A Bubble, Eh? Scotiabank’s “Very Pessimistic” Outlook Is Real Estate Prices Rise 10% Here we go again with another prediction! Canadian real estate is so bubbly a large bank sees prices soaring in a downturn. Scotiabank (BNS) reported earnings today, filing the bank’s macroeconomic forecasts. These forecast scenarios help to determine outlook, and include a base case, optimistic case, and two pessimistic ones. Even in the bank’s worst-case scenario, they forecast home prices will still rise at a breakneck speed.
Economists are predicting that Canadian home prices will fall as much as 20 percent this year as higher interest rates begin to hit the country’s booming real estate market. Mortgage rates are expected to climb again as the Bank of Canada aggressively hikes interest rates to deal with runaway inflation. Economists expect higher borrowing costs will lead to a significant price drop in some of the hottest markets.
Canadian Senior Homeowners Borrowed $5.4 Billion In Reserve Mortgage Debt Canada’s house rich but cash strapped Boomers are back to tapping their home equity. Regulatory filings with the Office of the Superintendent of Financial Institutions (OSFI) show reverse mortgage debt hit a new record in February. Over the past couple of years, the segment had seen a slowdown. However, growth is now suddenly back, and the balance grew by nearly a fifth in just one year.
Greater Toronto real estate slowed last month and it’s not a total mystery. Demand is eroding due to higher rates and buyer exhaustion. This has led to healthier levels of relative inventory, allowing price growth moderation. Economists warn once prices slow (or fall), more investors will be motivated to sell. Considering investors represent over a quarter of buyers, that’s a lot of potential inventory that can drive prices lower.