RBC Expects Soft Landing for Canadian Real Estate Market

RBC Expects Soft Landing For Real Estate MarketRBC’s recently released housing forecast for Canada includes a number of interesting points about the Canadian housing market, both currently and moving forward:

  • An increase in interest rates over the next two years will cool Canada’s resale market and slow down home price growth, but won’t cause either to decrease below current levels.
  • Essentially, while most reports focus on the negative effect that interest rate increases will have on the housing market, they fail to account for the simultaneous positive effect that an increasingly stronger economy will have. RBC predicts the two effects will essentially cancel each other out.
  • Current real home price growth (that is, home price increases minus inflation) is in the 1.2-1.6% range, well below the 10-year average of 5.4-6%.

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The latest RBC forecast for the Canadian real estate market is in line with what this writer has been saying for some time, namely, that the market will slow down next year, and that prices will moderate but not fall. In general, we can realistically hope for an extended period of more “normal” market conditions where there is more supply of homes for sale, fewer bidding wars, increasing but still very low mortgage rates and stable, slowly increasing home prices. If so, this will be a big improvement over the volatility of the last few years for both buyers and sellers!