According to Capital Economics, the drop in mortgage rates in 2020 boosted the maximum amount homebuyers could afford by around 15% to 20%., Capital’s Chief Canada Economist, says the rest of the price jump can be explained by an overall increase in demand for real estate among Canadians.
But with pandemic shutdowns coming to an end, some of that trend reversed. Rural areas and small towns that saw the largest run-up in house prices are now seeing some of the largest price declines.
On the other hand, “the demographics of the country are really, really strong,” as King puts it. The federal government recently announced it is raising its immigration targets, to 465,000 newcomers next year, rising to 500,000 per year by 2025. Still, this amounts to bad news for first-time buyers. King doesn’t see housing affordability returning to the levels seen before the pandemic — levels that were already fairly high.