Housing rebound risks upending Macklem’s inflation battle plans: realtors
Global News
Realtors say pent-up demand, chronic shortage of homes, a spike in rents and hopes of an interest rate cut may fuel a rally in the sector that could reignite inflation.
After a year-long slump, Canada’s housing market is showing early signs of recovery, and realtors say pent-up demand, chronic shortage of homes, a spike in rents and hopes of an interest rate cut may fuel a rally in the sector that could reignite inflation.
With most factors beyond the central bank’s control, the only lever the Bank of Canada (BoC) can pull is through monetary policy, although Governor Tiff Macklem explicitly said on Tuesday that interest rates alone can’t “fix” higher shelter cost, which is the biggest contributor to inflation.
Yet, bringing down interest rates from a 22-year high of five per cent early could spark a frenzy in the housing market that the central bank would want to avoid.
Some buyers are already coming out of hibernation.
A three-bedroom townhouse listed for $828,000 last month in Newmarket, a thriving town outside Toronto, received 40 offers and sold for $1.06 million, said John Pasalis, whose Realosophy Realty marketed the property.
“All of these multiple offers … are working now because demand is a lot higher than in the fall,” Pasalis said.
Pasalis, like five out of six of the real estate brokers Reuters spoke to, sees a rebound in the housing market. For instance, home sales in January in and around Toronto jumped almost 10 per cent on the month and surged 37 per cent from a year earlier, data showed on Tuesday.
Meanwhile, annual rents in December rose by 8.6 per cent compared with a year ago, and January was already showing signs of another uptick, further supporting housing demand.
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