Home prices in Ontario are expected to fall next year and here’s why

There may still be some hope for anyone dreaming of owning their own home in Ontario, as a recent housing report indicates prices are expected to fall next year.

The Royal Bank of Canada has predicted how Bank of Canada interest rates could impact the housing market across the country, and it could finally bring good news to potential home buyers in Ontario.

“But with inflation at its highest level in three decades, the Bank of Canada is now changing course, signaling that it will raise interest rates significantly over the coming year. We believe this will change the gives for the market,” the RBC report said. bed.

The Bank of Canada is forecast to raise interest rates to 1.0% and RBC expects them to rise another percentage in six months, the biggest increase the country has seen since the mid 2000s.

Fixed mortgage rates have also risen, but the higher rates will reduce the amount of mortgage future homeowners can claim and the price they can pay, the report says.

“For households earning the median income, for example, rising fixed mortgage rates will reduce the maximum purchase budget by about 15%. This will more than reverse the increase in 2020 and early 2021, when the lower rates provided substantial additional fiscal headroom,” the report read.

So what impact will this have on the Ontario real estate market?

Well, RBC predicts there will be an annual price decline next year in Ontario, and they predict there will also be intense “downward pricing pressure” for the notoriously expensive Toronto market.

But before that happens, house prices are likely to go up first.

“We believe prices will generally peak this spring before weakening slightly over the remainder of this year. However, stronger than ever gains expected so far this year will result in a higher annual average price for 2022 than we previously anticipated,” the report said. bed.

Average benchmark home prices will first rise to 8.1% nationwide in 2022, but RBC expects next year to fall by just over 2%.

For Ontario, RBC forecasts that overall home prices will cost $936,900 in 2022 before dropping to $915,300 the following year.

The cover image of this article was used for illustrative purposes only.

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