We should be solving Canada's housing problem by focusing on supply, not demand: Chief economist
Home prices in some of Canada’s most populated cities rose in May, showing resilience amid the heightened interest rate environment, a new report has revealed.
The price of a home jumped eight per cent in Toronto, and seven per cent in Vancouver, over the past four months relative to trough levels in January 2023, according to data released by Keefe, Bruyette & Woods on Tuesday.
“Canada's housing market showed further signs of recovery during May with prices rising, sales activity heading back to more normal levels, and tight supply that suggests Canadians are not yet feeling any material impact from higher interest rates,” it said.
The Bank of Canada’s overnight lending rate currently stands at 4.50 per cent ahead of the bank’s next interest rate decision set to be released Wednesday.
Total sales of existing homes within Canada's six largest cities also rose by five per cent year-over-year, which was roughly in line with the prior 10-year average for the month of May, the data showed.
The strength throughout Canada’s housing market continues to be spurred by supply shortages, which fell modestly across the board from already low levels the month prior, the report said.
An increase in home prices and sales is regarded as a positive for the country’s Big Six banks, which stand to benefit from the uptick the report said. However, it cautioned that continued interest rate hikes could be a headwind to mortgage renewals.
The report forecasted at least one more rate increase in 2023, with the possibility for a second.
“We believe higher rates in the near-term could slow the recent momentum in housing, assuming mortgage rates follow,” it said.