Home affordability to improve in Canada as rates fall and incomes rise, BMO says
BNN Bloomberg
One of Canada’s biggest banks says housing affordability is poised to gradually get better — but not enough to bring it close to pre-pandemic levels.
A combination of falling interest rates, roughly flat home prices and rising incomes will make buying a home easier for more Canadians, Bank of Montreal economists Robert Kavcic and Sal Guatieri wrote in a report to investors. Even in this scenario, however, affordability will still be “strained” by 2027, they said.
Their forecast assumes a decline of 75 basis points in five-year mortgage rates to 4.25 per cent and flat home prices in 2024, followed by three years of 3 per cent annualized price growth and per-capita income growth of just under 3 per cent.
The report underscores the challenges faced by policymakers who are dealing with frustration, particularly among younger Canadians, over the cost of housing. “We do see progress, but it’s going to take a long time to unravel something that took years to develop,” Guatieri said in an interview.
