A panel of 17 experts in Finder’s Bank of Canada interest rate forecast report foresee real estate prices trending downward throughout the year, with most believing there will be another 10 to 20 per cent decline from prices seen in November last year.

This past December, the Canadian Real Estate Association reported the average home price was $626,318, a year-over-year decline of more than 12 per cent. According to Finder’s panel of economists, the most effective action the Bank of Canada can take to improve housing affordability greatly depends on interest rates.

“[The Bank can] stay the course through tightened monetary policy in order to dampen inflation by reigning in interest-sensitive sectors like housing,” said Derek Holt, vice-president and head of capital markets economics at Scotiabank. “If it eases up too quickly, then house prices may rip higher again and damage affordability once more.”

“The only thing the Bank can do to help housing affordability is keep interest rates so high that it pushes some Canadian households to default on their mortgages…and other Canadian households into a fire sale as they cash out their remaining equity,” added Moshe Lander, a senior economics lecturer at Concordia University. “The solution to Canada’s “unaffordable” housing situation is looser zoning laws and that is a municipal issue not a provincial or federal issue, and certainly not a Bank issue.”

The Bank of Canada hiked the interest rate by 25 basis points on Monday. Over the next six months, all economists do not foresee another hike April, but 18 per cent project one in March, while 12 per cent see a hike coming in June.

Bryan Yu, chief economist lecturer at Central 1 Credit Union, anticipates a pause through 2023 “as higher rates curb economic performance and inflation.”

The majority of  experts (78 per cent) anticipate that Canada would go into recession between now and 2025. One-third believe the country is currently in a recession, or on the verge of one in Q1 2023. Another 6 per cent expect a recession at the end of the year in Q4 2023, while 39 per cent  believe a recession will come at some point in the near future.

“The downturn will create slack in the economy and help lower inflation back to the Bank’s 2 per cent target. After averaging 6.8 per cent in 2022, we expect inflation will fall to 3.8 per cent in 2023 and further to 2.3 per cent in 2024,” says Tony Stillo, director of Canada Economics, detailing a forecast Oxford Economics.

The full research report with further statistics and insights can be accessed here.