RBC Economics sees nothing to indicate that home prices will fall anytime soon.
It’s the opposite instead.
“We see little that can stop the appreciation in property values near term,” RBC economist Robert Hogue wrote in a market update.
Hogue’s paper came out on the day the Canadian Real Estate Association (CREA) reported that July 2020 home sales posted the highest record in history.
“If anything, many markets are likely to experience further [price] acceleration,” Hogue wrote.
The Canadian real estate market dipped in April this year, amid the lockdowns and economic impacts brought about by COVID-19.
Although the pandemic stopped what was predicted to be a strong spring 2020 market, transactions started to pick up around May and June.
As Hogue wrote, COVID-19 “did not destroy this year’s spring market—it mostly delayed it”.
The CREA reported on Tuesday (August 17) that 62,355 home sales happened in July 2020, marking the “highest monthly sales figure on record going back more than 40 years”.
The price of a typical home in Canada rose 7.4 percent year-over-year last month, the “biggest gain since late 2017”.
Meanwhile, the national average price for homes sold in July 2020 posted a “record $571,500, up 14.3% from the same month last year”.
In B.C.’s Lower Mainland, the Real Estate Board of Greater Vancouver reported earlier that the price of a typical home increased to $1,031,400 in July this year.
The price represents a 4.5 percent increase over July 2019. It is also 0.6 percent higher compared to June 2020.
In his August 17 market update, Hogue noted that supply and demand conditions “got a lot tighter Canada-wide” last month.
“There is nothing to indicate any imminent slump in prices,” the economist wrote.
“On the contrary, super tight conditions in Halifax, Montreal, Ottawa, most of southern Ontario, Winnipeg and Victoria, if sustained, are likely to lead to a further price acceleration in the near term,” Hogue continued.
According to Hogue, “there’s still pent-up demand left to satisfy”.
“This is poised to keep the market humming in August and possibly September,” the RBC economist predicted.
Hogue noted that the sales-to-new listings ratio jumped to 0.74 Canada-wide in July, the “highest it’s been in 18 years”.
“If sustained at this level, it would signal intense upward pressure on prices,” he wrote.
On June 4, 2020, Canada Mortgage and Housing Corporation predicted a nine to 18 percent decline in average home prices over the next year.
A few weeks later, on June 23, the CMHC released its outlook report for the summer market, and again stated that home prices will drop.
“House prices will likely fall because of uncertainty over the economy’s path,” CMHC declared about the prospect in major urban centres in the country.
RBC’s Hogue qualified in his August 17 update that the market may see a “cooling effect on prices—most likely by the early stages of 2021”.
“We expect lower immigration and increased condo supply in core urban areas to concentrate any weakness on the high-rise condo segment,” Hogue wrote.
Hogue added that other segments of the real estate market could also “come under downward pressure if the pandemic worsens or the economic recovery runs into trouble”.
In a June 15, 2020, Hogue indicated that benchmark prices of homes in Canada are forecast to fall seven percent by the middle of 2021.