Canada’s housing market is cooling as rates rise. But rents have never been hotter
Global News
The Bank of Canada's moves to hike interest rates might be taking some steam out of the ownership market, but economists say it's having the opposite effect on rents.
The same forces cooling the national housing market are putting pressure on the country’s already-tight rental sector, driving rent through the roof in many large cities and complicating the Bank of Canada’s efforts to tame inflation, experts tell Global News.
Figures released from the Canadian Real Estate Association (CREA) on Friday confirmed what many economists suspected and what market watchers have been saying for months: rising interest rates are dragging the country’s ownership market down.
June home sales were down 24 per cent year over year, CREA said, following a trend that has seen housing activity slow drastically since April.
The spring’s housing market has marked a drastic shift from the past two years of the COVID-19 pandemic, which saw a flurry of activity driven, in part, by rock-bottom interest rates.
Bob Dugan, chief economist at the Canada Mortgage and Housing Corp. (CMHC), tells Global News the low rates helped lower the bar to homeownership and take pressure off the rental market as prospective buyers traded in their apartment leases for mortgages.
“When interest rates were still low, a lot of the demand was still funnelling towards homeownership. And we’ve really seen that begin to change,” Dugan says.
The Bank of Canada’s move to hike its policy rate by a full percentage point on Wednesday saw the benchmark interest rate in the country rise to 2.5 per cent, up from just 0.25 per cent at the start of the year.
Higher rates from the central bank lead to higher mortgage payments and make it more difficult for some prospective buyers to qualify for loans.