Canada’s Housing Market Forecast To Cool In 2022 As Interest Rates Rise

Canada's housing market is expected to cool next year as interest rates increase, according to a new survey of analysts.

A rush to purchase homes ahead of expected increases in Canadian interest rates next year is boosting the housing market in the final quarter of this year, with prices rising 18.2% in October compared to a year earlier.

However, the poll conducted for the Reuters news agency found that analysts expect Canada’s housing market to decline significantly in 2022.

Average house prices in Canada are expected to rise 18.6% this year but are forecast to slow to 5.0% in 2022 and 2.0% in 2023, according to the poll of 15 market analysts which was conducted from November 17 to December 6.

Only two respondents in the poll said they expect Canadian house prices to fall in 2023.

Asked what would have the biggest impact on house prices next year, nine of 14 respondents said higher interest rates or tighter monetary policy. The remaining five cited supply constraints.

A follow-up question on how many basis points of interest rate hikes would significantly slow housing market activity had a median forecast of 100, with predictions in a range of 75 to 175 basis points.

Canada's central bank is expected to start raising interest rates by the end of the third quarter of next year (2022). All 15 analysts who answered a question about affordability over the next two to three years said it would worsen.