THUNDER BAY, ONT. — As the Canadian economy continues to rebound from the pandemic, rising energy and commodity prices together with supply chain disruptions and shortages have resulted in Canadian inflation rates reaching the highest level in nearly four decades.
This has prompted the Bank of Canada to raise its policy interest rate at least four times from March to July 2022 with further rate hikes predicted in the near future.
Bob Dugan, a chief economist at Canada Mortgage and Housing Corporation (CMHC), says the rising rates will cause economic growth to slow which will lead to higher unemployment and less wage growth. Coupled with higher mortgage rates, it will make access to home ownership more challenging, he predicts.
“Equally, rising rates will increase construction costs, mainly due to increased financing costs,” he said. “Compounded with surging material costs and labour shortages, this constrains housing supply. Taken together, the Canadian housing markets are expected to experience a downturn by mid-2023.”
Wendy Ferris, a Thunder Bay realtor and owner of Century 21-Superior, doesn’t think it’s going to affect her city as much as a bigger centre such as Toronto, where there was such a surge in prices and buyers were taking on million-dollar mortgages.
“And that’s where it will hurt people,” she said in reference to the large mortgages. “In Thunder Bay, I still see a very strong demand for house sales. We’re busy.”
Ferris says she is watching as people lock into longer-term amortization because they fear interest rates will continue to rise.
“It’s going to hurt when the interest rates knock people out of a price range,” she said, giving an example of someone having to purchase a $350,000 house over their $400,000 preferred house to allocate the interest costs.
“I think that homes are staying on the market a little bit longer now. Buyers are a little bit more cautious when they go and buy a house so the houses are staying on the market a little bit longer, which gives us a little bit more supply.”
Ferris says Thunder Bay is still one of the most affordable places in Canada to buy a house and receives calls from southern Ontario buyers daily who are looking to purchase houses that can be used as rental properties. She added that a 20-per cent government tax is now slapped onto the price of Canadian houses for all foreign buyers looking to buy rental properties, which has been causing them to back out of deals due to the rise in cost.
Sandi Krasowski, Local Journalism Initiative Reporter, The Chronicle-Journal