A new report from Desjardins ’economics team says the Canadian real estate market is likely to bend, but not break, under the weight of rising interest rates and slowing activity. In a note to customers on Wednesday, Desjardins senior Canadian economy director Randall Bartlett and senior economist Hélène Bégin said prices could plausibly fall 15 percent from the February 2022 high at the end of next year, but would remain above pre-pandemic levels. “Looking to the future, we believe that rising borrowing costs will affect the activity of the housing market as more and more interest-sensitive households run out of hatches for the impending storm. “It is expected that this will lead to a sustained weakness in sales activity, thus maintaining the persistent downward pressure on prices,” they said.
“While some Canadians may lose their sleeves, we do not expect Canadian households in general to lose their T-shirts.” Canadian home prices have fallen sequentially over the past two months, after hitting a non-seasonal record of $ 816,720 in February, according to the Canadian Real Estate Association. The fall came when the Bank of Canada began to aggressively raise its benchmark rate, raising it by half a per cent in each of the last two meetings to combat inflation that had not been seen in three decades. . By context, the last major rise of the central bank was 22 years ago. The Desjardins team said they do not expect the falls to be uniform, with greater pain in markets where prices skyrocketed due to the influx of Canadians able to work remotely during the restrictions of the era. the pandemic. “As we look ahead to how the national housing market will be corrected at the provincial level, it is somehow expected to be the reverse of what we saw during the pandemic,” Desjardins said. “For example, the provinces that experienced the most spectacular price gains, especially the maritime provinces, should see the biggest corrections. In contrast, the provinces that saw the least increase in house prices, the provinces of Prairie and Newfoundland and Labrador should see the slightest correction in the pandemic. ” And with the gradual return to office, the Desjardins team thinks it might feel a little painful in Ontario’s housing markets, which are a little too far away to move to the big centers, though that this could be dampened by immigration and hybrid work plans. “It is likely that communities within a few hours drive of Toronto will see sales activity and prices cool faster as loan costs increase and commuting becomes more common,” they said. “But again, we do not expect average house prices in any of these regions to fall below their pre-COVID-19 starting points due, in general, to high levels of international migration and labor agreements. ongoing hybrids “. Overall, Desjardins said the correction should return the domestic housing market to more balanced conditions following the recent rise in overfeeding. “It looks like the correction in the Canadian real estate market that we were expecting has begun, although it is still focused on a small number of markets. But don’t panic,” they said. next year in most provinces a correction in the range of 10 to 20 percent, average house prices are expected to remain above the level and trend prior to COVID. As such, the planned correction should bring more balance to the Canadian real estate market. “