Canada CPI Surprise: April 2023 Inflation Ticks Higher! What Does This Mean For Toronto Real Estate?

Canada CPI Surprise: April 2023 Inflation Ticks Higher! What Does This Mean For Toronto Real Estate?


Canada CPI numbers came out this morning and it was a bit of a surprise this time. Headline CPI come in higher than expected and showed a month over month increase for the first time since June of 2022. Core CPI, which is what BoC says they look at, ended up better than forecasts and edging down a bit more. 

This could just be a little bump in the road but it be something more, so in this video, we’ll dive into the details and let you know what we think this might mean for Toronto real estate. Let’s get started.

Canada CPI For April 2023

The latest CPI numbers for April came in higher than expected at 4.4%, while the forecast was 4.1%. March’s figure was 4.3%. At the moment, this news actually made the Canadian dollar stronger because traders now think there’s a better chance of a rate hike.

The BoC says they pay closer attention to core CPI, and if that’s the case, then the numbers for April are better. It came in at 4.1%, slightly lower than expected at 4.4%. March’s figure was the same at 4.3%.

Here’s the deal. The BoC predicts that CPI for Q2 will be around 3.3%, so we’re currently above that average. To hit the BoC’s targets, we’ll need to see lower numbers for May and June.

Let’s take a closer look at the CPI breakdown. Apart from food prices, which are still rising each month, there’s another major contributor— shelter inflation. This one is more manageable, though. 

It’s directly related to monthly mortgage payments and we know that’s because of rising interest rates so I would say the BoC isn’t worried about this. Actually, if this goes up, it’s a good sign because normally, this should mean a more balanced real estate market.

Obviously, we’re seeing the opposite of that in recent weeks and I’ll have more on that soon.

What Might The BoC do?

Now, the next rate decision by the Bank of Canada is scheduled for June 7th. After two rate pauses and falling 75 basis points behind the US, there’s a greater possibility of a rate hike this time around.

BMO has an interesting point, and we agree with it. When the BoC hinted at a potential pause in January, the real estate market shifted gears. Since then, Toronto real estate prices have surged by a whopping 20% – more wealth in real estate makes people feel more rich and could potential start to cause inflation to keep going up.

While major banks don’t expect the BoC to raise rates beyond the current 4.5% level, it’s definitely something that the BoC will be closely watching.

How Might This Affect Toronto Real Estate?

These days, there’s a lot more confidence among buyers and homeowners. Both groups believe that real estate prices will continue to rise due to strong immigration and slow housing growth. 

There’s some truth to it, but there’s also FOMO driving the market. Homeowners are holding off on selling even if it’s much tougher to hang onto their homes these days, which is causing this scarcity of listings. 

We think the governments may need to do something more to dial down the FOMO. 

It could be from interest rates but the BoC mentioned before that controlling real estate isn’t their mandate. So perhaps more likely might be much stricter lending policies from regulators like OSFI and more of this talking with the big banks in recent days like putting a much lower cap on the number of properties an investor can own, so more of this could very much be the direction moving forward.

How We Can Help

At the end of the day, real estate is a reliable way for long term growth of your wealth since it’s value grows over time and creating more of a balance on the real estate market is actually healthy. 

This cuts down on speculation and the bigger swings up or down, and giving us better risk adjusted returns which is something good for long term real estate investing. 

We’re seasoned real estate investors in Toronto and our team is a sales brokerage that focuses on what we’re best at – so if you want to learn more about whether real estate investing in Toronto is right for you, we’d be happy to chat!

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