'Full-scale attack on Canadian home prices': BMO economist
BNN Bloomberg
From spiking mortgage rates, to government intervention, and the unknown of what Canada's finance minister has in store next week, BMO Capital Markets' senior economist isn't mincing words about the stakes for the housing market.
From spiking mortgage rates, to intervention at the provincial level, and the unknown of what Canada's finance minister has in store next week, BMO Capital Markets' senior economist isn't mincing words about the stakes for domestic housing markets.
"There is now a full-scale attack on Canadian home prices across various levels of policy," wrote Robert Kavcic in a note to clients titled "House prices in the crosshairs."
A chronic supply crunch in large cities and their surrounding regions has put affordability under the microscope across the country. The Canadian Real Estate Association said national inventory levels were at an all-time low in January and last December, which sent the non-seasonally adjusted aggregate home price index up by record 28 per cent year-over-year in January.
Kavcic pinpointed four factors that could disrupt the surge in home prices that has pushed affordability farther out of reach for many first-time homebuyers.
Two of the items Kavcic highlighted are new provincial moves that were announced Tuesday: the higher and expanded tax on non-resident homebuyers in Ontario, and the two-per-cent tax on foreign homebuyers that was unveiled in Nova Scotia's budget.
He also pointed to a recent jump in mortgage rates as anticipation builds for additional rate hikes from the Bank of Canada. A number of economists (including at BMO) have recently made the case for a half-point hike at the bank's next policy meeting in April; and there are also calls from Citi and BofA for half-point hikes at each of the next three rate-setting meetings.
