UnionCity Condos in Markham.Canadian house prices are expected to fall by 15%. As rising mortgage rates could lead to a prolonged downturn in the housing market, the Canadian National Housing Agency plans to revise its forecast for a fall in house prices, which is expected to fall by 15%.Please Visit: UnionCity Condos in Markham to Get Your VVIP Registration Today!
CMHC, the Canadian mortgage lender, said in July that house prices across the country could fall 5 per cent from their levels earlier this year by mid-2023. The company, CEO Romy Bowers, said in an interview at a financial conference on Thursday that it was currently revising the forecast and did not rule out a 10-15 per cent decline.
“We have seen inflation last longer than we initially expected and the Bank of Canada is taking more aggressive action, so we are revising our forecasts,” Bowers said. New forecasts will be released soon, he added.
Since the CMHC forecast in July, the Bank of Canada has accelerated one of the most aggressive interest rate hikes in its history. It shocked the market by raising its policy rate by one percentage point on July 13 (the biggest increase since 1998) and by another 75 basis points in September.
RBC’s floating-rate mortgages, which were less than 2% in February, are now more than 5%, and could be even higher if the central bank raises interest rates in October, as expected. The sudden rise in borrowing costs had an immediate impact, sending benchmark house prices down for six months in a row.
CMHC’s new forecast will bring its forecasts closer to those of private sector economists. However, Bowers said the decline in house prices must be compared with the historic rise in house prices over the past two years.
“when considering price declines, it is very important to consider the rapid and somewhat unsustainable rise in house prices during the pandemic,” Bowers said. She added that many Canadians still cannot afford housing.
In fact, although Canadian house prices have fallen since February, it has never been so difficult for Canadians to buy, according to a new report by economists at RBC. Currently, the total cost of ownership, including mortgages, accounts for 60 per cent of a typical household’s income, up from a previous record 57 per cent.