Canadian Real Estate Correction Is Almost Over, But Bulls Will Be Disappointed: RBC

Canada’s largest bank believes the end of the real estate correction is within sight. That was the message in RBC’s latest housing brief, though that doesn’t mean price declines are over. The bank believes home prices are halfway to the bottom, and doesn’t anticipate a bounce until next year. However, they expect the market to pick up after inflation moderates in 2024, and interest rates begin falling.

Canada’s Real Estate Correction Is Half Over

The Canadian real estate correction is half over, according to RBC. The bank had forecast a 15% decline from peak-to-trough for the national RPS Index. We’re about halfway, with the bank reiterating they see another 8% price decline still in the pipeline. 

It’s important to note they’re using the RPS Index, and not the CREA HPI that you’re used to seeing. As previously mentioned, RBC sees this being the largest home price correction in history. Movements in the CREA HPI are roughly 2-3x the size of the RPS Index, so it sounds smaller than other organizations are forecasting. 

Canadian Real Estate Bulls Will Be Disappointed

The correction is half over, but that doesn’t mean there’s a boom waiting around the corner. “What happens next will disappoint the housing bulls,” warns the bank. 

They see the recovery beginning later this year, but affordability and the economy will limit the recovery. Affordability has eroded sharply since 2021, and it won’t be easy to unwind those issues. They see falling home prices helping, but don’t anticipate significant improvements in the near term.

Canada’s economy hasn’t seen the hiccup that economists have been calling for, but they still expect it. The remainder of this year (ffs, it’s only March) is seen as relatively slow due to elevated interest rates. It won’t be until 2024 that inflation is expected to be back to target, and interest rates can begin to pull back to help with growth.  

Bank of Canada Expected To Hold Rates At This Level 

The last rate hike was in January, according to RBC. While the market is pricing in at least one more hike, they firmly hold the belief the Bank of Canada (BoC) pause will actually be a pause. They don’t anticipate any rate cuts this year, but they believe bond yields will “drift lower” throughout the year. 

The take on yields is somewhat contrary to reality, which has headed in the opposite direction. Despite this forecast being released this week, it appears the math was done prior to the recent surge in yields, which we’ve annotated in red on their chart. 

RBC Forecast For Longer-Term Interest Rates To “Drift Lower” At Odds With Reality

RBC forecast for the 5-year Government of Canada bond yield, and the Bank of Canada overnight rate. The 5-year yield as of this morning is annotated in red. 

Source: Bank of Canada; RBC Economics; Better Dwelling. 

In any case, RBC doesn’t anticipate an easy credit market in the coming months. Despite their call of easing conditions, they still see credit to be generally restrictive until 2024. That’s when most have forecast the BoC will begin to cut interest rates.



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  • Dennis_K 12 months ago

    I find it odd that interest rates would decline starting in 2024, when they say inflation will be back ‘on target’, because even if inflation is ‘back’ to ~2%, how does one unwind the pricing exacerbations (in dollar terms) caused by the most recent inflationary spiral? When de-coupled from incomes, is this not why we currently have affordability issues for a multitude of things? Didn’t we just see that excessively low interest rates help instigate non-productive price increases?

    Without inflation going negative (i.e. deflation) to deal with the recent pricing spirals, it would seem to me that such price increases would then be ‘baked in’ moving forward, and will remain permanent. If incomes haven’t risen by the same extent, doesn’t that mean that everything will then be less affordable? Is this why the OECD is projecting Canada’s economic growth to be dead-last amongst member states for the next 40 years?

    • David T 12 months ago

      Bingo. Inflation is intentional – it is the means to reduce high debt/GDP ratios by inflating price to collect more POS tax. Excessive fiscal and monetary stimulus in 2020 (more demand) combined with locked down economy (less supply) was the econ 101 recipe for rapid price increases. Now the recession is intentional to destroy demand, expect it to be severe, and this will require a fix = more inflation causing stimulus – expect double digits. Why? Cause that’s what history tells us. 3 spikes in money supply, 3 spikes in asset prices, 3 spikes in CPI over the span of 10yrs. 2020 was 1933 (massive stimulus) 2021 was 1936 (inflation) 2o22 was 1937 (rapid reversal of stimulus policy) 2023 = 1938 severe recession from the “policy mistake” Which is the BS claim they’ll make again this time when the truth is INFLATION IS THE POLICY OBJECTIVE.

