Bank of Canada sees signs of cooling in hot housing market
OTTAWA, June 16 (Reuters) – The Bank of Canada is starting to see signs of a slowdown in the country’s scorching real estate market, although it will take time to get back to normal, Governor Tiff Macklem said on Wednesday.
The industry surged in late 2020 and early 2021, with house prices rising sharply amid investor activity and fear of missing out. The national average selling price fell 1.1% in May from April, but was still up 38.4% from May 2020.
“You are starting to see the first signs of a housing market slowdown. We expect supply to improve and demand to slow, so we expect the housing market to balance out better. “Macklem said.
“But we think it’s going to take some time and it’s something we are following closely,” he told the Canadian Senate Banking Committee.
Macklem reiterated that the central bank had seen evidence that people were buying homes with the intention of selling them at a profit and said the recent price hikes were not sustainable.
“Interest rates are exceptionally low, which means they ultimately have more room to grow,” he said.
Last year, the central bank cut its key interest rate to an all-time high of 0.25% and Macklem reiterated that it would stay there at least until the economic downturn was completely absorbed, which should be in the second half of 2022.
“The economic recovery is making good progress… (but) a full recovery will take some time yet. The third wave of the virus has been a setback,” he said.
The bank experienced a slowdown in growth in the second quarter of 2021 after a strong economic recovery from the COVID-19 pandemic earlier this year, he added.
Reporting by David Ljunggren and Julie Gordon; Editing by Leslie Adler
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