Canada’s largest bank has downgraded its outlook for the housing market and now forecasts a “historic correction,” worse than any national decline seen in this country in the past 40 years.<\/p>\n
Soaring inflation has put the Bank of Canada on a course of aggressive hikes that will take its policy rate to restrictive levels by the fall, wrote RBC assistant chief economist Robert Hogue in the report that came out Friday.<\/p>\n
“This will send more buyers to the sidelines, especially in British Columbia and Ontario where affordability is extremely stretched,” he said.<\/p>\n
RBC now expects home sales to fall nearly 23% this year and 15% next year, and national benchmark prices to drop more than 12% from peak to trough by the second quarter of 2023.<\/p>\n
The 42% drop in home sales from the peak in early 2021 will exceed the declines seen in the past four national downturns, Hogue said. In 1981-82 and again in 1989-1990 sales fell 33%; they fell 38% in 2008-09 and 20% in 2016-2018.<\/p>\n
The 12% decline in prices by early 2023 will be the steepest correction in the past five housing downturns, he said.<\/p>\n
The housing correction first began to take hold when the Bank started to hike rates in March, but the 100-basis point-rise on July 13 — an increase that brought variable rates within sight of fixed rates — will speed the cooling, Hogue said.<\/p>\n
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