Even as concerns over the fast-growing second wave of COVID-19 continue to rise, one of Canada’s largest real estate franchisers is projecting that Canadian home prices will end the year up substantially over 2019.
Royal LePage, which published its House Price Survey this week, said that it expects the median price of a Canadian home to be $693,000 at the end of 2020, or seven percent higher than the same period last year.
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It’s not what many would have anticipated after housing markets across the country froze up in the typically busy spring months. Some experts believe that the market momentum currently on display will wane and eventually reverse course under pressure from elevated unemployment and reduced incomes. Detached home prices just rose over 20% in 10 Toronto suburbs
Royal LePage CEO Phil Soper, however, has a decidedly more upbeat view on how the situation is likely to evolve.
“Typical consumption patterns have been disrupted in 2020 as the pandemic has driven the household savings rate to levels not seen in decades,” said Soper, in a media release. Sellers are back in control of Toronto region’s housing market
“Most Canadians have sharply reduced spending on discretionary goods and services involving a great deal of human interaction, and with mortgage rates at record lows, many have refocused on housing investments, be it renovations to accommodate work-from-home needs, a recreational property or a new property better suited for the times,” he continued.
It’s not difficult to be convinced that prices will remain on the upswing, with two of the country’s largest and most competitive markets — Toronto and Vancouver — now back in seller’s market territory. Soper believes that even urban condo markets, a recent source of some concern as new listings surge in Toronto, are well-positioned to remain on steady ground in the months ahead. Toronto new home sales hit a 20-year high in August
“Chronic under-supply [in urban centres] has created a robust pipeline of potential buyers that currently far outsizes the number of homeowners who may need to sell as a result of COVID-19 related job loss,” said Soper.
“The price of condominiums, the sector hardest hit by the pandemic, has risen 5.3 per cent nationally compared to last year. When a landlord needs to sell a unit after young tenants move back to their parent’s home, and with fewer new immigrants or opportunities for short-term rental income, there are plenty of first-time buyers ready to seize the opportunity to get into the market,” he added. Canadian home prices forecast to fall 7% in 2021: Moody’s
That said, even within the Royal LePage report, there are signs that the strong bounce back the market experienced through the summer and early fall will lose some of its momentum.
The report pegged the median national home price at $692,964 at the end of the third quarter. That means its forecast that the median home price will be $693,000 by year end represents more of a plateau than a continued surge. For comparison, the median home price was $647,310 at the end of 2019’s fourth quarter and $637,884 at the end of its third quarter. Canada’s housing agency still forecasting up to 18% home price drop
This anticipated slowdown did not faze Soper.
“Home price gains realized this quarter are forecast to be sustained through December,” he said. “While the pace of price growth is expected to slow considerably in the final weeks of this most unusual year, it is highly unlikely we will see housing values back up.” Canada’s housing agency still forecasting up to 18% home price drop