The housing correction now runs far and wide across Canada. Early reports from local real estate boards provide further evidence that higher interest rates have taken a huge toll in July. In the Toronto and Vancouver areas, the decline in activity is quickly becoming one of the deepest of the past half a century. Prices are sliding fast, and the exuberance that permeated these markets earlier this year is being replaced by fear. The downturn may be more contained in other markets but unmistaken nonetheless. Even in Calgary\u2014where activity remains well above pre-pandemic levels\u2014property values are easing as buyers dither. While activity had been slowing for a while, Montreal prices likely just passed their peak and are poised to pursue a downward course for the next little while. <\/p>\n
Soaring interest rates have been the catalyst for this widespread correction. Higher borrowing costs have pushed many buyers to the sidelines and reduced the purchasing budget of others. Our expectations for further hikes by the Bank of Canada\u2014another 75 basis points to go in the overnight rate by the fall\u2014will keep chilling the market in the months ahead. We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates. Canada\u2019s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.<\/p>\n