Are Climbing Guelph Real Estate Prices Pushing Locals Out?

Like other housing markets across the country, the Guelph real estate market has witnessed record-breaking growth, from sales activity to prices, since the onset of the pandemic. Thanks to historically low interest rates, an increase in out-of-town homebuyers, and demand that’s outpacing supply, the southern Ontario town was reporting some impressive numbers. But, as interest rates rise, will this trend continue?

Sales Trends in the Guelph Real Estate Market

For a long time, many younger households from major urban centres had relocated to suburbs, small towns and rural communities to access cheaper housing options. During the coronavirus pandemic, the tables had turned, with young people in these non-metropolitan cities potentially leaving these places for somewhere more affordable. But with skyrocketing valuations in communities big and small, finding these affordable housing pockets is becoming increasingly challenging.

Like many small cities across Canada, Guelph is seeing sales numbers fall from the record highs of just a year ago. According to the Guelph & District Association of REALTORS®, home sales have continued to soften, as new listings increase.

In September, there were 268 homes sold in the region. Those sales numbers are down 27.6 per cent from September 2021. Zooming out at the historical numbers, September sales sit below monthly averages. Home sales were 29.4 per cent below the five-year average and 28.6 per cent below the 10-year average.

The year-to-date numbers show 3,240 residential units sold from January through September, down from 2021 by 26.6 per cent. According to Dustin Davis, President of the Guelph and District Association of REALTORS®, this is an ongoing trend. “Home sales were running well below average levels for this time of year and will likely continue to do so until interest rates have stabilized, and buyers have had a chance to absorb the impact of these higher rates and re-evaluate their financial positions.”

Sales are falling as listings are rising. “New listings came in higher compared to the same month last year but were also trending below average levels in September. Overall inventories are up from their record lows seen at the end of 2021 and now stand on par with supply levels from mid-2019, which has been some very welcome news on the supply front,” says Davis.

The number of new listings was up 14.2 per cent from September 2021, with 531 new residential listings in September 2022. Though the supply is up from last year, it is below historical averages for September. New listings were 7.5 per cent below the five-year average and 7.3 per cent below the 10-year average.

Are Prices Pushing Locals Out of the Market?

Recent year-over-year trends saw housing prices rise by double digits. It wasn’t uncommon to see price increases of 25 per cent or more, compared to the previous year. These rising prices prompted concerns over housing affordability in markets such as Guelph, leaving people wondering if it is becoming too expensive for locals to afford.

With rising interest rates, those piercing trends appear to be changing. Some first-time homebuyers find borrowing too expensive and have paused their home search. This is one reason that inventory is increasing. With a drop in demand and a rise in supply, we are moving toward a more balanced market. But when will that be reflected in the price?

We may be seeing the beginning it in Guelph. The benchmark price for single-family homes was $916,800, down slightly by 0.4 per cent compared to September 2021.

When we look at the average price, the double-digit percentage gains over the last two years appear to be over. However, the average cost of homes sold in September 2022 was up 7.4 per cent from September 2021, selling for $937,964.

New home builds are one hope for driving down prices, but those numbers do not favour buyers. According to Canada Mortgage and Housing Corporation’s (CMHC) new home construction data, housing starts in the city declined just over 58 per cent year-over-year. Completions were down significantly as well, with 589 starts last year between January and February; there have been only 150 completions this year.

If you are a prospective home buyer looking for a price drop, signs are there as listings increase and the number of sales declines. In other markets, those factors have led to a price drop. Time will tell if the same trend holds in Guelph.