Here’s how interest rates could affect Canada’s housing market in 2023

Lower interest rates in 2023 could revitalize Canada’s housing market before the end of the year, according to some economists, even as the central bank warns the rate cut conversation is premature.

A report from Desjardins Economics released Thursday expects home sales in Canada to “reach a low in the second half of 2023 before lifting off again.”

Some provinces such as Ontario and British Columbia should see a return to higher prices next year as a result, the report argues, putting a “brake” on any improved housing affordability.

The revised market outlook points to a possible drop in the Bank of Canada’s benchmark interest rate as driving the housing sector’s resurgence, as well as strong demand from immigration and higher purchasing power from robust household savings and a tight labour market.

The Bank of Canada signalled last month it would pause further changes to its policy rate while it lets its aggressive rate hikes from the past year take effect.

The central bank’s own surveys released earlier this week show some market watchers are expecting rate cuts before the end of the year.

Governor Tiff Macklem pushed back on the idea after a speech in Quebec City on Tuesday, telling journalists: “It’s really far too early to be thinking about cutting rates.”

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