Bank of Canada has said it is not seeing the decline in house prices it had expected

Bank of Canada has said it is not seeing the decline in house prices it had expected, per the Globe and Mail.

The Bank of Canada revealed that the impact of higher interest rates on home prices has been less significant than anticipated due to a persistent shortage of housing in the country, preventing a substantial decline in property values. Despite the benchmark interest rate reaching 5%, a considerable increase from 0.25% in March 2022, the average home price nationwide has only experienced a moderate 13% decrease.

Senior Deputy Governor Carolyn Rogers emphasized that the usual correlation between house prices and interest rates has not played out as anticipated, attributing this deviation to the structural housing supply deficit in Canada. Until this shortage is addressed, interest rates alone may not be sufficient to restore housing affordability, she added.

Bank of Canada Governor Tiff Macklem highlighted the role of structural issues in the housing market, contributing to elevated inflation and complicating the central bank's efforts to curb consumer price growth. After a brief rebound following the Bank of Canada's pause in rate hikes, home prices began declining again, reaching an average of $741,400 in September.

Despite government initiatives, such as tax breaks for developers and increased financing support, challenges persist in the quest for enhanced housing affordability.