Episode #239 "Interest Rates and the Canadian Housing Market: What Does the Future Hold?"
The Bank of Canada recently announced an increase of 0.25% in interest rates, bringing it to 4.50%. However, lenders have started dropping fixed rates and the BOC is forecasting inflation to reach 3% in mid-2023 and 2% by 2024. The Governing Council has stated that they are prepared to increase the policy rate if needed to bring inflation back to the target of 2% and are now monitoring closely.
The Canadian housing market is also seeing an increase in sales activity, due in part to the uptick in immigration. In the year from July 2021 to July 2022, BC saw an influx of 83,200 immigrants, with 53,603 in Q3 alone, a 78.1% increase over the same period last year. This is the first time ever that the province has seen 50,000 immigrants in a single quarter.
But is this trend sustainable in the long term? As more people immigrate to Canada, there will be more money flowing into the market, leading to increased sales and demand for housing. However, some might argue that the market will eventually cheapen. It's important to consider both short-term and long-term trends when making predictions about the housing market.
While the Bank of Canada's next meeting is on March 8, it remains to be seen what major impacts the recent interest rate hikes have created other than bringing the current rate of CPI inflation down to 6.3%. The other trend which remains to have a clear impact on the housing market is that of the immigration trend. However, one thing is for certain, the future looks promising with a strong commitment from the Governing Council to restore price stability for Canadians.
In conclusion, the Canadian housing market is in a state of flux, with interest rates possibly no longer on the rise and immigration definetly on the uptick. It's impossible to predict the future with certainty, but it's important to keep a close eye on the long-term trend and the impact of the various economic factors at play. With more people and more money coming into the market, the future looks bright for the Canadian housing market.