\nAcknowledgment on three fronts that the strength we’re seeing is excessive<\/p>\n
Robert Kavcic, Bank of Montreal<\/p>\n<\/blockquote>\n
Robert Kavcic, senior economist at the Bank of Montreal, pointed out that the bank\u2019s indication that interest rates may rise sooner than previously expected could help change the tide of speculative activity.<\/p>\n
\u201cYou almost have acknowledgment on three fronts that the strength we\u2019re seeing is excessive, and probably needs to be dealt with in some fashion,\u201d he said, referencing today\u2019s central bank announcement and proposals by OSFI and in the budget.<\/p>\n
Two weeks ago, Kavcic told the Post that he believed the central bank would need to raise interest rates in order to address demand in the housing market that had \u201ccompletely vapourized\u201d supply.<\/p>\n
With the latest policy developments, \u201cthe housing market might not even require (the Bank of Canada) to raise rates right now,\u201d he said. \u201cAcknowledging that there is some excessive strength in the housing market, and pulling forward guidance \u2026 might be enough to start changing the psychology in the housing market, even if just a little bit.\u201d<\/p>\n
On the flip side, Royal Bank of Canada senior economist Robert Hogue believes the calendar bump for interest rate action will have a negligible impact on the housing market in the near term.<\/p>\n
\u201cIt might have more of an impact later on,\u201d Hogue said. Either later this year or early next year, as we get closer to the possibility of an interest rate hike, that could be a driver of increased activity \u201cand people trying to lock in rates before they start rising.\u201d<\/p>\n
With the pickup of residential construction \u2014 which slowed at the beginning of the pandemic \u2014 and expected moderation of demand, the central bank still expects housing activity to \u201cremain well above pre-pandemic levels\u201d but that it should soften, it said in its monetary policy report.<\/p>\n
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