The latest BoC increases will prove to be a significant drag on the market, industry board says
The surge of activity observed in British Columbia’s housing market earlier this year has begun decelerating following two Bank of Canada rate hikes in June and July, according to the province’s premier housing industry group.
The province saw a total of 7,103 residential transactions in July, increasing by 25.9% annually. Meanwhile, the average home sales price reached $967,948, up by 5.6% annually.
This activity level pushed the total sales dollar volume up to $6.9 billion in July, representing a 33% surge from the same period last year.
Active listings were essentially flat compared to July 2022, at just over 31,000 total listings.
“Home sales are up significantly since this time last year,” said Brendon Ogmundson, chief economist at BCREA.
The Real Estate Board of Greater Vancouver has reported an upward trend in the average home price in Vancouver for the month of July. https://t.co/m2EyjxNLNb#breakingnews #mortgageindustry #homesales #housingmarket— Canadian Mortgage Professional Magazine (@CMPmagazine) August 2, 2023
BoC hikes are having a chilling effect
However, Ogmundson warned that the latest central bank hikes will prove to be a significant drag on the market for the rest of the year.
“There are signs that the most recent Bank of Canada rate increases are slowing activity as mortgage rates climb to their highest levels in over a decade,” Ogmundson said.
The BoC assured that it will strive to not raise its policy rate, currently at 5%, more than it needs to. This is despite sustained pressure from excess demand and elevated core inflation.
The central bank said that the July hike is its closest move so far when it comes to striking a balance between the risks of under- and over-tightening.
“If policy is not restrictive enough to bring inflation to target on a reasonable timetable, there is a risk that rates will have to be increased by even more later,” the BoC said. “If policy is simply taking longer to work because the lagged effects of nominal tightening are only recently starting to have an impact on overall consumption, over-tightening risks making economic conditions more painful than necessary.”