The housing sector's momentum might encounter headwinds, analyst says
Canadians’ housing purchasing power in 2022 appears to be in peril due to higher home prices and mortgage rates, according to a veteran finance markets observer.
In particular, a return to pre-pandemic mortgage rates might derail the national housing market’s momentum next year, financial analyst Christopher Liew said in a recent contribution to The Motley Fool.
“Affordability is already a concern before higher interest rates take effect next year,” Liew said. “The Bank of Canada expects elevated inflation until the first half of 2022 before it tapers toward 2% in the back half.”
Polling by the Bank of Canada at the beginning for Q4 showed that Canadians are keeping their expectations for wage growth and overall purchasing power moderate. Over the past year, perceptions of wage growth fell to 1.2%, below the historical average as measured by the central bank.
Read more: Fixed vs variable rates – what direction will debate take in 2022?
Some of the reasons cited by Canadians who have modest expectations for wage growth and purchasing power were labour market volatility, collective agreements that have already defined wage growth trajectories, and the growing importance of better work-life balance.
Vulnerable sectors such as minorities, Indigenous people, and people with disabilities also tended to believe that they might leave or lose their jobs in the next year, the BoC said.
