2022 was a pretty wild year for real estate prices in London. In February last year, we saw the price for a detached home peak at just over $960,000. Shortly after this point, the Bank of Canada began raising interest rates, causing prices to drop steadily. When you averaged out the numbers for the whole year, it seemed like overall 2022 brought a solid increase in real estate values over 2021. This was deceptive. By the end of the year, once most of the rate effects had their impact, the average price for a detached home was just a hair under $675,000. The average price for that same detached home for the whole of 2021 was $710,000. So, by the end of 2022 there was roughly a 5% drop in the value of a detached home. Because of the spike in values during the first quarter of 2022, the overall average for the year seemed to indicate rising prices, when in fact the opposite was the case. By the end of the year, after reaching crazy highs, the price for your typical detached home fell 5% from 2021 to 2022.
What does this mean for the first quarter of 2023? Compared to the first quarter of 2022, 2023 seems to be off to a terrible start, dropping 20.87%. While this is technically true, if we take a longer view, prices are stable when compared to 2021. The first quarter of 2023 is up by 0.62%, six tenths of one percent compared to Q1 in 2021. The good news is that prices are rising slightly as the spring market begins, which is typical. As long as they don’t start rising at the pace as 2022, this may be a sign that the market is finding a new normal. This would create the feeling of stability and predictability, something missing for the last number of years. A stable, predictable market is good for both buyers and sellers.
The average dwelling in London, when we include houses, townhomes and apartments together, is now priced at $626, 108. A typical detached home in the city and suburbs of London through the first quarter of this year will cost you $698,108. A condominium, a category which includes both townhouses and apartments, now carries an average price tag of $481,301. While the market overall and houses specifically have returned almost exactly to the numbers for the first quarter of 2021, condominiums are up almost 4% from the same period. What this indicates is that as interest rates have increased, more buyers are looking to buy condos as their first home. A detached home is out of reach for many now as a first home.
Going forward, what do we want to see? In a normal spring market, prices will increase through the spring — sometimes by as much as 10% — and then drop back over the summer when everyone goes on vacation. If we see that happen this year, it may be a sign that some normalcy is returning to the market.
May 20, 2023
