The report follows earlier forecasts from Canada Mortgage and Housing Corporation, the nation’s largest public mortgage provider, and cites its data. On Monday, CMHC chief economist Bob Dugan reaffirmed his call that house prices could drop 18% due to weak housing demand induced by the pandemic.
“High unemployment and lower incomes will limit the return of buyers to the market,” Singh said. “The same will be true for accessibility issues in Vancouver and Toronto. In addition, the slowdown in migration flows to Canada due to the disruptions of COVID-19 will weigh on the demand for housing. Even lower interest rates will not be enough to save the housing market.
Housing starts are expected to fall to 151,000 annualized units by the third quarter of 2021, from 206,000 in the first quarter of 2020, according to the report. But the market will rebound in 2021 after the generalization of vaccines and the prices of single-family homes are expected to rise 4.6% in 2022, Singh predicts.
“Rental vacancy rates will rise in Toronto and Vancouver as an increased supply of rental housing coincides with a drop in demand due to the disruption of migration to Canada,” she writes.
One bright spot was the tendency for city dwellers – freed from working from home – to seek out suburban and country properties with more space.
“The pandemic has spurred demand for properties with more space to work from home and fewer areas shared with neighbors,” Singh said. “Small markets where these properties are more affordable will particularly benefit from this trend.”