What goes up, must come down. But for how long?
While COVID-19 provided for unprecedented times, with low rates, government funding, and a massive build up of demand for suburban properties, it also provided for record levels of inflation. Prices on everything from homes to maple syrup soared across the country forcing the Bank of Canada to change course...drastically.
Tiff Macklem and the Bank of Canada have proceeded with the fastest central bank rate hikes seen in the developed world, reducing real estate transaction volumes by up to 60% and reducing prices by 20%. The rate increases almost immediately had an impact on real estate specific spending, but other items have lagged behind. The good news, we have seen realty prices stabilize since August of 2022 and other prices are beginning to follow suit.
The real question on everyone's mind now is what happens next. Without a crystal ball, no one can be certain in these unique times. Our opinion is based on the big banks rate forecasts, housing supply figures and demand from current citizens and immigration. Toronto Dominion Bank expects 2 more rate increases, one in December of 2022 and another in January 2023 before the Bank of Canada holding steady.
Looking at data between August to October, prices have remained stable despite the BOC increasing rates 125 basis points in that period. We see no reason for this to be any different over the next 2-3 months as people remain on the sidelines through to the January 2023 announcement.
While Premier Ford is taking strides to build more housing, we do not see this being enough, at least in the near term. Lack of housing supply coupled with indication in January that the tightening cycle is over will cause an increase in demand and with it the rebound. Will we rebound at the pace we saw last year, likely not, but we will rebound nonetheless!
Questions on buying or selling in today's market, contact The O'Brien Team today. We utilize our years of experience, market knowledge and our partners in the banking world to help our clients navigate.