New home prices are expected to continue rising during the first half of 2022, according to Statistics Canada.
The impending interest rate hike by the central bank is likely to impel further price growth “as buyers attempt to secure lower interest mortgages before the Bank of Canada announces rate increases,” StatCan said.
However, “since mortgage interest rates are currently at historically low levels and Canadians gathered a record amount of savings during the pandemic, the potentially upcoming rate increases may still not dampen the buoyant housing market in the near future,” StatCan predicted.
Recent polling by Bloomberg suggested that Canadian banks are expecting BoC interest rate hikes to take place as early as this week, considering that inflation pressures are not abating and that the national economy seems to be reaching its limits.
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Another factor that will propel home price growth is the chronic shortage of housing supply, particularly in the most contested markets.
“It will take time for the builders to bounce back to a pace that will allow a balanced supply and demand,” StatCan said.
The latest data from the Canadian Real Estate Association showed that the number of new listings fell by 3.2% from November to December, with supply boosts in the Greater Toronto Area dragged down by declines in Greater Vancouver, Montreal, and several other areas in Quebec. The national sales-to-new listings ratio stood at 79.7%, much tighter than the long-term average of 54.9%.
“This will continue to put upward pressure on prices until inventory can be replenished. As well, building construction materials will continue contributing to the rise of new home prices in the short term, as supply chains continue to struggle with backlogs spurred by the COVID-19 pandemic,” StatCan said.