Rate hikes will turn down the housing market heat: RBC

A new report from RBC Economics says the meteoric surge in home prices will start to slow as the Bank of Canada embarks on its rate-hiking campaign. However, homebuyers should still expect affordability to be stretched.

A new report from RBC Economics says the meteoric surge in home prices will start to slow as the Bank of Canada embarks on its rate-hiking campaign. However, homebuyers should still expect affordability to be stretched.

The report forecasts home prices will rise 6.2 per cent this year – a big slowdown from last year’s 17.8 per cent gain – as higher rates and the potential implementation of new anti-speculation measures sideline some end-user buyers and real estate investors.

RBC Senior Economist Robert Hogue estimates national home sales will total 579,000 this year – a number that’s down roughly 13 per cent from 2021, but still the second-highest amount on record.

“Most of that increase in supply and cooling of the market will take place in the second half of this year,” Hogue said in the report on Thursday.

“We expect demand-supply conditions to become much less favourable – though still broadly positive – for sellers by then, reducing upward pressure on prices.”