Rapidly cooling housing market helps to quell Canadian inflation - BNN Bloomberg

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Housing costs, and Canada’s unique way of capturing them in inflation, suggest that consumer price gains may slow rapidly in coming months.

As the largest expense for most households, shelter makes up 30 per cent of Canada’s consumer price index — a similar proportion to the U.S. But unlike its southern neighbor, Canada’s inflation metrics capture these costs in a way that’s more sensitive to changes in interest rates and home prices.

While inflation was still 6.3 per cent in December, price pressures in Canada are expected to lose momentum thanks to base effects and continued cooling in the Canadian real estate market, which features shorter-duration mortgages than the U.S. and a higher share of variable-rate home loans. “One way Canada actually stands out from a lot of other countries is that when the Bank of Canada raises interest rates, there’s a temporary boost to inflation because of this mortgage interest rate effect,” Stephen Brown, an economist at Capital Economics, said by phone. The U.S. calculates housing inflation using owners’ equivalent rent, or the price a property owner would have to pay to rent to live there.

But with rates now on hold, Brown expects mortgage interest costs to peak before dropping sharply in the second half of this year. Other inflation inputs, such as commissions on home sales, are already easing.

 

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There’s no soft landing under the BOC dim-twits.

This is just beginning worst things will happen in 2023/2024 because rates are not going down anytime soon at least for 2 years and BoC will never get inflation 2% to 3%

As well in Toronto due to constant property tax hikes and tax levies by JohnTory TorontosMayor cityoftoronto CllrCrawford these housing costs continue to balloon. Stop the tax hikes TOpoli Toronto

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