Joining recession calls, CMHC expects home prices to fall 14% next year from 2022 peak – National

The Canada Mortgage and Housing Corp. is calling for a steeper decline in the Canadian housing market amid higher-than-expected inflation and interest rate hikes so far this year.

The Crown corporation said in an updated housing outlook released Thursday that it believes the national average home price in Canada will fall 14.3 per cent by the second quarter of 2023, as compared with the historical peak of $770,812 seen in the first quarter of this year.

Back in July, CMHC had said that a “high interest rate scenario” would see average home prices decline five per cent over the same period.

Read more:

Royal LePage expects Canada home prices to end year down 0.5%, ‘erasing the gains’ of Q1

CMHC is also joining a growing chorus of forecasts that expect Canada will fall into a recession in the near future, predicting the national economy — of which housing represents a significant chunk — will hit the downturn before the end of 2022.

Story continues below advertisement

The agency said it expects the recession to be “shallower” than most, a sentiment shared among Royal Bank of Canada and Deloitte, which have also forecast a looming recession.

Click to play video: 'Will Canada see a recession by the end of 2022?'

Will Canada see a recession by the end of 2022?

Driving the housing market declines are rising interest rates from the Bank of Canada, which seeks to tamp down inflation by cooling spending demand. CMHC expects the central bank’s policy rate to hit four per cent by year’s end, up from 0.25 per cent at the start of 2022.

The agency said in its report that once interest rates stabilize, demand should return, putting upward pressure on home prices again. It expects the average home price will rise 2.1 per cent in 2024.

“Canada’s house prices will resume their upward trend in the second half of 2023 as demand rises with the recovery in economic and income conditions and mortgage rates begin normalizing,” CMHC said.

Story continues below advertisement

An ongoing housing supply shortage in the country will limit declines in home prices, CMHC noted.

The agency added that drops in sale prices will not see housing affordability meaningfully improve, as rising rents, higher mortgage rates and reduced household income in 2023 will limit renters’ ability to achieve home ownership.

More to come.

Click to play video: 'How are labour shortages affecting Canada’s housing prices?'

How are labour shortages affecting Canada’s housing prices?

&copy 2022 Global News, a division of Corus Entertainment Inc.

Source link

Denial of responsibility! galaxyconcerns is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave A Reply

Your email address will not be published.