London Condo Apartment Prices
Metro London apartment prices are rising but, given the broader market headwinds, are likely to fall in the second half of 2023.
With more people working from home, we expect developers will begin marketing larger (i.e., 2 and 3 bedrooms) apartments to meet buyer preferences. As the supply of more generous floor plans comes to the market, it may depress the values for small floor plan condos.
At Mortgage Sandbox, we would like developers to build 4 and 5 bedroom condos because:
Not everyone can afford to buy a house for their family.
Canadians who work from home need more room to segregate workspace from living space within their homes.
Many Canadians with longer working hours find it challenging to stay on top of necessary house upkeep (i.e., mowing lawns, clearing eaves, shovelling sidewalks).
Many people prefer to live in higher-density neighbourhoods with all the essential amenities within walking distance.
Still a challenge for first-time homebuyers
London’s house prices have become much less affordable. A homebuyer household earning $75,500 (the median Metro London household before-tax income) can get a $310,000 mortgage. That’s enough to buy a benchmark condo, but buying a house is out of reach for more than 70% of locals.
Houses are for the rich, but most land is zoned for single-family detached houses. 🤔
What about other parts of Ontario?
Read the Toronto Forecast, Ottawa Forecast and the Hamilton Forecast.
1. Where are prices headed?
There is a lot of uncertainty in the forecasts for 2023 and 2024. Many of the forecasters we've surveyed have different expectations for:
Will the federal government achieve its aggressive immigration targets?
How much will interest rates rise? How quickly?
There has yet to be a consensus among economists. Market sentiment and government stimulus have led to price acceleration and record home purchases even though most economic fundamentals have faltered.
How do we arrive at our forecast range? Check out our full assessment of the five factors that drive these forecasts. These five forces help explain why several forecasters are anticipating price drops.
At Mortgage Sandbox, we provide a price range rather than attempting a single prediction because many real estate risks can impact prices. Risks are events that may or may not happen. As a result, we review various forecasts from leading lenders and real estate firms, and we then present the most optimistic estimates, the most pessimistic predictions, and the average forecast.
Do you want to learn more about real estate risk? We've written a comprehensive report explaining the uncertainty level in the Canadian real estate market.
Our forecast inputs:
3. Should Investors Sell?
From a seller’s perspective, more changes in the market influence prices downward, so now may be a better time to sell than in two years, and the annual real estate cycle usually favours sellers in the first half of the year.
Sellers should always consult a mortgage broker early to prioritise flexible loan conditions and reduce the risk of mortgage cancellation penalties. Find out more about the benefits of a mortgage broker.
Planning to Sell? Check out our Complete Home Seller’s Guide.
Fixed or Variable rate mortgage? Find out where mortgage rates are headed before you start to negotiate.
4. Is this a good time to buy?
It’s hard to say, prices have been falling, but interest rates are projected to rise, which means prices could fall further. It's almost impossible to time the market. If you are buying your forever home and don't plan to sell for ten years then the risks of buying now are lower.
Regardless, the annual real estate cycle usually favours buyers in late summer.
If you are in a hurry to buy because you’ve recently expanded your household (Congratulations!), try to drive a hard bargain and pay less than the recent prices for a comparable home in the area. Of course, this is easier in the condo market than in the house market.
Also, don't bite off more than you can chew when it comes to financing.
Are you planning to Buy? Check out our Complete Home Buyer’s Guide so we can walk you through the end-to-end process and get you ready to buy your new home!
Recent news
Here are some recent headlines you might be interested in:
Posthaste: Canada's housing market is hot again — expect it to stay that way, economists say (Financial Post)
Friction upon reentry: Three landing scenarios (KPMG Economics)
Posthaste: Canada's housing market is showing green shoots, but something is missing (Financial Post)
Banks seek workarounds to avoid mortgage default for struggling variable-rate borrowers (Financial Post)
Larger investors dominate condo ownership in smaller cities in Ontario and B.C. (The Globe & Mail)
Interest rate hold could add heat to real estate markets: mortgage experts (BIV)
More than half of GTA condo investors losing money on properties, says new report (CBC)
Private mortgage lenders refusing to renew loans to borrowers (The Globe and Mail)
Richmond developer allows buyers to move in today, pay mortgage in two years (Richmond News)
Rising rates are exposing weak spots in the financial system and the next flashpoint could be real estate (Financial Post)
Immigration fuels Canada's largest population growth of over 1 million (BBC News)
Housing affordability - first improvement in 2 years (National Bank of Canada)
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