In a new report, RBC Economics has found that the Bank of Canada’s recent interest rate hikes have had an impact on Canada’s housing market. The study examined housing market data from June and July and discovered that the two 25-basis-point rate hikes in those months resulted in a decrease in month-over-month home sales for the first time in six months.
Although new listings increased by nearly six percent from June to July, resales fell by 0.7 percent nationally in July. This decline in sales can be attributed to the lack of supply, which had been hindering sales across the country. Buyers were struggling to find homes to purchase.
Despite the higher borrowing costs, home prices still slightly increased by 1.1 percent month over month according to the MLS Home Price Index. However, the pace of growth slowed down compared to the previous three months, which had an average increase of 1.9 percent.
Ontario and British Columbia saw the most significant decreases in housing market activity. Municipalities like Fraser Valley experienced a sales decline of over 11 percent, while Toronto saw a significant slowdown of nearly nine percent.
Overall, the report suggests that there is now a more balanced market between buyers and sellers in Canada. The average sales-to-new-listings ratio for the country is currently at 59 percent, indicating a balanced market. A ratio above 60 percent favors sellers, while a ratio below 40 percent favors buyers.
Among major Canadian cities, Calgary has the highest ratio at 82 percent, indicating a market that heavily favors sellers.
The report concludes that the Bank of Canada’s interest rate hikes have had a significant impact on the housing market, resulting in decreased sales and slower price growth. However, the increased supply of new listings has helped to balance the market between buyers and sellers.
Sources:
– RBC Economics report
– MLS Home Price Index
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