Rate hikes hit Canada housing with first price drop in two years
BNN Bloomberg
Canadian home prices fell for the first time in two years as a rapid rise in interest rates looks set to threaten one of the world’s hottest housing markets.
Benchmark home prices declined 0.6 per cent in April from the month before, the first drop since April 2020, according to data released Monday from the Canadian Real Estate Association. The number of sales, meanwhile, plunged 12.6 per cent.
The shift is coming as the Bank of Canada embarks on an aggressive campaign of rate increases to fight inflation running at a three-decade high. Markets are betting that the policy interest rate, which began the year at 0.25 per cent, will have to rise to 3 per cent over the next year.
The sharp jump in Canadian home prices since the pandemic -- they’re up 24 per cent over the past 12 months -- was partly driven by emergency-low rates that helped the economy through the COVID-19 crisis. But now rate increases have left the nation’s housing market looking increasingly vulnerable.
