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Canada home prices to defy gravity this year, correction unlikely: Reuters poll -Breaking

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© Reuters. FILE PHOTO – Single family homes can be seen against Vancouver’s skyline, British Columbia Canada, September 30, 2020. REUTERS/Jennifer Gauthier

Shrutee Sarkar

BENGALURU – Canada’s property prices continue to rise at a fast pace this year, despite several rate hikes from the central banks, according to Reuters poll. The poll showed that there was little chance of a major correction.

Canada is one of the most expensive property markets worldwide. Home prices have increased for over a decade with near zero interest rates. This, along with C$100 million in government assistance to the economy, drove a boom in the market during the pandemic.

The Canadian economy is likely to start 2022 strong despite Omicron and the protests that closed key border crossings. In January, home prices rose nearly 21% compared with a year earlier, ahead of widely expected interest rate increases starting Wednesday. [CA/POLL]

Ten out of thirteen respondents stated that the probability of significant corrections in Canada’s housing market was very low. Two others said it could be extremely low.

It is expected that home price rises will continue through spring. Bryan Yu (chief economist at Central 1 Credit Union) said, “Buyers are running against time as lower rates commitments end.”

Housing market activity for 2022 will likely be driven by higher expectations of rising interest rates in the next year, shortages of homes and stronger labour markets.

Canada will welcome over 1.3 million new immigrants in the coming three years according to Canada’s 2022-24 Immigrant Levels Plan, released February.

A Reuters poll conducted between February 8 and 28, 2018 among property market analysts revealed that Canada’s average home prices will rise by 9.2% in 2019, 1.5% next year, and 2.0% 2024.

This is compared to the 5.0% growth in 2022, 2.1% and 2.1% respectively in the next two year forecasts in December.

Christopher Alexander, President at RE/MAX Canada, wrote that “the ongoing housing supply shortfall is likely to persist, continuing to put upwards pressure on prices.”

Graphic – Reuters Poll: Canada home prices outlook – https://fingfx.thomsonreuters.com/gfx/polling/lgpdwaomavo/Canada%20housing.PNG

Toronto and Vancouver are expected to see house prices rise by 10.0% and 6.0%, respectively. These numbers were up from 5.2% in December, and down from 5.0% and 5.0%, respectively. Buyers, particularly first-timers, will be challenged as the market continues to grow.

Record high property prices force first-time homebuyers to look elsewhere for housing.

Answering another question, all 15 real estate experts said that the market for housing would not turn into a buyers market in this year’s market. Although there was consensus that it would happen in the next year, or sooner, respondents were not convinced.

Stephen Brown of Capital Economics Canada, senior economist said that “the market is so tilted in the sellers’ favor at this moment that it will be balanced market rather than a buyer’s market” as interest rate rises.

The median rate of overnight interest was 1.25%. This is the level that separate Reuters polls predicted would happen later in the year. The range of forecasts was between 1.00% and 3.50%.

(For more stories about the Reuters quarterly housing market polls, click here:

Reporting and polling done by Shrutee Sharma and Anant Chandak. Editing by Ross Finley and Alexandra Hudson (NYSE)

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