I won’t bore you with all the nitty gritty, instead I have noted below for you the Key Takeaways from The Royal Bank of Canada for Canadian Real Estate. I echo these sentiments often and think it is valuable to understand them because I am also a strong believer in the mantra of ‘if you know better, you do better.’ Thank me later.
- During the pandemic, the household savings rate increased to historic levels – there is now C$280 billion sitting in bank accounts. With this increased purchasing power, we expect continued strength in housing demand for the foreseeable future.
- The federal government’s immigration targets will result in over a million new immigrants over the next three years, putting additional pressure on demand for housing.
- Housing affordability will continue to be a challenge in the near term as prices continue to increase, interest rates rise and much of the strong income gains will decline – as sizeable government programs will be rolled back.
- Despite the disappointing GDP figures, RBC believes the Bank of Canada will hold course and overnight rates will be 50 basis points higher by the end of 2022 relative to today. There is a small risk of a larger move in interest rates – if it were to happen, it will significantly hit affordability and the housing market.
- RBC’s base case scenario is for the housing market to cool, not collapse. We expect prices to flatten in the second half of 2022.