29 Jul 2020
Sustained market strength, subject to supply constraints, will be the predominant dynamic in the Canadian housing sector for the rest of the year, according to Royal LePage CEO Phil Soper and Sotheby’s Canada CEO Don Kottick.
In a joint interview with The Financial Post, the two executives highlighted the major role that housing inventory will play in the period immediately after the COVID-19 pandemic eases.
Soper said that home prices largely rely on the balance between supply and buyer activity.
“There are a lot of people who are looking to put roofs over their heads,” Soper said. “We just don’t see the number of homes for sale, the supply side of this, climbing to the point where home prices will collapse.”
Royal LePage’s latest predictions have placed annual growth by year-end at 2.5%.
MORTGAGE RATE FORECAST......BCREA
As the year ends, it's worth reflecting on how significantly the Canadian interest rate environment has changed in just twelve months. One year ago, the Canadian yield curve was its usual upward sloping shape, with markets expecting gradual rate increases by the Bank of Canada. Based partly on those expectations, Canadian mortgage rates were climbing. However, within 8 months the yield curve in Canada had inverted, bond yields tumbled, and Canadian mortgage rates were once again heading lower.
The Impact of Higher Interest Rates
Contrary to what most people seem to believe, it’s not automatic that higher mortgage rates are negative for housing activity. There are lots of historical examples where sales and prices rose along with interest rates. For example, between 1978 and 1980 mortgage rates were headed towards 18% yet sales activity and house prices continued to climb. The reason? As long as people perceive that the price increase will be bigger than the cost of borrowing they will continue to borrow. As soon as the price perception changes then the buying dries up