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Canada Housing Market Predictions for 2021

Tuesday Jan 12th, 2021

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It is well known that human beings are always thinking about what’s going to happen in their future. Predicting things to one’s liking is nearly always the case, even though the evidence is contrary. In the same way, it was mostly predicted that the housing market in Canada will fall to its knees ever since the world has experienced an economic slowdown like no other during 2020. This prediction did correlate with the COVID-19 pandemic that had changed the work lifestyles like never before.

But the market in Canada did grow exponentially with high housing demand, lack of supply, and record-breaking average prices that shot up by 13.1% to $568,600 for the year 2020. Mostly in cities like Toronto and Vancouver, there was great competition among buyers to have detached houses. The Bank of Canada's lower mortgage rates, the central bank of Canada, allowed the home buyers to invest more in the housing market.

Low rental demand leading to low occupancy in condo-dense markets did help the housing sales to keep on going strong throughout the last year. This growth of the housing market in Canada during 2020 ensured that most predictions were outright proven incorrect to many agencies' surprise.

With the global pandemic still looming large, the year 2021 is even harder to predict in terms of what will happen next to Canada's housing market. Already there are so many predictions being made regarding Canada's housing market at the start of this year.

Some are predicting a shortage of houses leading to rapid price growth in continuation of last year. Meanwhile, others predict a steep decline in housing prices with the expectation that the current COVID-19 pandemic situation will get better as this year rolls along.

Canada Housing Market predictions from various agencies for 2021

  • The Canadian Real Estate Association (CERA) has predicted a 9.1% climb to $620,400 in average prices in Canada's housing market for the year 2021. This umbrella group of local real estate boards has stated that Ontario will have a 16.3% shot up in average housing prices closely followed by Quebec at a 13.6% increase. They have stated it because of fallen mortgage prices and high housing demands due to increasing migration in Canada.
     
  • Central 1 Credit Union from Vancouver has predicted that the surging growth in the housing market will continue, with average prices rising by 5.6% to $615,000 during 2021. It's because of the high demand for recreational properties in interior and island markets and the impact of low mortgage rates, especially in British Columbia.
     
  • Canada Imperial Bank of Commerce (CIBC) base-case for average housing prices is to increase by 2.4% to $582,000 for the year 2021. The best case scenario for housing prices on average is to rise by 11% to $631,000. Meanwhile, the worst case scenario is the decrease in average housing prices by 6.9% to $529,000. CIBCC has predicted such variations for the market simply because of the volatile market conditions and the ever-threatening COVID-19’s negative impact on the housing sector as a whole.
     
  • Royal Bank of Canada (RBC) has predicted a 30% decline in the average housing price to $400,000 in Canada as their worst-case scenario because of investors' supply shocks and liquidation of rental properties. As far as the base-case scenario goes, RBC has predicted a flat market with a 0.6% increase to $572,000 in the average prices for housing. The best-case scenario for the average housing prices is to climb at 6.1% to $603,000, although it's the least expected thing to occur as per the financial institution.
     
  • Canada Mortgage and Housing Corporation (CHMC) has predicted a double-digit average price drop from around 9% to 18% in the housing market. It is citing the potential market correction in the housing sector and the tremendous financial risks posed by the COVID-19 on the Canadian economy for the first half of 2021. They are also predicting the housing market to slowly recover its average prices as the latter half of the year continues.

Expectations from Canada Housing Market for 2021

  • Housing market average prices in Canada are expected to increase with the sales of detached houses reaching all-time high levels in suburbs of the major cities like Toronto, Vancouver, and Ottawa for 2021. With the work from home culture becoming very common in recent times, most home buyers prioritize spacious housing in the suburbs rather than workplace proximity in the cities. This trend has the prospect of bolstering the demand for large houses outside the city centre, consisting of decently furnished amenities.
     
  • Fierce competition among the buyers in the housing market is expected to continue as the Canadian economy continues to recover from the slump of last year. Even the traditional housing market seasonal cycles of spring and fall have the potential to make a return this year with pent-up demand and limited supply of houses.
     
  • The condo-dense market is the only segment of the housing sector that has seen a decline in prices because university students do studies remotely and less immigration in a very long time. Although with the COVID-19 preventive measures set to impact during the first half of 2021 positively, the average prices and the rental demand in the condo-dense market are expected to rise once again in Canada.
     
  • Bank of Canada is expected to leave the lending rates and regulations for the year 2021 unchanged until the economy recovers from the impacts of the pandemic in due course. Short term spike in COVID-19 cases and the implementation of the vaccine will play a crucial part in this decision. With the lower mortgage rates set to continue, more and more home buyers will have the opportunity to invest in the Canadian housing market.
  • Low-density cities of Canada are expected to outperform their urban counterparts in terms of housing demand as home buyers want less shared areas with their neighbours. This trend will lead to a widening of the economic inequality among the people while bringing a potential housing correction in the long term for Canada.

Takeaway

These are unprecedented times in the history of the Canadian economy and the world economy as a whole. Canada's housing market has felt the positive impact of the pandemic in the year 2020. While most agencies are predicting that the housing market will grow at high rates in 2021, just like last year, there is still no certainty about what will happen next in the COVID-19 era.

Canada is known to be a very unpredictable housing market that has already surprised many agencies with its performance last year. So, it's anyone’s guess on how this year will shape up to be for Canada's housing market.


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