TORONTO — Activity in Canada’s real estate market will slow “modestly” in 2016 as interest rates begin to rise, according to a new report from RBC Economics.
The report pegs the risk of an outright crash in real estate as low, saying RBC expects the economy to grow and that interest rates will likely rise gradually starting next year.
However, the bank says there could be a “severe” downturn in the real estate market if employment plunges due to a deep recession or if interest rates surge dramatically.
Meanwhile, RBC says the economic shock from lower oil prices hasn’t been big enough to derail Canada’s overall real estate sector.
In fact, it says the Canadian housing market is poised to post one of its best years on record despite a drop in home resale activity in the oil-sensitive provinces of Alberta and Saskatchewan.
RBC says rock-bottom interest rates have fuelled demand for housing elsewhere, particularly in Ontario and British Columbia.
In July, the Bank of Canada cut its overnight lending rate — which affects variable-rate mortgages and other products — by 25 basis points to 0.5 per cent.
RBC predicts the central bank will raise the rate by 75 basis points to 1.25 per cent in the second half of 2016.
“Much of the market’s vibrancy in the past several years can be attributed to exceptionally low — and declining — interest rates.”
RBC said it expects the cooling to be moderate and controlled — for instance, home resales declining by less than 10 per cent over several years and price growth slowing to a rate of 3.2 per cent in 2016.
“In our opinion, the risk of a crash — resales plummeting by more than 25 per cent nationwide for instance — is low for three main reasons,” the report says. “First, we expect the Canadian economy to grow and create jobs and boost incomes. Severe housing downturns usually coincide with recessions.”
The other two reasons cited are strong immigration and the gradual pace at which interest rates will rise.
Easy Related Posts
Buying a home in the GTA requires a six-figure income
In toronto real estate, it takes a six-figure household income to afford a home in ...read more
CMHC elevates red flag about housing, warns of Toronto, Vancouver price spillover
In toronto real estate, the head of the federal housing agency is elevating a red ...read more
Home Price market correction will begin soon - National Bank
Vancouver's detached home prices will fall 20 per cent over the next year as the ...read more
Toronto home prices jump in October despite new mortgage rules
Toronto's real estate sales clambered more than 11 per cent in October, 2016 compared with ...read more
Less Home Sellers Want To Sell And More Home Buyers Want To Buy In 2020
Less Home Sellers Want To Sell And More Home Buyers Want To Buy In 2020 TRREB ...read more
Central Toronto Real Estate TRREB Released January, 2020 Resale Market Figures
Central Toronto Real Estate TRREB Released January, 2020 Resale Market Figures Toronto Area REALTORS® reported 4,581 ...read more