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Special Report

Canada Housing Research Brief

February 2023

Peaking Interest Rates Could Boost Housing
Market, Despite Slow Start to the Year

Housing market continues to correct. Canada’s average single-family home price fell 2.3 per cent month-over-month in January, a 15 per cent drop from the February 2022 peak. While the general consensus calls for a peak-to-trough price decline of 20 per cent, the Bank of Canada’s recent announcement to pause interest rate hikes could aid the nation’s slowing housing market. New listings, despite increasing by 3.3 per cent monthly in January, are down 1.1 per cent when compared to the same time last year. Also, the sales-to-new listing ratio has hardly been changed since June 2022, suggesting that elevated borrowing costs have not yet caused widespread force sales. Price corrections, as a result, could be in the later stages as low listing volumes could provide a floor for falling home values. However, if inflationary pressures continue to prevail and the BoC is forced to increase borrowing costs beyond the current level, a prolonged and deeper correction will likely occur.

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