House prices throughout Canada are forecast to fall as much as 17.5% from their peak, according to a new poll by the Reuters News Agency.
The survey of market analysts found that a doubling this year in the average five-year mortgage rate to nearly 5% has led to a rapid cooling of Canada’s housing market and prompted a steep drop in prices that is expected to accelerate in coming months.
House prices in Canada rose more than 50% during the pandemic, and many analysts say a correction is long overdue.
Now, with a debt to net disposable income ratio of 1.85, Canadian households are among the most indebted in the world and vulnerable to higher interest rates, which have been rising at a steady clip this year to dampen inflation that is at a 30-year high.
The poll found that most market analysts feel that house prices in Canada need to fall as much as 25% from their peak to make them more affordable.
After rising 11.8% this year compared with 2021, average house prices are forecast to drop as much as 17.5% in the coming year before rebounding in 2024, according to the poll.
Housing starts in Canada declined 11% in October this year as sellers held off on listing their property and rising borrowing costs hurt demand.
