The oft-feared correction in the Canadian housing market is now running far and wide, according to Robert Hogue of RBC Economics.
Taking early reports from regional real estate associations into account, “higher interest rates have taken a huge toll in July,” Hogue wrote in a new analysis.
This was especially apparent in the traditional powerhouse markets like Toronto and Vancouver, which are seeing some of their most drastic decelerations in decades.
“Prices are sliding fast, and the exuberance that permeated these markets earlier this year is being replaced by fear,” Hogue said. “The downturn may be more contained in other markets but unmistaken nonetheless. Even in Calgary – where activity remains well above pre-pandemic levels – property values are easing as buyers dither.”
With many buyers now forced into the sidelines due to mounting costs, further rate hikes by the Bank of Canada – which is anticipating increases totalling another 75 basis points – are likely to keep market activity muted in the foreseeable future, Hogue warned.
“We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates,” Hogue said. “Canada’s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.”