RBC Economics has revised its housing forecast for 2021, anticipating more increases in prices and sales.
This is good news or bad news, depending on whether one is a homeonwer or a prospective home buyer.
As RBC economist wrote in a report Tuesday (June 8), the scenario presents a “favourable outcome” for current homeowners by “preserving huge gains in property values”.
“It would be a very different story for future first-time buyers,” Hogue wrote.
The economist noted that the increase in home prices that happened during the course of the COVID-19 pandemic has “already resulted in mortgage payments increasing $330 to $2,500 per month for a standard house in Canada (valued at $724,000 in April)”.
“Our projected price increase over the next 12 months (4.2%) would add another $150 per month, making ownership costs that much harder to handle,” Hogue wrote.
Moreover, the down payment for that same house has also gone up.
“Clearly, future buyers will face more intense affordability pressure across many parts of the country,” Hogue wrote.
“Home ownership will become a more distant dream for an increasing number of Canadians,” Hogue continued. “And a heavier debt load will come to those who will realize it.”
Hogue report was predicated on the absence of any major policy changes from government to rebalance the market, which has favoured sellers over buyers.
He noted that other factors will drive the rebalancing process.
“We expect a modest, gradual rise in long-term interest rates, deteriorating affordability, mortgage stress test tightening and the resumption of office work to cool demand a few degrees over time,” Hogue wrote.
Also, high property values could encourage more owners to sell.
“These factors are unlikely to deliver quick results,” Hogue wrote.
“And so long as demand-supply conditions remain tight, prices will escalate further,” he went on. “Rising prices, in fact, will be an integral part of the rebalancing process.”
In a January 13, 2021 report, Hogue projected that the national benchmark price for a home in Canada will rise 8.4 percent to $669,000 in 2021 compared to 2020.
Meanwhile, home resales are expected to increase 6.5 percent to 588,300 units this year over 2020.
In the June 8 report, Hogue “boosted” his 2021 home price forecast to an increase of 13 percent to $697,400.
“We expect price pressure to start easing later this year, setting the stage for a more modest 3.3% appreciation in 2022,” Hogue stated.
As for home resales, Hogue projected the number to rise 16 percent in 2021 to 636,700 units, up from the 588,300 units he projected in January.
“We expect the monthly pace to moderate over the remainder of this year and into 2022, producing a noticeable 21% annual drop next year to 505,300 units—still a solid level of resales historically,” Hogue wrote.