Home prices in some of Canada’s major urban centres could decline by as much as 12 per cent over the next 18 months before recovering in 2022, according to a new report from the Canada Mortgage and Housing Corp., the country’s federal housing agency.
The report comes just weeks after CMHC CEO Evan Siddall predicted up to an 18 per cent decline in average home prices across the country over the next 12 months, a data point which prompted a skeptical realtor community to characterize the forecast as “panic inducing.”
On Tuesday, CMHC’s deputy chief economist Aled ab Iorweth cautioned that any predictions the agency makes over the next few months will be subject to a high degree of volatility because of coronavirus-related uncertainty.
“We do not know, for example if there will be a second wave later this year,” Iorwerth said on a call with the media as the agency released its report on future housing trends in the key markets of Toronto, Vancouver, Montreal, Ottawa, Edmonton and Calgary. “It is also too early to say what impact (the virus) will have on the rental market, for example. We know that the decline in immigration and inter-provincial mobility will lower demand for rentals.”
In Toronto, the CMHC predicts average home prices could decline by between three per cent and 10 per cent by 2021, with the softening disproportionately affecting condominiums as opposed to houses and townhouses due to supply discrepancies between the segments.
“Strong pre-construction sales across the Toronto central metropolis area owing to a more robust and diverse economy will ensure that Toronto’s recovery will be slightly stronger than the rest of Ontario in 2021 and 2022,” the report said. Home sales in Toronto are forecast to decrease for the rest of the year, before recovering in 2021.
Dana Senagama, a senior analyst at CMHC focused on the Toronto housing market, said that because short-term job losses in the city came largely from the low-wage workforce, the rental market would bear the brunt of the housing crisis. Home prices in Vancouver, which has already experienced its biggest price decline since 2018, will see a more tepid decrease in prices of between three and seven per cent over the next two years before signs of recovery late in 2022, according to the report.
But the decline in prices will be uneven, depending on the type of home, CMHC predicts.
“The uneven impact on buyers at different levels of income will result in a change to the share of condominium and single detached sales, creating additional uncertainty for the path of the average price decline,” wrote CMHC’s senior Vancouver analyst Braden Batch and senior specialist Eric Bond.
Toronto’s recovery will be slightly stronger than the rest of Ontario in 2021 and 2022
Broadly, the CMHC expects the housing markets in Quebec, Ontario and B.C. to follow a similar trajectory in terms of recovery given the similarities in the labour market trends in those provinces. Alberta, Saskatchewan and Newfoundland and Labrador will likely take longer to recover, given the impact of the prolonged oil and gas recession.
In Calgary, average home prices are forecast to decline between 2.5 per cent and 12 per cent, with stabilization occurring only by the end of 2022, the report said. The pace of new home construction in Calgary will decline by a staggering 43 per cent to 64 per cent in 2020, as builders look to sell off existing inventory before starting new projects.
Out east in Montreal, a city that was charting record levels of home sales prior to the pandemic, market conditions are not expected to change dramatically, says the CMHC’s Francis Cortellino, simply because of scarce supply. Home prices are expected to decline by roughly three per cent, though they could potentially go up by the same amount by the end of 2021.
“Even though prices could decline significantly in the coming months, as economic and demographic conditions become more favourable, prices are still expected to trend slightly higher by 2022 and could even exceed their pre-pandemic levels,” he wrote.
In Ottawa, the report predicts a 10 per cent decrease in prices in 2020 and 2021, while in Edmonton, prices could decline as much as 13 per cent over the course of the next 18 months as the city deals with the oil market fallout.