Strong Demand in The Housing Market Despite High Interest Rates
1.5 min read.
According to the recent announcement by the Bank of Canada, interest rates have been raised by 0.5 percentage points, reaching 3.5%, the highest level seen in 22 years. The central bank has implemented these measures to address inflationary pressures and stabilize the economy. Economists had expected this move to slow down the real estate market, prompting potential buyers to reconsider their options due to expensive mortgages.
However, despite the interest rate hikes, the Canadian housing market continues to display remarkable resilience, with national aggregate home prices rising by 8.5% by the end of the year. The continuous increase in demand for buying houses has surprised the analysts who had predicted a slowdown in the face of rising borrowing costs.
Buyers determined to purchase this year have accepted the reality of higher initial carrying costs, believing that interest rates are at or near peak and will become more affordable soon. Contrary to expectations, the housing market has shown exceptional strength. According to The Canadian Real Estate Association (CREA), the actual national prices in May have moved upward by 19% compared to January 2023, marking a surprising end to the year.
The continuous rise in home prices and the persistent strong demand for properties have motivated buyers to participate in the market actively. However, as the situation remains uncertain, buyers and sellers must keep a close eye on further economic developments and interest rates.
References
Bank of Canada raises policy rate 25 basis points, continues quantitative tightening. Bank of Canada. (2023, July 12). https://www.bankofcanada.ca/2023/07/fad-press-release-2023-07-12/
National statistics. July 14 2023 News Release | CREA Statistics. (2023, July 14). https://stats.crea.ca/en-CA/
Suhanic, G. (2023, July 16). Home prices to end year 8.5% higher, despite Bank of Canada rate hikes ... Financial Post. https://financialpost.com/real-estate/home-prices-end-year-higher-bank-of-canada-rate-hikes
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