Canadian house price inflation will slow to 10% this year as the Bank of Canada raises interest rates aggressively, a Reuters poll of property market experts found. Yet although prices will fall modestly in 2023, it won't be enough to improve affordability due to the rising cost of mortgages, the poll found.
Ultra-low borrowing costs and pandemic-related stimulus measures contributed to a more than 50% rise in average home prices over the last two years, forcing the Canadian government to lay out a budget geared at making housing more affordable.
But home prices fell more than 6% in April, suggesting the market is already cooling, even as BoC Governor Tiff Macklem said more rate increases would be needed to curb runaway inflation, pledging to do so "forcefully" if needed. "In the past two months we have started to see downward pressure on home prices and this trend will likely continue as interest rates continue to trend up," said John Pasalis, president of brokerage and research firm Realosophy Realty.
"Another 100 bps increase in the BoC policy rate and another 100 bps increase in 5-year posted (mortgage) rates will have a material impact on the housing market," Pasalis added.
Average house prices were expected to rise 10.0% this year, up from a 9.2% rise predicted in a March poll. While the increase was expected to weaken through the remainder of this year, stronger-than-expected gains so far have resulted in a higher annual average forecast median. Home prices were predicted to fall 2.2% next year and rise 0.5% in 2024, according to the May 10-30 poll of 13 market analysts. That compared with rises of 1.5% and 2.0%, respectively, in the March poll.
