The Bank of Canada's latest decisions seem to indicate that it is now at the end of its tightening cycle, association says
Elevated interest rates will likely limit home sales over the next year, according to the British Columbia Real Estate Association (BCREA).
Over the past two years, BC’s housing activity has generally “mirrored” the movements made by the Bank of Canada.
“Sales dropped significantly when the bank began raising rates last year, staged a brief recovery when the bank paused hikes earlier this year, and declined once again when the bank tightened rates over the summer,” BCREA said in its Q4 market forecast. “There is little reason to believe that sales will meaningfully detach from the anchor that is monetary policy over the next year.”
The central bank’s latest decisions seem to indicate that it is now at the end of its tightening cycle, with rate cuts highly likely by late next year, BCREA said.
“’If mortgage rates decline as expected in 2024, it certainly will provide some relief to potential buyers,” BCREA said, while stressing that “both fixed and variable mortgage rates will be much higher over the next two years than the rates borrowers have been accustomed to over the past decade.”
Doug Porter, Chief Economist at BMO noted that the Bank of Canada’s latest rate hike would probably temper the immediate homebuying ambitions of many would-be entrants to the market.https://t.co/QJcWPzTC1A#mortgagenews #mortgagebroker #ratehike #homesales #housingmarket
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 18, 2023
The slowing economy and an anticipated chill in the labour market could further contribute to reduced demand in the region.
“Sales activity will likely remain below normal through the end of 2023 and for much of 2024,” BCREA said. “We forecast 76,700 sales in 2023, followed by a slight uptick to 80,375 in 2024.”
BCREA added that while home prices registered a significant increase in the first half of 2023 – essentially recovering around half of what they lost in 2022 – the resurgence “has since given way to a flattening trend as market conditions balance out, albeit at a low level of market activity.”
The association is anticipating annual prices this year to fall by 1.9% lower than 2022 levels, and will only “slightly increase” in 2024 due to a likely recovery in the latter half of the year.
