Canadian real estate brokerage Royal LePage says any increases in interest rates this year will not do much to tame soaring home prices.

“While rising interest rates slow house price appreciation, higher borrowing costs will be coming off historical lows and the increases may not be enough to offset the significant upward price pressure from Canada’s housing supply crisis,” the firm said in a release Friday. 

Royal LePage is forecasting national home prices will rise by an average of 10.5 per cent on an annual basis this year, led by double-digit gains in the Greater Toronto, Greater Vancouver and Halifax markets.

“We are experiencing the first expansionary housing cycle, which began in the second quarter of 2020, since the introduction of the federal mortgage stress test. Buyers have had to qualify for a loan at a rate much higher than what they will actually pay, creating a significant buffer before they reach their capacity to manage larger payments,” added Phil Soper, Royal LePage’s president and chief executive officer, in a release.

The issue of housing affordability has continued to worsen despite interventions by various levels of government.

Royal LePage said the aggregate price of a property in Canada rose 17.1 per cent year-over-year in the fourth quarter of 2021 to $779,000.

On Jan. 1, a new one per cent tax on foreign-owned vacant homes came into effect, and some policymakers have considered ending the practice of blind bidding – where prospective buyers don’t know what other buyers are offering for a home – as a way to cool price growth.

Soper said while he supports measures that improve transparency in the purchasing process, he believes those don’t get to the root of the problem in the Canadian housing market, which ultimately comes down to a lack of supply.

“Policies that attempt to artificially quell demand in the face of growing household formation are distractions from Canada’s housing shortage crisis,” he said.