home prices toronto

Ontario's red hot housing market might actually cool off in 2022

It's no secret that Ontario real estate is excessively expensive, but with inflation at a three-decade high, the Bank of Canada's recent signalling of hikes in interest rates has experts at RBC asking "Will a rapid rise in interest rates finally cool down our housing market?"

It's a question that's been on the minds of many aside from just experts, from those with connections in the real estate biz to investors to prospective buyers that have been priced out of the home-buying market.

For many years, low interest rates have been stoking demand in the housing landscape and allowing easier entry into the market for first-time buyers. But it's also fuelled a boom in development across the country as purchasers flock to buy in, contributing to competition and runaway price growth.

Higher interest rates have been in the cards for some time, and on April 13 The Bank of Canada unveiled a long-expected 50 basis point hike to 1.0 per cent, with the expectation that the Bank will raise its policy rate a further 100 basis points to 2 per cent within six months.

This would be a slight jump over the pre-pandemic levels of 1.75 per cent, and represent the single-largest increase in over a decade and a half. The last time levels were that high, back in 2005-2006, Facebook and YouTube were in their infancy and the Leafs were only one year past their last and still-most-recent playoff series win.

Experts at RBC are suggesting that rising interest rates, along with measures unveiled in the federal budget and by the provincial government, could be a game-changer in overblown housing markets like Ontario's.

These combined hikes and government measures could have prospective buyers thinking twice about their investment, which RBC experts suggest will lead to a more noticeable slowdown in home resale activity than was previously anticipated. The expectation is that prices could peak this spring, followed by mild price correction.

The RBC report states that "We expect downward price pressure to be more intense in Vancouver, Toronto and other pricey markets. This will translate into larger annual price declines in 2023 in British Columbia and Ontario."

Lead photo by

Karen Longwell

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