Activity remains well below pre-pandemic levels in most markets
RBC: Prolonged housing market deceleration in the offing
Ephraim Vecina
other
The central bank’s rate hikes served as significant headwinds to the market this fall
All current signs are pointing to a “generally soft” market over the next few months, according to Robert Hogue of RBC Economics.
The central bank’s recent substantial rate hikes have played a major role in cooling down the Canadian housing market this fall.
“Activity remains well below pre-pandemic levels in most markets and prices are softening further from peaks reached earlier this year,” Hogue said, noting that while signs of stability are gradually becoming apparent, “our view is the market will stay generally soft over the coming months.”
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“The massive interest rate increases to date and a further 25-basis-point hike expected from the Bank of Canada by year-end will continue to significantly challenge buyers,” Hogue added.
“Poor affordability poses a huge obstacle in many markets that only lower prices can ease in a meaningful way. We expect prices will keep falling until a bottom next spring.”
RBC is projecting the national benchmark price to drop 14% from (quarterly) peak to trough by mid-2023.
The market slowdown is likely to trigger a sharp decline in Canadian net wealth in the near future, RBC said in a separate analysis.
“We expect total net worth to fall by more than $1.1 trillion from peak pandemic levels by the end of this year,” the bank cautioned. “This decline in household wealth will come at a time when Canadians are already feeling the squeeze of higher inflation and rising interest rates.”
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