As expected, the Bank of Canada held interest rates steady this week, although increases are on the horizon and additional government measures to combat inflation and increase housing affordability are spurring debate across the nation.
Read about potential speculation and capital gains taxes, as well as the impact of rising rates on both first-time and long-time homebuyers in Livabl’s weekly roundup of Canadian housing news and trends.
Rising rates will turn up heat on first-time buyers: While rising interest rates could cool hot housing markets and impact affordability, they’ll increase the difficulty for first-time buyers to qualify for mortgages in 2022. The Toronto Star examines the obstacles facing those entering the housing market as politicians squabble over proposed initiatives, including a $4-billion “housing accelerator fund” to help cities increase supply, a more flexible first-time homebuyers incentive and a rent-to-own program.
Toronto home prices spur speculation tax talk: According to the Toronto Regional Real Estate Board, the average price of a home in the GTA rose by 21.7 per cent year-over-year to approximately $1.16 million. Calling the recent spike “insanity,” Toronto city councillor Mike Colle is planning to introduce a motion asking the Ontario government to implement a speculation tax. CBC News reports on Colle’s reasoning and looks back at lessons learned from 1974, when the Ontario government introduced a 50 per cent speculation tax on non-principal residences.
Putting houses in order before interest rates rise: A recent BNN Bloomberg survey found that 29 per cent of Canadian mortgage holders don’t understand the effect higher interest rates could have on their mortgage. Helping educate those in need, RE/MAX has put together a primer to outline how the rate hike could impact both households and Canada’s real estate market, as well as steps homeowners can take to prepare themselves before rates rise in 2022.
Government rightfully reluctant to rein in housing?: A Vancouver Sun editorial notes that “Canada’s housing sector has become an out-sized behemoth in the country’s economy,” with investors owning approximately 20 per cent of Canadian homes. And while the Bank of Canada and federal policymakers could rein things in with rate increases, tighter mortgage rules or capital gains taxes, there are fears that tinkering with the nation’s housing market could lead to a recession.
Home prices expected to keep rising before 2023 slowdown: Fitch Ratings recently released its forecast for 2022, noting that Canadian home prices are expected to increase between five and seven per cent next year before levelling off in 2023. While strong demand, low inventory and rising construction costs will contribute to increased prices over the next year, Fitch sees higher mortgage finance costs and inflation pressure eventually slowing both prices and demand.
