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Canada’s biggest bank is updating its forecast for the country’s housing market through 2017 as a result of a strong first quarter of sales and price gains.
In January, RBC had predicted that national home resales would drop 0.6 per cent this year and 6.4 per cent in 2017.
For British Columbia, the bank expected existing home sales to plummet 10.1 per cent next year, following a 3.7 per cent increase this year. In Ontario, RBC said transactions would be down 0.7 per cent this year, and then crumble by 7.6 per cent the following year.
“We’re probably going to bump up those numbers given the strength year to date,” said Robert Hogue, senior economist for RBC’s economics research department.
The Canadian market, driven by the Greater Toronto Area and Greater Vancouver, has repeatedly defied bearish industry observers’ expectations, and in March sales were up 12.2 per cent year over year and prices surged 15.7 per cent.
“Year to date price increases have been much stronger than we’ve expected,” Hogue told BuzzBuzzHome News recently, noting the slowdown RBC previously called for won’t be as drastic as anticipated.
The January forecast saw composite resale prices in BC growing by 6.4 per cent and 1.5 per cent in 2016 and 2017, respectively. Meantime, Ontario gains were pegged at 4.5 per cent this year and 1.3 per cent the next.
However, while the updated forecast should appear rosier by comparison, the general narrative remains unchanged.
“Our story has long been a rise in interest rates will cool housing demand in Canada,” Hogue explains. “We have a first rate increase by the Bank of Canada in the second quarter of next year,” he says.
The economist explains RBC’s forecast is “more event driven than time driven.” However, Hogue admits “our expectations that interest rates would rise have been off,” adding, “We’re not the only ones where were off.”
“Just because that interest rate hike has been delayed, that story is still there,” says Hogue.