Robert Kavcic: Latest News

Signs of recovery in Canada’s housing market after a year-long slump, just as higher borrowing costs are expected to slow much of the rest of the economy, could raise inflation and delay a shift by the central bank to interest rate cuts, analysts said.

interest rates over the last year is starting to throttle the pace of homebuilding, the Canada Mortgage and Housing Corp. (CMHC) warned in a new housing supply report Wednesday.As the Bank of Canada’s interest rates rose substantially through 2022 and early 2023, many homebuyers were priced out of the market and home values retrenched from their pandemic-era highs.

interest rates coupled with new provincial taxes on non-resident buyers could send home prices down more than 10 per cent, according to an analyst with the Bank of Montreal.BMO senior economist Robert Kavcic wrote in a note to clients Wednesday morning that “there is now a full-scale attack on Canadian home prices across various levels of policy.”He cited marked expectations of surging interest rates in the months ahead and new or higher taxes on real estate speculators and non-resident buyers in some provinces as the biggest factors that could see home prices take a hit in the year ahead.Reuters reported this week that money markets are betting the Bank of Canada could raise its overnight rate target by up to 225 basis points before the end of 2022. Such a hike could see the key rate rapidly rise from its current 0.5 per cent level to 2.75 per cent over the next nine months.To do so, the central bank might take the rare step of raising interest rates by half a percentage point at its next meeting on April 13.

home prices reach the stratosphere, calls on the government to bring the housing market back to Earth — possibly with a soft landing — are growing increasingly urgent.Some of Canada’s big banks have recently joined the chorus.“Overheated markets threaten to destabilize the economy down the road if or when a correction occurs, with possible heavy costs for governments,” Robert Hogue at RBC Economics has warned in a note to clients.