The Canadian market continues to labour under mounting borrowing costs and the central bank's rate increases
Royal LePage has revised its forecast for Canadian home prices and said that aggregate prices in Q4 will likely be lower by 0.5% on an annual basis, in effect nullifying the increases seen during the earlier parts of the year.
This was far below Royal LePage’s July projections of a 5% year over year gain during the fourth quarter. The lower prediction was due to the substantial increases in mortgage borrowing costs spurred by the Bank of Canada’s outsized rate hikes.
“September did not bring the typical seasonal lift in the number of homes trading hands in this country, a clear indication that our housing market continues to adjust to higher borrowing costs,” said Phil Soper, CEO of Royal LePage.
“Our revised outlook has national prices at just below where we ended 2021, erasing the gains made in the first quarter of 2022,” Soper added.
The third quarter only saw a 3.3% annual increase in the national aggregate home price to reach $774,900, although it was 4.9% lower on a quarterly basis.
Royal LePage had previously warned that inflationary pressures would continue to weigh on Canadian housing activity.
In particular, “a worrying increase in inflation expectations, a further decline in the already record-low unemployment rate, and accelerating wage growth, all suggest monetary policy needs to get away from stimulative territory as soon as possible.”