“Even lower interest rates will not be enough to save the housing market. ”
Moody’s report did not go into detail on how it created the forecast, but said its home price index for 2021 also forecast a 6.7% drop for single-family homes and 6%. , 5% for condominium apartments.
Moody’s prediction comes after the Canadian Real Estate Association announced record home sales in July and August amid low mortgage rates.
Some optimists expect this record to continue. A survey of ReMax brokers earlier this month suggested that average residential home prices could increase 4.6% by the end of 2020.
CMHC echoes predictions
But Moody’s forecasts indicate that the real estate industry will lose momentum in the first half of 2021, and it’s not the only one. Canada Mortgage and Housing Corporation economist Bob Dugan also predicted earlier this week that house prices will fall in the future.
“Moody’s Analytics expects the short-lived burst of growth in the third quarter to produce too few job gains to significantly reduce unemployment,” the report said.
For example, Moody’s said housing starts – a closely watched statistic that rebounded strongly this summer – in part reflects investments made before the pandemic.
“Builders spent too much money on projects to abandon them,” the report said.
While house prices would fall in all regions according to Moody’s model, the impact would be uneven and favor small, affordable markets. While lower immigration may hurt condos in urban markets, Moody’s has suggested that buyers looking for more space may turn to Oshawa, Ont., As prices rise in other Toronto suburbs like Mississauga.
The Prairies strike hard
Moody’s forecast hits the Prairies particularly hard, amid shrinking government support, the end of mortgage payment deferrals and ongoing struggles with consumer debt and unemployment. The report notes that bankruptcy filings and insolvency proposals have been increasing since the end of 2018.
“The pandemic will lead to an even greater worsening of economic inequalities, including in housing,” the Moody’s report said.
“While the demand for single-family homes with lots of space and large pantries may increase, the demand for smaller apartments and condos may also increase given the struggle many families will face to save for a down payment. . ”
If a COVID-19 vaccine comes out in the second half of 2021, the report suggests house prices will rebound in 2022.
“A second downward step in the labor and financial markets caused by a new wave of COVID-19 this fall and winter could lead to a larger-than-expected drop in house prices,” the report said.
“The development and large-scale deployment of a highly effective coronavirus therapy or vaccine remains the biggest wildcard in the forecast. If a vaccine is delayed, so is the time of recovery. “