Home prices across Canada will drop seven percent in 2021 due to higher unemployment and lower incomes, according to a forecast published by Moody’s Analytics on September 23.
Economist Abhilasha Singh predicted a 6.7 percent decrease for detached single family house prices, and 6.5 percent for condo apartments in 2021.
The housing price decline will look different regionally depending on independent factors, Singh said.
She noted that there is a “dangerous” excess supply of new single-family homes in Calgary and Edmonton. Coupled with a hit to the oil industry in Alberta, the report predicts the two regions will suffer from a peak-to-trough decline of 10 percent.
Regina is close behind at nine percent, with Toronto forecasted to reach an almost nine percent decrease as well. Vancouver and Montreal home prices are expected to drop a little less than seven percent, and Ottawa comes out on top with only a three percent predicted decrease.
“The housing market will no longer be able to escape the poor condition of the labor market as vacancy and delinquency rates rise in 2021,” Singh wrote in the report.
She said the pandemic’s downward impact on employment and income will slow buyers’ return to the market, as will “affordability issues” in Vancouver and Toronto.
“Rental vacancy rates will rise in Toronto and Vancouver as an increased supply of rental units coincides with a fall in demand due to disruption of migration to Canada,” she wrote. “Not even lower interest rates will be enough to save the housing market.”
The predictions from Moody’s report follow data released from the Canadian Real Estate Association that home sales in Canada rose over six percent month over month in August.
The report also predicted other trends in demand for different properties due to COVID-19, including ones offering more space for working from home without as many shared spaces with neighbours.
“While demand for single-family homes with ample space and large pantries may rise, so too might demand for smaller apartments and condos given the struggle many families will face in saving for a down payment,” the report stated.
Ultimately, Singh says the pandemic will result in “even further widening in economic inequality,” including housing.