Canada Mortgage and Housing Corporation (CMHC) has released its Canadian housing market forecast that reflects the new market reality with the impact of COVID-19 and the Government of Canada's measures to stabilize the economy.
Production, employment, and immigration in Canada could decline more than during the crisis of 2008-2009 and their decline will cause the falling of housing starts and sales in 2020. Housing prices are expected to be below pre-pandemic levels.
CMHC anticipates some disparities between provinces. For example, the slowdown should be particularly marked in oil-producing provinces, as lower prices have put additional pressure on these housing markets.
Here is an overview of the main forecasts:
- Falling of housing starts
CMHC recalls that the decline in economic activity and provincial measures to contain the virus have slowed residential construction in many provinces, particularly in Quebec and Ontario. According to its forecasts, housing starts will probably show a decline of up to 75% compared to the first quarter of 2020 and then begin to recover in the second half of 2021 if economic conditions improve.
- Decline of sales for existing homes
The significant decline in employment and household disposable income will lead to a sharp drop in the demand for existing housing in 2020, despite the economic measures taken by governments to keep the interest rates low. Existing home sales could decline by up to 29% from pre-pandemic levels, before slowly recovering after 2022. This decline in sales is expected to increase the attractiveness of the rental housing market.
- Lower prices
House prices could fall by 9% to 18% from the first quarter of 2020, before beginning to recover in 2021. Prices could return to pre-pandemic levels by the end of 2022.
Regional disparities in economic conditions lead to different price impacts. In the oil-producing provinces of Alberta and Saskatchewan, prices could decline by up to 25% from their pre-pandemic levels by the end of 2022. In Quebec, the decline is expected to be between 6% and 11%, less pronounced than in Ontario or British Columbia, as prices in the province have not reached the same level of overvaluation.