When do home prices fall in Canada? RBC says spring – patriotic

A major Canadian bank calls for cooling the country housing market to hit a low point in the spring before fully adjusting to higher interest rates.

Assistant Chief Economist RBC Robert Hogg He said in a report on Friday that home buyers are “on the defensive” because Bank of Canada Continue to raise interest rates. The central bank delivered a 75 basis points high Last week and signal rates You will have to rise more in the coming months With the continued high rate of core inflation.

But the high cost of borrowing has had a chilling effect on the housing market, with the Canadian Real Estate Association (CREA) reporting Thursday that Home sales fell in August 1 percent compared to July and 24.7 percent less than the same month last year.

CREA also lowered its forecasts for both housing activity and price growth. It now expects home sales to fall 20 percent by the end of 2022 compared to last year’s peak.

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Hogue’s forecast is more risky, however, as it forecasts a 23 percent drop in year-over-year sales by the end of this year and another 14 percent drop in 2023.

RBC is now calling for the Bank of Canada’s benchmark interest rate to reach four per cent by the end of the year, up from the previous 3.5 per cent.

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“Higher interest rates will deprive more buyers of obtaining a mortgage and reduce the amount of mortgage for which others can qualify,” Hogg wrote.

“Fewer active market buyers – and more people on a tight budget – are staying away from prices aggressively,” he added.

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Hogue wrote Friday that he expects the housing market to adjust to the higher-priced environment early next year.

With the onset of spring, Canadian home prices are expected to fall to a low of about 14 per cent from their peak in February 2022.

He added that the decline would be most severe in Ontario and British Columbia, calling for home prices to fall 16 percent from peak to lowest in both provinces. Meanwhile, Alberta and Saskatchewan will see only 4 percent declines in prices, Hogg predicts.

Hogue’s estimates are more conservative than other market forecasts.

TD Bank said in late August that it expects to be An “unprecedented” drop of 20 to 25 per cent in home prices In the first quarter of 2023 from the highest levels a year ago.

The Desjardins credit union also expects a A 25% drop in home prices by the end of 2023.

– Files from the Canadian Press

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