Canada Housing Market

Mortgage interest costs continued to be the #1 driver of inflation

Recent data from Statistics Canada reveals a decrease in the inflation rate for January to 2.9% from December’s 3.4%, which was below the expected 3.3%. This change is significant for those interested in the Ontario housing market, suggesting a shift in economic conditions.

Highlights from the January Inflation Data:

• Yearly Inflation Rate: The inflation rate dropped to 2.9% in January, showing a slowdown in the rise of prices across the country.
• Monthly CPI Movement: Despite predictions of a 0.4% increase, the Consumer Price Index (CPI) did not change from the previous month.
• Core Inflation: Without including the unpredictable costs of food and energy, the core inflation rate also slightly decreased to 2.4% from 2.6%.

A notable cause for the decrease in the overall inflation was the significant 4.0% reduction in gasoline prices from the previous month. Without considering gasoline, the inflation rate for January was 3.2%, a slight reduction from December.

Implications for the Ontario Housing Market

This easing in inflation could mean several positive things for the Ontario housing market:

• Mortgage Rates: With the pressure on inflation easing, the Bank of Canada might hold off on increasing interest rates further. This could keep mortgage rates stable or even lower them, making it easier for people to buy homes.
• Market Balance: A stabilizing effect on interest rates may help the Ontario housing market find a more even balance, benefiting both buyers and sellers.
• Looking Ahead: It’s essential to keep an eye on inflation trends and core inflation numbers. Other costs remaining high could push the Bank of Canada to adjust its policies, affecting borrowing costs and the housing market’s direction.

Here are the inflation rates by province for January:

— Newfoundland and Labrador: 2.5 per cent (3.4)

— Prince Edward Island: 1.6 per cent (2.6)

— Nova Scotia: 3.0 per cent (3.6)

— New Brunswick: 2.3 per cent (2.9)

— Quebec: 3.3 per cent (4.0)

— Ontario: 2.7 per cent (3.4)

— Manitoba: 0.8 per cent (1.7)

— Saskatchewan: 1.9 per cent (2.7)

— Alberta: 3.4 per cent (3.0)

— British Columbia: 3.0 per cent (3.4)

Conclusion

The recent report from Statistics Canada offers a clearer view of the current economic situation, with implications for the Ontario housing market. As we adapt to these economic shifts, understanding how inflation and interest rates interact with the housing market is crucial. For those looking to buy, sell, or invest in Ontario, staying updated with these economic indicators is key to making well-informed decisions in a changing market.

Source: The Daily — Consumer Price Index, January 2024 (statcan.gc.ca)