The Canadian housing boom will stop next year due to higher mortgage rates - a Reuters survey

The Canadian housing boom will stop next year due to higher mortgage rates – a Reuters survey

Author: Shrutee Sarkar

BENGALURU (Reuters) – Real estate price inflation in Canada will slow to 10% this year as the Bank of Canada aggressively raises interest rates, a Reuters survey of real estate experts found.

Although prices will fall slightly in 2023, this will not be enough to improve availability due to rising mortgage costs, the survey found.

Extremely low borrowing costs and pandemic-related incentives have contributed more than 50% to average house prices over the past two years, forcing the Canadian government to set a budget to make housing accessible.

However, home prices fell more than 6% in April, suggesting that the market is already cooling, although BoC Governor Tiff Macklem said further rate increases would be needed to reduce uncontrollable inflation, and pledged to do so if necessary. “strongly”. [CA/POLL]

“In the last two months, we have begun to see downward pressure on house prices, and this trend is likely to continue as interest rates continue to rise,” said John Pasalis, president of brokerage and research at Realosophy Realty.

“Another 100 bps increase in the BoC base interest rate and another 100 bps increase in 5-year (mortgage) rates will have a significant impact on the housing market,” Pasalis added.


Average real estate prices were expected to rise by 10.0% this year, compared with a 9.2% increase predicted in the March poll. While growth was expected to weaken for the rest of this year, stronger-than-expected gains so far have led to a higher average annual median forecast.

According to a survey between May 10 and 30, 13 market analysts predicted that house prices would fall by 2.2% next year and rise by 0.5% in 2024. This compared to an increase of 1.5% and 2.0% in the March survey.

When asked about availability for the first home buyers in the next two years, nine out of 13 respondents said they would get worse, including three who said they would get worse. The other four said it would improve.

Robert Hogue, chief economist at RBC, said: “Higher rates will be a huge challenge for buyers.

“We do not expect the federal budget for 2022 to prevent this. New federal initiatives will either not bring full benefits for some time or offer only marginal support to home buyers, such as doubling tax credits for first-time buyers.”

More than 85% of analysts, 12 out of 14, who answered another question, said that affordability in the rental market will worsen or worsen over the next two years. Only two said it would get better.

When asked how high interest rates would have to cause a significant slowdown in housing market activity, the median was 3.25%, with a forecast between 2.0% and 6.0%.

The BoC is expected to raise rates by 50 basis points to 1.50% on Wednesday. According to another Reuters survey, rates were expected to reach 2.50% by the end of 2022.

(More articles from Reuters’ quarterly housing market surveys 🙂

(Shrutee Sarkar report; Susobhan Sarkar and Anant Chandak polls; David Holmes)

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