Home prices to drop, new report predicts — and even Toronto and Vancouver won’t be immune
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The report follows earlier forecasts by Canadian Mortgage and Housing Corp., the country’s largest public mortgage provider, and cited its data. On Monday, CMHC chief economist Bob Dugan reaffirmed his call that house prices could decline by 18 per cent because of pandemic-induced weak housing demand.
“High unemployment and lower income will restrain buyers’ return to the market,” Singh estimated. “So will affordability issues in Vancouver and Toronto. Further, slower in-migration flows to Canada due to COVID-19 disruptions will weigh on housing demand. Not even lower interest rates will be enough to save the housing market.”
Housing starts are forecast to decline to 151,000 annualized units by the third quarter of 2021, compared with 206,000 in the first quarter of 2020, according to the report. But the market will rebound in 2021 after vaccines have become widespread and prices for single family dwellings should rise by 4.6 per cent in 2022, Singh predicts.
Abhilasha Singh, Moody’s Analytics
Ottawa appeared to be an outlier, with a forecast decline of 3 per cent, less than half the amount for the next cities in the outlook, Hamilton, Halifax and Montreal. Meantime, Toronto and Vancouver house prices are among the nation’s highest, but their condo markets will contract from oversupply, Singh said.
“Rental vacancy rates will rise in Toronto and Vancouver as an increased supply of rental units coincides with a fall in demand due to disruption of migration to Canada,” she wrote.
One bright spot was the trend of city dwellers — freed by working from home — seeking suburban and countryside properties with more space.
“The pandemic has boosted demand for properties offering more space for working from home and fewer shared areas with neighbours,” Singh said. “Smaller markets where such properties are more affordable will particularly benefit from this trend.”