Faster-Rising Interest Rates Set to Shake Up the Housing Sector

Summary of the publication

Although runaway real estate prices continue to cause concern, there is light at the end of the tunnel. The rise in mortgage rates, which will be more important than projected a few months ago, will help cool down the resale market. Lower demand from first-time buyers, who generally have more limited budgets, will gradually ease price pressure. Overbidding is expected to eventually recede, helping prices stabilize somewhat by the end of the year. Prices could even drop next year in Quebec and Ontario as households feel a bigger pinch from interest rate hikes. Housing starts will also reflect lower demand, but construction of rental apartments should continue at a good clip. While it may seem hard to imagine now, the residential real estate boom will soon give way to a lull.