Posthaste: Housing market faces 'bumpy' road amid high interest rates, RBC says
The Bank of Canada’s latest interest rate hikes appear to have put the brakes on the housing market rebound in many cities and the road ahead for further recovery is expected to be rocky, say economists at the Royal Bank of Canada.
Recent data released in major real estate markets show housing activity slowed between June and July after the Bank of Canada raised interest rates a ninth and tenth time, according to RBC’s latest state of housing report. The central bank’s key policy rate is now at five per cent, a level not seen since 2001.
Home sales in June and July fell in Vancouver, Toronto and Ottawa, and prices also lost momentum, RBC said. However, housing markets in the Prairies defied the interest-rate induced slowdown seen in Ontario and British Columbia. Sales gained in Alberta and Saskatchewan in July, with Calgary, Edmonton, Regina and Saskatoon, all firmly in sellers’ market territory.
Meanwhile, RBC said more listings helped ease supply constraints in many markets, part of a trend that has extended for months. As a result, Ontario and B.C.’s housing markets have grown more balanced after a spring squeeze.
If that trend continues, price increases should keep slowing down, especially in Toronto, the economists said. A cooling economy, combined with the high cost of living are also expected to keep a lid on sales and price gains in major housing markets.
“Signs of cooling activity in some of Canada’s largest markets are consistent with our view that the spring rebound was premature and will taper off further amid high interest rates, ongoing affordability issues and a looming recession,” Robert Hogue and Rachel Battaglia said in the report.
“We think the path ahead is more likely to be slow and bumpy, with the
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