Canada’s soaring house prices will decline sharply next year, but still not enough to make them affordable as the Bank of Canada is set to continue raising interest rates and keep them higher for longer, Reuters polls showed.
Although prices have declined nearly 6 per cent since the BoC started hiking the overnight rate in March, analysts say it will take years for affordability to return, if ever. “The pandemic may not be over but the pandemic-era housing market boom certainly is. And the bottom is likely many months away still as our central bank has more work to do,” said Robert Hogue, assistant chief economist at RBC.
“Our expectation for an additional 100 basis-point rate increase over the next two rate announcements … will no doubt keep chilling things.”Despite easing slightly in July to 7.6 per cent from a near 40-year high of 8.1 per cent in June, BoC Governor Tiff Macklem said it would “remain too high for some time,” implying the central bank, which has already raised rates by 225 basis points this year, still has more to do.
That is likely to keep pressure on economic activity, particularly in the rate-sensitive property sector, where prices have gone far out of reach for many people.