Canada’s average home price is expected to jump 9 per cent next year, the country’s national real estate group says in a forecast, with record-low mortgage rates and a housing shortage in Ontario and Quebec driving competition among buyers.
The prediction for a strong 2021 comes after this year’s surprise boom in the housing market, with the pandemic’s work-from-home phenomenon triggering buyers to seek larger living spaces and bid up prices across most of the country.
The Canadian Real Estate Association (CREA) expects the average selling price to hit $620,400 in 2021 compared with an estimated $568,000 this year.
Although CREA expects the pace of sales to slow next year compared with this year’s buying frenzy, the association forecast sales rising 7 per cent to 584,000 units in 2021.
Demand for homes in Toronto, Ottawa and other major employment centres has pushed up sales for the past few years. But after an initial lull when the pandemic first hit, sales rapidly increased for detached houses in the cities as well as properties with outdoor space and in vacation areas such as Muskoka in Ontario and Okanagan Valley in B.C.
“It used to be drive until you qualify, but now it’s drive away from the city and virus,” said Shaun Cathcart, CREA’s senior economist, who characterized homebuying outside the major cities as “gangbusters.” “There is a lot of demand that wasn’t there 10 months ago,” he said.
This year, the biggest price gains have been recorded in areas well outside of reasonable commutes to the cities.
The CREA outlook sees the average selling price climbing in every province, with Ontario recording the biggest gain of 16 per cent, followed by Quebec at 14 per cent. Even Alberta, which has suffered from the slowdown in the energy sector, is expected to see home prices increase.
CREA said demand continues to exceed supply in major real estate markets such as Toronto. The association predicts that sales will increase in all provinces but Ontario where it said sales will drop by 3 per cent because of a shortage of property listings.
For 2020, the association expects sales to reach a record 544,413 units, an 11-per-cent increase over 2019, and says the market is even tighter heading into next year.
“It’s hard to see how it will not result in price growth,” Mr. Cathcart said.
Tuesday’s forecast was CREA’s first since late 2019. The association typically publishes an outlook every quarter but stopped issuing them during the early months of the pandemic because of the massive uncertainty. The bullish outlook contrasts with the one from the federal housing agency, Canada Mortgage and Housing Corp.
In May, CMHC said the average home price could drop as much as 18 per cent under the most dire pandemic conditions, such as a second wave of COVID-19 cases, severe recession and job losses. Although much of the country is experiencing record numbers of coronavirus cases and high unemployment, home sales and prices continue to rise.
The housing agency has yet to change its outlook, though its economists have said the trough in the housing market could have already occurred in April when sales fell precipitously amid provincial lockdowns.
“The bearish predictions were proved wrong very early in the pandemic, when the bottom never fell out and sales, prices and starts came back strongly upon reopening in late spring,” said Bank of Montreal senior economist Robert Kavcic.
He expects the home price index, which corrects for expensive home purchases, to rise in the mid-to-high single digits next year. The largest real estate brokerages, Royal LePage and Re/Max, also predict single-digit price increases.
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