There have been heavy concerns on how the Canadian economy is going to recover post-pandemic, however, statistics have come out showing that the economy is doing better than most had expected. In this blog, we are looking into how the Bank of Canada is holding down a low overnight lending rate, and how this will affect the housing market in Canada.
Bank of Canada Holds Policy Rates at 0.25%
Much has changed since the last decision of the Bank of Canada. With the lockdown implemented in late 2020 and the new travel restrictions placed in early 2021, many fear that the Canadian economy will have a difficult time recovering. On the contrary, the Q4 growth came in at a surprisingly strong 9.6% annual rate double the pace expected by the public. Economist now expects the economy to expand at a 5.5% pace this year compared to a 4% projection by the Bank of Canada in January.
Canadian Housing Market Still on Fire
Based on the Canadian Real Estate Association (CREA) released statistics, national home sales hit another all-time high in February 2021. The number of newly listed homes rebounded by 15.7% in February, recovering all the ground lost to the drop recorded in January. The February numbers came in as the second-highest on record. The long-term average for the national sales-to-new listings ratio hit a high of 54.4%. New listings going live on a daily basis. However, the listing number is not the only increase, property prices also show an upward trend. According to Aggregate Composite MLS® Home Price Index (MLS® HPI), purchase prices were up 5-10% in Great Vancouver. In some hot markets such as Oakville-Milton and Ottawa, incline range from 20-25%.
At end of the day, although mortgage rates are slowly backing up now, they are still below the pre-pandemic level. With the number of listings available on the market, and the Bank of Canada holding down the Policy Rate, it could be a good time for one to enter the market.
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