25 Jul 2011

Home prices expected to rise in Canada by 4.4 percent

The Royal Bank of Canada is out with its latest forecast, this one detailing the state of home prices over the remainder of 2011 and into next year.

According to the RBC, home values are expected to rise by an average of 4.4 percent through December, but by the time January rolls around, prices are expected to moderate.

Robert Hogue, senior economist for RBC, said the anticipated rise in prices is tied to the jump in interest rates economists are projecting.

"The main policy shift will be one toward progressively higher interest rates, which will cool demand but not deep-freeze it," said Hogue.

Among the provinces, the RBC projects Alberta will have the most prosperous housing market throughout 2011 and 2012, while homebuying activity is anticipated to fall most precipitously in Quebec.

As for Ontario, RBC states housing activity will remain flat over the next several months. However, the projected rise in interest rates may lead to a weakened market in 2012 due to a drop-off in first-time homebuyers.

Should interest rates trend higher, it may lead homebuyers to seek smaller properties. Renting a storage unit may be able to provide the extra room they'll need to house some of their belongings.

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