COMM1133
Professor Robyn Wilson
Critical Analysis Report Questions
Amber Nolan
November 19, 2023
1) What impact does having high interest rates and high housing prices have on both the
buying and selling market?
In the buying and selling market, high interest rates and high housing prices leaves a negative
impact. According to CREA President Larry Cerqua, buyers are looking for interest rates to neutralize
while sellers for the most part do not need to sell (Evans, 2023) . This leads to a slowing of the overall
market for both buyers and sellers as the Bank of Canada notes in a recent press release where they
stated their intentions to keep the current interest rate at 5%, as “there is growing evidence that past
interest rate increases are dampening economic activity and relieving price pressures” (Bank of Canada
Maintains Policy Rate, Continues Quantitative Tightening, 2023) that are affecting our current economy.
2) Outside of interest rates, what other factors do you feel have an impact on housing prices?
Give at least two examples.
Outside of interest rates, other factors I feel that have an impact on housing prices is a
combination of high numbers of immigration with a shortage of available housing. Consistent with the
Bank of Canada’s October 2023 press release regarding interest rates, they note, “The surge in Canada’s
population is … adding to housing demand and consumption.” (Bank of Canada Maintains Policy Rate,
Continues Quantitative Tightening, 2023). The Fraiser Institute posits, “the gap between the number of
homes produced and the number needed has never been so wide” as data collected by them from 1972
– 2022 indicates that only one home was built for about every 4 people currently residing in the country
(Filipowicz, 2023). This increases the demand for available housing for not only the current population,
but the population increase that Canada has planned in the coming years, as well as those displaced by
war or climate seeking refuge.
3) For current homeowners, what kind of effect, if any, do rising interest rates have? Give at
least two examples.
For current homeowners, some may not feel the effect for another few years as fixed-rate
mortgages come up for renewal under new, much higher interest rates. Though, for many, the effect is
currently being felt as a survey of 1,000 Canadians revealed that 21.8% cannot currently afford their
mortgage payments as of August 2023 (Ovid, 2023). As homeowners feel the squeeze of rising rates,
their household budgets have been reduced, with over 49% of Canadians in a separate survey choosing
to forgo meat or proteins at the grocery store to reduce the price of their bill (Lee, 2023).
4) What are your predictions for the future of the Canadian housing market? What trends do
you think we will see in early 2024? Use research to support your opinion.
It is very hard to make predictions for the future of Canadian housing market due to how volatile
the market has become post-pandemic. Researchers and analysts depend on historical data to forecast
for the future but the past three years has been unprecedented, which has left them making educated
guesses based on feelings more so than historical data. Many analysts have predicted that some
Canadian housing markets such as Toronto and Vancouver may never be considered affordable again to
the average Canadian (Siekierska, 2023). It is likely that early 2024 will look a lot like late 2023 as house
sales have slowed significantly over the year due to high interest rates. Some predict that the Bank of
Canada will no longer raise rates any higher, but many had made a similar prediction in the spring of
2023 which turned out to be wrong, as the Bank did raise rates and sales slumped dramatically (Sondhi,
2023).
Citations
Evans, P. (2023, October 13). Canadian home sales slumped again in September — and benchmark price
went down, too. CBC. https://www.cbc.ca/news/business/crea-housing-september-1.6994989
Bank of Canada (2023, October 25). Bank of Canada maintains policy rate, continues quantitative
tightening. Bank of Canada. https://www.bankofcanada.ca/2023/10/fad-press-release-2023-1025/
Filipowicz, J. (2023, October 13). Canada’s gap between homebuilding and population growth has never
been wider: op-ed. Fraser Institute. https://www.fraserinstitute.org/article/canadas-gapbetween-homebuilding-and-population-growth-has-never-been-wider
Ovid, N. (2023, August 18). Posthaste: Some Canadians are regretting their mortgages amid high
interest rates. Financial Post. https://financialpost.com/news/some-canadians-regrettingmortgages-high-interest-rates
Lee, M. (2023, October 4). Nearly half of Canadians choosing cost over nutrition when buying food due
to high prices: survey. CTV News. https://www.ctvnews.ca/canada/nearly-half-of-canadianschoosing-cost-over-nutrition-when-buying-food-due-to-high-prices-survey-1.6589589
Siekierska, A. (2023, September 5). Toronto housing market would stay unaffordable even in deep
recession: report. Yahoo! Finance. https://ca.finance.yahoo.com/news/toronto-housing-marketwould-stay-unaffordable-eve-deep-recession-report-174135690.html
Sondhi, R. (2023, October 4). Provincial Housing Market Outlook: Higher Rates to Weigh on, But Not
Upend, Canadian Housing Markets. TD Bank. https://economics.td.com/ca-provincial-housingoutlook