    • Billy B 12 months ago

      100% agree. Which is why I think we’ll see modest rate decreases when the BOC pivots and unlikely to see rates below 3% for a very long time till there is a rebalance.

    • Luke 12 months ago

      If high rates are now bringing inflation down, then it’s reasonable to assume high rates will continue to bring inflation down even when inflation hits 2%. If rates are too high they are a drag on the economy. If they are too low they overheat the economy. With the amount of debt Canadians have, a ~4.5% rate is economically restrictive. Rate hikes take 12 to 18 months to work fully there way through the economy and the rate hikes that took place 12 months ago by March 2022 are only truly being felt now. From those early 2022 hikes inflation has now dropped from 8.1% to 5.9%.

      When the BoC hits their 2% target they will begin to lower rates until they reach balance, meaning the interest rate doesn’t lower inflation excessively below 2% nor increase it beyond 2%.

  • Kate 12 months ago

    I think this is b…t and they jut want to calm down people and hide something from public. They are talking about many thing which not happened and even a while ago they were say everything is ok and there is not inflation and other issues.

  • Mike 12 months ago

    What if the big brother raises interest rates in the south? In that case, the BoC would have to follow and hike interest rates even higher.

  • Based on What Evidence? 12 months ago

    Re: Dennis_K Post
    Agreed! Past, recent (and likely future) Canadian federal and provincial housing public policy that skews to demand side incentives, lax consumer protection and regulation of the R/E sector (to name but a few policy streams) have now locked us into unprecedented wealth disparities and debt loads at the expense of productive investment.

  • dave Frazer 12 months ago

    On the sunshine coast of B.C population 40,000 or so ,they sold 8 houses in Feb 74% less than last year. Prices have barely moved down, but listings have gone up to what has been the normal rate over the last few years. They now have 17 months of inventory. Something will have to give. One example, I am sure there are lots more all over Canada, So no, we are not near the bottom. Forced sales will soon start to occur everywhere and thats another leg down about to happen. Takes a while for people to realize they are broke. They can run up credit cards, get loans etc but in 12- 18 months after their outgoings exceed their income it comes to the crunch. A lot of people will be this position in the next year. Then the market may really collapse.

  • Oldguy 12 months ago

    You will likely not publish this but here goes.
    I understand why you give so much coverage to the wisdom coming from the banks, but your reporting should come with a warning.
    The banks are in this to make money. Everything else is secondary. So you need to remind everyone how the banks make money, which is by lending it, and the more the better. They also have the luxury of being largely insulated from losses so their risk tolerance is high, meaning that they will keep lending as long as they can, and nobody will stop them.
    Just saying.

  • James Smith 12 months ago

    The correction is almost over because it is only half finished…

    “Activity will bottom sometime this spring.”
    “Prices will level out a few months later”

    So a year of price declines will be doubled in the next “few months”

  • Sergej 12 months ago

    Interesting logic. Housing has become even less affordable and correction is over. I suspect it is just a start until prices come back down to meet reality of people incomes. If correction is over, than Canada is plainly not a place worth living as the one major part of Canadian dream own place to live becomes pipe dream and unreachable for most. Prices have been run up purely on speculations and low interest rates. They gotta come down to what people really can afford. IMHO it calls for another 50% drop or more.

  • JCH 12 months ago

    Why is this article titled ‘correction almost over’ then goes on to say ‘half way to bottom’? Half way is nowhere near almost over!

    • J 12 months ago

      I think it has to do with the call by RBC. Almost over = short time frame. Past downturns (aka bubble pops lasted years). RBC is calling an end in one to two more years at max. Unlike the one that hit Spain/Japan that lasted decades. That’s a while extra zero. Are they trying to influence? Absolutely – telling everyone our economy is screwed for two more generations is bad for the loan making business. They have every interest to keep the housing pyramid going and make more money on the backs of the working class. There are three classes. Banks – rich – pleeebs.

  • Ash 12 months ago

    How does one ever think, say and write that 15% is correction when prices have gone up by over 100% in last 6 years ( 2015 to 2020)?
    Correction will be if it goes down at least 35%. Inflation and interest rates in those 6 years were low, cheap money was abundant.
    In detached structures reduction of 40% will be normal and in condos 35% is acceptable.

  • Tim 12 months ago

    Sarcastic title! Six months ago, average people were saying where’s the recession?
    Now, since their accounts shrieked, they’re saying it’s over because they want it to be over and they know, they won’t last much longer.

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