There is no denying that the Squamish real estate market is red hot and has been for a few years now. The demand for homes far exceeds the available housing. Prices have continued to rise and there is no plateau on the horizon. However, it will be interesting to see what the interest hike by the Bank of Canada will do to the future of the market. It may have little or no effect. At this point, it remains hard to gauge.
Interest Rates Rising For the First Time in Seven Years
On July 12, the Bank of Canada increased the interest rate by .25 points. The hike could mark a turning point with future hikes forecast. For the last seven years, the interest rate has held steady and the market has flourished with historically low rates. However, that may gradually start changing as the interest rate steadily climbs.
Rising Interest Rates May Spur the Squamish Housing Market
Although many people balk at buying real estate when the interest rates are high, the reality is that the interest rate increase is not that dramatic. It may actually make the Squamish market even more robust for the short term as people scramble to buy before a significant rate hike hits.
Investors and Squamish
The region around Squamish has been a Mecca for real estate investors but with the interest rates on the rise that may come to a screeching halt. Uncertainty makes investors put the brakes on because they are planning on making money on the future market and who can project if the market will remain strong enough to create a sufficient return on their investment.
Investor Uncertainty in Squamish
Investor uncertainty may make housing even more difficult to obtain in Squamish as big investors stop building townhomes, condos, and subdivisions because of their concern over future interest rate hikes. In an area where housing is already difficult to find, the lack of investors willing to invest could cause problems for anyone looking to buy.
Forecast for Squamish
Despite the modestly small interest rate hike, the interest rate still remains historically low. However, RBC’s Chief Economist Craig Wright has indicated that the modest rate hike is simply the turning point to a longer-term trend which will result in steady increases in the interest rate. If the rate continues to rise but wages remain stagnant then inevitably the market will start slowing and experience difficulty as it becomes harder for the working class to afford to buy a home and makes end’s meet. The reality is that no market stays red hot forever.
Squamish Long-Term Real Estate Market Uncertain
Eventually, there is going to be a slowing and cooling off period. It is inevitable in all real estate markets. The rate increase is a small window into the future and if the rate continues to climb then the market will slow and plateau. If the interest rate gets too high and the wages remain the same then a downturn will happen as buyers back off from buying.