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House Prices To Fall

House Prices To Fall

July 21, 2022

Homeowners face the possibility of significant decrease in value of their house, writes Peter Watson.

“Property values, already slipping, are likely to fall more than 10% in the coming year.”

This quote is from a recent report from RBC Economics. Add this to other news on housing prices and the new reality is Canadians largest asset is losing value.

According to the report, the reason for the decline in price is a combination of extremely high prices of houses and increasing interest rates.

The Bank of Canada’s prime objective is to get control of inflation. This is its top priority and by putting the brakes on inflation with higher interest rates leaves the collateral damage of house prices.

The Toronto market was singled out as being very unaffordable as well as other parts of southern Ontario. Those and other markets are expected to continue to fall in value.

The financial challenge faced by many is significant. Especially for those that had a relatively small down payment and a very large mortgage.

Many of those homeowners could lose all the equity in their house and even be in the unenviable position to have a mortgage that is greater than the value of the property. The anguish will be both financial and emotional.

Some might end up selling her house and walk away from homeownership while still owing money. Depending on how high interest rates go that could end up being a very expensive debt.

Previous generations of homeowners have been rewarded because of decades of escalating prices. Capital gains on a principal residence are tax-free so the financial gains in many cases have been enormous.

Most investments including houses do experience volatile times with fluctuating prices. The value of houses people have purchased is significantly higher than any other financial decision they have made.

Financially extended homeowners have difficult times ahead.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through