Canadians are bracing themselves for the impact of higher interest rates. This morning, the Bank of Canada (BoC) announced another hike to the overnight rate. The central bank justified the move by citing a strong economy and excess demand. Even with the strength, they plan to hit pause “conditionally” on any higher moves to assess the impact.

Canadian Real Estate Prices Are Still Falling

Let’s start with the aggregate, or national, house price index (HPI) for single-family homes. The benchmark price of a home fell to $748,800 in December, dropping 1.2% (-$9,200). Since peaking in March 2022, the national index has plummeted 18.8% (-$181,400). At this point, it’s a little shy of being a “crash.”

A crash is a technical term for asset prices falling more than 20% from its peak within a 12-month period. At this pace, just one more month like December would be enough to make that happen. Right now, 20 cities have HPIs that would meet this criteria when it comes to single-family homes.

The annual rate of rent inflation in Canada remained in double digits for the eighth consecutive month in December, according to the latest rent report from Rentals.ca and Urbanation.

 The average listed rent for all property types increased 12.2 per cent year-over-year to $2,005, an increase of $217 from the December 2021 average of $1,788. 

On a month-over-month basis, average rents decreased by one per cent, which Rentals.ca notes is typical this time of year. This is the second straight month the average monthly rent has exceeded $2,000.

Markets with high population growth, low vacancy, and limited new rental construction will likely see the most rent inflation, with Atlantic Canada, Ontario, and British Columbia expected to lead the country in rent growth.