Canadian home prices to be flat this fall amid high interest rates: report

A new Re/Max Canada report forecasts the country’s real estate market will soften this fall with average home prices predicted to remain flat as the housing market deals with high interest rates and a lack of homes for sale.

“We’ve been in this kind of stalemate or stagnation for several months now,” said Christopher Alexander, president of Re/Max Canada.

“We’ll see more of the same for the remainder of the year.”

Mortgage rates have risen sharply as the Bank of Canada hiked interest rates in an effort to bring inflation back to its target of 2%.

Alexander said younger Canadians — gen Z and millennials — are highly sensitive to interest rate fluctuations, affecting their decisions to get into the housing market.

He said consistency from the Bank of Canada on interest rates could help restore confidence among buyers but inventory levels will continue to be impacted as new homes take time to build.

In the fall outlook report released Tuesday, Re/Max predicts there will be a few outliers where home prices are expected to increase, including the Greater Toronto Area, Calgary and Sudbury, Ont.

Prices in Greater Toronto are expected to rise 2.5% on average by year-end, Calgary prices are seen rising 4.5%, while Sudbury prices are forecast to increase 5%, according to the report.

Interprovincial migration to provinces with more affordable housing options, such as the Prairies, could continue despite shrinking inventory, Alexander said.

“Immigration numbers are off the charts,” he said. “That’s keeping prices right across Canada relatively in check, but also pushing prices higher in affordable provinces. There’s not enough product to meet those demands.”

In Edmonton, the brokerage expects prices to rise 2% by year-end.

According to a Re/Max survey that accompanied the report, 33% of Canadians who were interested in buying and/or selling a home in the next 12 months said they will wait and see how interest rate changes play out.

Half of the survey respondents, or 51%, said further interest rate increases this year would not change their financial situation or affect their plans to buy or sell a home.

Alexander said the survey highlighted two groups of people — one worried about interest rate hikes and the other concerned about inventory levels in the market.

“It’s been tough to predict this year because you’ve got the Bank of Canada raising and pausing [interest rates],” he said.

“What’s really needed is stability from Bank of Canada so that buyers and sellers can make better-informed decisions.”

The online survey of 1,517 Canadians was done by Leger between July 21 and 23, with a margin of error of +/- 2.5%, 19 times out of 20.