Canadian real estate prices expected to continue rising
Rumours of an imminent interest rate hike did not materialize, as the Bank of Canada opted to maintain its benchmark rate at a record-low 0.25 per cent in its scheduled interest rate announcement today. The move (or lack thereof) comes despite soaring inflation and a stronger-than-expected economic recovery. The Bank noted that economic slack has been absorbed, but said the Omicron variant of COVID-19 continues to weigh on growth.
Globally, good are in high demand, with supply-chain disruptions impeding production and transportation pushing inflation upward. The Bank projected global GDP growth to ease from 6¾ per cent in last year, to 3½ per cent in 2022 and 2023.
Meanwhile, Canada’s economy proved stronger than expected in the third and fourth quarters, rounding out 2021 at +4½ per cent. Entering 2022, the Bank highlighted economic momentum, pointing to employment growth, a tighter labour market, job vacancies, strong hiring intentions and rising wages as positive factors. The Bank forecasts Canada’s economy to grow by four per cent this year and another 3½ per cent in 2023.
“CPI inflation remains well above the target range and core measures of inflation have edged up since October. Persistent supply constraints are feeding through to a broader range of goods prices and, combined with higher food and energy prices, are expected to keep CPI inflation close to five per cent in the first half of 2022. As supply shortages diminish, inflation is expected to decline reasonably quickly to about three per cent by the end of this year and then gradually ease towards the target over the projection period,” said the Bank. “Near-term inflation expectations have moved up, but longer-run expectations remain anchored on the two-per-cent target.”
On a final note, the Bank also expects elevated housing market activity to continue putting upward pressure on prices, which aligns with the 2022 Housing Market Outlook, where RE/MAX Canada anticipated average residential prices in the Canadian real estate market to increase 9.2 per cent this year, amidst high demand and a severe housing supply shortage.
The next Bank of Canada interest rate announcement is scheduled for March 2, 2022.
