The Canadian property market is going to lose steam in 2022, according to a Reuters poll of analysts.
The rush to purchase homes ahead of expected increases in Canadian interest rates https: www.reuters. In October, the article on the canada-economy housing-idCAKBN 2 I 01 EP was compared to the year-earlier period.
The Bank of Canada has added additional froth in the market, fueled by investors who believe that prices will keep rising. com markets us-caused-market-higher risk-correction says-bank-canadian -- 2021 -- 11 -- 23 to warn of an increased risk of a correction.
Rishi Sondhi, economist at TD Economics, said that house price inflation will slow down next year as prices should go higher, even as interest rates creep upwards.
We think rate hikes will weigh on but not increase demand, as the macro backdrop should be supportive for sales. The average house price in Canada is expected to increase 18.6% this year, up from a 16.0% increase predicted in an August poll.
The market analysts conducted a poll of 15 market analysts from Nov. 17 to Dec. 6 and released on Tuesday, but they were forecast to slow down, to 5.0% in 2022 and 2.0% in 2023. In the August poll, it rose by 3.2% and 2.6%.
In 2023, only two respondents expected prices to fall, and by modest amounts.
Nine out of 14 respondents said that higher interest rates or tighter monetary policy would have the biggest impact on house prices next year. The remaining five cited supply constraints.
A follow-up question on how many basis points of interest rate hikes would slow housing market activity had a median forecast of 100, with predictions in a range of 75 to 175 basis points.
Canada's central bank is expected to raise interest rates by the end of the third quarter. Com World americas bank-canadaq 3 -- 2022 rate-hike expected-q 2 -- rise-possible -- 2021 -- 12 -- 03 next year.
John Pasalis, president of brokerage and research firm Realosophy Realty, said one or two rate increases is not likely to have a meaningful impact, but if we see four or more rate increases in 2022, this should take some demand out of the market, especially from interest rate-sensitive investors.
For many first-time home buyers, prices have climbed beyond their reach and a supply shortage of housing units has only aggravated their woes.
Tony Stillo, director of economics for Canada at Oxford Economics, said that investors, house 'flippers and speculators, who account for over 20% of home purchases, have exacerbated the severe demand-supply imbalance, boosted prices and made housing more vulnerable to a correction.
All 15 analysts who answered a question about affordability over the next two to three years said it would worsen.
Out-of- reach housing prices will invariably lead to more Canadians renting, especially if they have to live close to where they work. Stillo said that people who can work remotely will migrate out of more expensive urban centres and drive until they qualify.