Among the main factors inflaming the Canadian residential real estate segment is runaway price growth, particularly in crucial hubs like Toronto, Vancouver, Ottawa, and Montreal.
Charles St-Arnaud, chief economist at Alberta Central and former Bank of Canada economist, said that the overheated activity in these markets – which collectively account for some 50% of the national population – might force the central bank to make “extremely careful” adjustments to interest rates should the need arise.
This cautious approach will be necessary since the historically low rates are conducive to better affordability, St-Arnaud explained.
“The housing market will probably be the first casualty of higher rates,” St-Arnaud said. “When rates go up, that affordability will disappear very, very quickly.”
Even something as small as a 25-basis-point hike “will have more impact than we’ve seen over the past 20, 30 years,” the economist added. # SANDI HALPERN # SOLD # LEASED # REAL ESTATE MARKET # INTEREST RATES
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