Shrutee Sarkar

BENGALURU, (Reuters) – Canadian house prices will fall to 10% as aggressively raised interest rates by the Bank of Canada are revealed in a Reuters poll of experts on property markets.

However, even though prices may fall slightly in 2023 due to rising mortgage costs, this won’t make it affordable, according to the poll.

The Canadian government was forced to create a budget to make housing affordable by imposing extremely low borrowing costs on top of pandemic-related stimul measures.

However, home prices dropped more than 6 percent in April. This suggests that the market has already cooled. [CA/POLL]

John Pasalis (president of Realosophy Realty and researcher) stated that there has been a downward trend in home prices over the past 2 months. This trend is likely to continue as long as interest rates trend upwards.

Pasalis stated that a further 100-bps BoC policy rate increase and a 100-bps rise in 5-year mortgage rates (mortgage), rates would have an impact on the housing market.

HUGE RESPONSIBILITIES

According to a March poll, average house prices are expected to grow 10.0% this year. This is up from 9.2% in March. 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.

The May 10-30 poll conducted by 13 market experts found that home prices would fall 2.2% next and climb 0.5% in 2024. Compare this to rises in home prices of 1.5% or 2.0% as per the March poll.

Nine out of thirteen respondents were asked about the affordability of first-time buyers over the next two year. Three said that it would increase significantly. It would increase, the remaining four respondents said.

Robert Hogue is a senior economist with RBC. He stated: “Higher interest rates will pose enormous challenges for buyers.

This is not something we expect to be prevented by the federal budget for 2022. The new federal initiatives won’t bring full benefits or offer marginal support to homebuyers. For example, the tax credit for first-time homeowners will be doubled.

Over 85% (12 of 14) of those who answered another question stated that the affordability of home rentals would decline or be significantly worsened over the next 2 years. It would only improve, however, it was said by two.

The median interest rate needed to create a serious slowdown in the housing market was 3.25%. There were predictions that it would be between 2.0% and 6.0%.

On Wednesday, the BoC will raise rates 50 basis points to 1.50%. Another Reuters poll indicated that rates would reach 2.50% by the end of 2020.

(To see other stories, go to the Reuters Quarterly Housing Market Polls: