South forest hill residences.The housing market has been “completely besieged” by governments at all levels. Affected by the increase in interest rates and overseas buyers’ tax, experts from the Bank of Montreal (BMO) said that house prices in the Greater Toronto area are expected to fall by 10%, 15%, or about C $300000 based on the average price of independent houses in Toronto, Wankin and Richmond Mountains of more than C $2 million.Please Visit: South forest hill residences to Get Your VVIP Registration Today!
“House prices in Canada are now besieged by policies at all levels,” Robert Kavcic, senior economist at BMO Bank, wrote in a note to clients on Wednesday morning.
Mr Kavich cited clear expectations of a surge in interest rates in the coming months, as well as new or higher taxes on property speculators and non-resident buyers in some provinces, which are likely to be the biggest hit to house prices in the coming year.
Money markets are betting that the Bank of Canada may raise its overnight interest rate target by up to 225 basis points by the end of 2022, Reuters reported this week.
Such a rate hike could quickly climb the central bank’s benchmark interest rate to 2.75% from the current 0.5% over the next nine months.
To this end, the central bank is likely to take the rare measure of raising interest rates by 0.5 percentage points at its next meeting on April 13.
BMO expects to raise interest rates by 50 basis points in the next two Bank of Canada announcements, followed by a 25 basis point hike in July.
The Bank of Canada raised interest rates by 25 percentage points for the first time earlier this year, a move that some observers say has had a “cooling effect” on the country’s red-hot property market.
In an interview with Global News on Wednesday, BMO bank Cavich said it was controversial that the Bank of Canada was “far behind the curve” in raising interest rates as inflation soared and house prices continued to hit records.
“because of this, they will act quickly,” he said. “this is the biggest single measure we can take here to more broadly slow the pace of house price growth and soaring inflation.”
However, the Bank of Canada is not the only player aimed at cooling the property market.
The provincial government announced this week that it would raise the existing tax on non-resident buyers to 20% and extend the policy to the whole province.
Scotia also said it would impose a purchase tax (purchase tax) on non-resident buyers.
Kavich believes that the participation of investors and real estate speculators has been one of the factors driving up Canadian house prices.
“We have seen that over the past year, some speculation and investor activity have pushed up house prices beyond the reasonable levels justified by income, employment, population growth fundamentals and all the factors that normally drive house prices,” he said. ”
Mr Kavich said concerted action by the Bank of Canada and Ontario policymakers could lead to a fall in house prices based on signs of past history.
He explained that the situation was similar to that in 2017, when Ontario first introduced a non-resident buyer tax. At the same time, the Bank of Canada has entered a cycle of raising interest rates to curb the excessive rise in house prices.
As a result, prices of detached houses in the greater Toronto area have fallen by 10% to 15%, Mr. Kavich said.
“this echoes what we saw in the last cycle, when our house prices were very strong,” he said. ”
“if we saw house prices fall by 10% after the beginning of 2017, and the situation at that time was not as frothy as it is today, so we can see it fall even more today.”
‘falling house prices and some asset losses for homeowners may not be a problem for the Bank of Canada, ‘Mr. Kavich said.
Because average house prices in Canada soared during the pandemic, prices rose 26.6% year-on-year in 2021, according to the Canadian Real Estate Association. He believes that the value of these homes has even adjusted back by 15%, which will not cause most families to go backwards.
The Bank of Canada aims to curb inflation, and their first priority is to get inflation back within the 3% range. If falling house prices are a side effect of this situation, the central bank will have to let it go. ”
According to a report by the Toronto Real Estate Bureau in February, the average price of a detached house in the Greater Toronto area is about C $1.8 million, while the price of a detached house in the Toronto area is 2.07 million.
2.12 million in Wanjin City and 2.15 million in Richmond Mountain, which are inhabited by Chinese in the north.
According to BMO bank experts, if house prices were to fall by 15%, the prices of detached houses in Toronto, Manjin and Richmond Hill would fall by about $300000.
