Peterborough Real Estate: Most Overvalued Housing Market in Canada

Is the performance of the Canadian real estate market based on fundamentals or speculation? And what about local markets, such as Peterborough real estate?

Before the COVID-19 public health crisis, many financial experts argued that the housing market was in a bubble, consumed by too much speculation in the major urban centres, from the single-detached homes in downtown Toronto to the condominiums in downtown Vancouver. But while the pre-pandemic housing boom was concentrated in only a few pockets of the Canadian real estate market, the COVID-era increase happened nationwide.

Whether in suburban or rural communities, prices are up significantly, leading to an affordability crisis throughout the nation (although recent data suggests they may be starting to cool). Of course, some markets are more overvalued than others, including Peterborough real estate.

This municipality located north of Toronto has witnessed exceptional gains over the last couple of years, as more people enjoyed the freedom to work remotely, allowing households to relocate to cheaper parts of the province, and different provinces entirely. But is Peterborough really the most overvalued market in Canada?

Moody’s Analytics recently published its fourth-quarter assessment of housing price valuations in Canada. Peterborough was at the top of the list of most overvalued housing markets, coming in at 107.8 per cent. The next city on the list was St. Catharines-Niagara, at 106.9 per cent.

This has first-time homebuyers priced out of the market, especially local buyers. The average annual household income in Peterborough is about $70,000, which means they would be approved for a mortgage of roughly $300,000. But since the average home is on par with the national average, too many prospective homebuyers are still stuck waiting to achieve the dream of home ownership.

Study authors note that housing market investors have taken over the Peterborough landscape, doubling in the last couple of years. Housing experts note that real estate investment trusts (REITs) have contributed to the overvaluation of residential properties. Blind bidding, speculation and low interest rates have been the other factors contributing to Peterborough’s ascent.

But can Peterborough continue posting remarkable gains? The April statistics point to the same types of developments as other parts of Canada, from sliding home sales to climbing home prices.

Peterborough Real Estate – The Most Overvalued Housing Market in the Country

The latest data from the Kawarthas Association of REALTORS® Inc. show that residential property sales plunged at an annualized rate of 34.3 per cent in May, with 222 homes sold. In the first four months of 2022, home sales slumped 18 per cent year-over-year, totalling 975 units.

Historically, sales have been down as well, sitting 7.2 per cent below the five-year average, and 17.7 per cent below the decade average for this time of the year.

Prices are the key in the Peterborough real estate market. Association data highlight that the MLS® Home Price Index (HPI) for a single-family home advanced 27.4 per cent year-over-year to $793,800. The average price of homes sold in May 2022 jumped by nearly 19.8 per cent to $836,843.

“Sales activity was down in May from last year’s near-record level, a trend that we’re seeing play out almost everywhere in Southern Ontario,” said Kate Kidd, President of the Peterborough and the Kawarthas Association of REALTORS® Inc. “New listings are beginning to return to the market, which is lifting overall inventories from their historically low levels. However, it’s going to take more than a few months of stronger supply to have any meaningful impact on the market balance in the long term.”

Indeed, the Peterborough housing market saw the new number of residential listings increase by 8.4 per cent in May, to 425 new units. For the month of May, this is 11 per cent above the five-year average but three per cent below the decade average.

Active residential listings rose 44.3 per cent to 339 units. On a historical level, active listings were 18.8 per cent below the five-year average and more than almost 50 per cent below the 10-year average.

Months of inventory were 1.5 at the end of May, up from 0.7 months from the same time a year ago. This is a commonly used measurement since it takes into account the number of months it would take to exhaust current stockpiles at the present rate of sales activity.