Langstaff Gateway Condos floor plan.House prices in Canada are going to fall? Home prices, sales and starts in Canada will begin to fall in the coming months, CMHC said in an outlook released on Wednesday.Please Visit: Langstaff Gateway Condos floor plan to Get Your VVIP Registration Today!
CMHC, the federal housing authority, predicts that the real estate industry is under pressure and sees no sign of a rapid V-shaped recovery.
The market may recover in a slower “U” shape, while in a pessimistic case it is a flatter and longer “L” trend.
“We don’t expect it to recover any time soon,” Bob Dugan, CMHC’s chief economist, said on a conference call.
CMHC has predicted that average house prices could fall by 9-18 per cent, while in oil-producing provinces it could fall by 25 per cent. In the case of rapid recovery, house prices are likely to start to pick up in mid-2021, while in the case of slow recovery, prices will not return to pre-epidemic levels until the end of 2022.
Dugan said that if the job market does not recover and banks’ loan losses increase, then in a more pessimistic scenario, mortgage delays may turn into foreclosures.
“if too many houses are in foreclosure and banks suffer losses as a result, it may affect their willingness to lend and may lead to a liquidity freeze in the lending market.”
Job losses affect buying decisions, and home sales will fall by 19% to 29% compared with those before the outbreak, and the decline in sales will put pressure on prices, the report said.
“with so much uncertainty, people tend to be more cautious about buying,” Dugan said. ”
He pointed out that the official unemployment rate of 13% in April was more serious than expected, and that if all people who had been unemployed since the outbreak were included in the unemployment rate, the unemployment rate would be close to 20%.
Uncertainty in the housing market will also affect new housing construction, which is likely to fall by 50% to 75% this year compared with pre-outbreak levels, before rebounding next year.
CMHC’s forecast is more pessimistic than that of Commercial Bank of Canada, with the National Bank (National Bank) saying on Wednesday that it expects house prices to fall by about 10 per cent. The bank said the decline in house prices was limited because the unemployed were concentrated in industries where homeownership rates were generally low. But the market does have pressure because interest rates were low before the crisis, the central bank had little room to operate, and a decline in tourism could put pressure on the economy and push short-rent homes into the real estate market.
The forecasts of other banks vary widely. CIBC said in early May that house prices were expected to fall 5 to 10 per cent from 2019 before they recover.
At the end of April, TD predicted that house prices would rise 6.1 per cent this year.
Dugan said there was a lot of uncertainty in general and that accurate forecasts could not be made. The data used by CMHC is different from that of banks. “our forecasts are pessimistic,” he said. This is a very bad time for the economy. There have been a lot of deferred mortgage payments and a high unemployment rate. I don’t know if our forecast is based on updated economic data. “