The bank now expects home resales to climb 16 per cent this year, to 636,700 units, and predicts the RPS House Price Index, which measures appraised values, will jump 13 per cent, to $697,400. The bank’s previous forecast had home resales increasing 6.5 per cent and prices rising 8 per cent.
“Canadian policymakers mostly ignored calls for forceful action,” RBC senior economist Robert Hogue said in a note on the updated forecast.
Qualifying for a mortgage became slightly tougher in June, and more homeowners listed their properties for sale, but Mr. Hogue said those two factors would not make a difference to buyers “who continue to try to outbid each other amid exceptionally low inventories and fast-rising prices.”
In April, the federal government proposed a tax on vacant homes owned by non-residents – similar to one in Vancouver and one approved by Toronto’s city council – but it has not yet been implemented. The goal of such taxes is to increase the housing supply by encouraging homeowners to sell or rent their properties.
“While the light touch may be of comfort to some, in our view it only prolonged the much-needed rebalancing of Canada’s housing market,” Mr. Hogue said.
Many economists, including Mr. Hogue and at Bank of Montreal, have been calling on policy makers to calm the frenetic housing market. Since the start of the pandemic, low mortgage rates and demand for single-family homes have pushed prices up. Smaller cities and rural areas have seen some of the steepest increases, with prices rising as much as 50 per cent in one year.
The average price of a home in the Toronto region topped $1-million earlier this year, and places that were once considered affordable have become unattainable for more residents.
The typical price of a detached house in Guelph and Kitchener-Waterloo in Ontario and Chilliwack, B.C., is now more than $800,000, according to the Canadian Real Estate Association’s home price index, which adjusts for expensive purchases. That is about $200,000 higher than a year ago.
Even with lower interest rates, RBC estimates the spike in home prices has led to monthly mortgage payments increasing $330, to $2,500, for a typical house in Canada.
It now takes much longer to save for a home purchase. In Toronto, the number of months required to save for a down payment tripled, to 277, in one year, according to National Bank of Canada’s housing-affordability monitor. The number of months required to save for a down payment in Hamilton is now 63; in Vancouver, 317; in Montreal, 37.
“Home ownership will become a more distant dream for an increasing number of Canadians. And a heavier debt load will come to those who will realize it,” Mr. Hogue said.
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