Following a move by the Bank of Canada to increase its policy rate this week, one real estate developer said the latest rate hike provides a sense of certainty to the market, which he thinks will heat up once interest rates stop moving higher.
Barry Fenton, president and chief executive officer of Lanterra Developments, said in a panel discussion with BNN Bloomberg Wednesday that interest rates are not the “full driver” of the real estate market. He said that he was “actually pretty happy” that the recent rate hike brought certainty.
On Wednesday, the Bank of Canada delivered a 25 basis point increase to its policy rate, bringing it to five per cent. The move marked the highest point for the Bank of Canada’s interest rate in 22 years.
Fenton said even if rates were increased by one per cent this week that “as long as we knew that there was certainty in the market and we were done, I think the market will continue to do very well.”
“I think that once we stop the interest rate increases, or at least people think that there’s certainty, we’re going to be way on fire,” he said.
Part of Fenton’s optimism in the real estate sector has to do with historically large population increases.
According to Statistics Canada, the nation’s population increased by an estimated 292,232 people between Jan. 1, 2023 and April 1, 2023.
Robert Kavcic, a senior economist at BMO Capital Markets, said in the panel Wednesday that Canada has a strong supply and demand relationship that supports Canada’s housing market.
“I would completely agree that fundamentally we have an extremely strong supply and demand situation in Canada and specifically Ontario, underpinning the housing market,” he said.
“And that’s why it’s really hard to drive a material long-term correction because there is that fundamental demand there.”
Kavcic said that the country “just cannot build enough, especially single detached,” but there was a problem in leaving interest rates at levels which were “far too accommodative” during 2021. He said this caused “a lot of froth to build up on top of that fundamental base,” but higher interest rates over that last year and a half have “taken that froth out of the market.”
“So we’re at a level where rates are closer to where they should be, maybe a little bit on the restrictive side, that froth has gone and the market has rebalanced itself based on those underlying fundamentals,” he said.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
