Latest threats of rising interest rates and high inflation may shift real estate outlook

Popular outrage at the soaring price of Canadian housing has a fix that almost no one is talking about — certainly not those aspiring to be Canada's prime minister.

While they have not framed it specifically as a method of curbing Canada's property sector, central bankers are the exception to that rule. Bank of Canada governor Tiff Macklem insists he is preparing to push a lever expected to have a real effect on the escalating price of houses: hiking interest rates. People with a stake in Canada's diverse housing sector, including homeowners, investors and those aspiring to buy, will be paying close attention to Wednesday's latest data from the Canadian Real Estate Association. They will also be watching Canada's inflation numbers coming out on the same day, expected by economists to hit 3.9 per cent. If so, that will be the highest Canadian inflation figure since 2003. In Canada's hottest markets, including Greater Vancouver and Toronto, regional housing data released early this month showed little sign of cooling in August. But nationally, many expect the July slide in both sales and prices to continue in Wednesday's results. The Canadian housing market is complicated, influenced by immigration, demographics, the rate of construction and speculative demand, sometimes called "exuberance." But as with any expensive asset, there is a clear relationship between price and interest rates. Simply put, in the case of things you cannot afford to buy outright — especially houses that take years to pay off — prices are partly determined by how much it costs to borrow the money to buy them.