Is it the beginning of the end of Canada’s real estate downturn? RBC thinks so.
Economists from the nation’s largest bank are calling it: The housing market may be entering the final stage of its cyclical downturn, a view justified by the slowing pace of declining home sales and the smallest monthly drop in property values seen since May 2022.
- The volume of home sales fell by over a third compared to the same time last year, and prices are down by almost 10% (but still sitting higher than before the pandemic).
- RBC’s Robert Hogue thinks “an inflection point is some ways off, [but] it does suggest most of the price correction is likely behind us—at least for Canada as a whole.”
Why it matters: The central bank’s aggressive interest rate hikes have gone pretty much according to plan by battering the country’s famously hot housing market—the average mortgage rate is about 5% these days, compared with less than 2% in early 2020.
- While prices are seemingly stabilizing, high mortgage rates keep homes out of reach for most Canadians and have contributed to a 12% surge in rental prices.
What’s next: According to big-bank counterpart BMO, property values aren’t quite done falling, and RBC’s Hogue agrees that “rising interest rates and the loss of affordability will keep market activity quiet into early 2023,” with prices bottoming around spring.