Photo: James Bombales
The floodgates have officially opened for Canadian housing market forecasts for the next year.
We’ve already heard that interest rates will likely sink lower in 2020 as the housing market continues to rally through the first half of the year. There’s also speculation around how the Liberals’ October election win will impact housing affordability and whether the NDP will play a bigger role in setting the housing policy agenda within the new minority government.
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Now the Canada Mortgage and Housing Corporation (CMHC) has released what amounts to the most comprehensive 2020 outlook for the national market available up to this point.
The report is about as broad as they come, so don’t expect to find out which Toronto neighbourhood is set to go gangbusters next year or the Vancouver suburb where your money is going to stretch the furthest. But for those who are likely to buy property in the next couple of years, it will pay off to have the 30,000-foot view of the market you’ll be buying into.
Here are three trends the CMHC is predicting will impact the market most over the next year and into 2021:
1. Canadian home sales will gain momentum over 2020 and 2021
After peaking in 2016, home sales took a dive in 2017 and continued to fall in 2018. If CMHC’s home sales forecast is accurate — likely, considering there are only a couple months left in the year — it will be more of the same in 2019. But there’s a turnaround on the horizon, with sales surges expected to continue in Ontario and BC’s major markets. The CMHC attributes this anticipated strength to disposable income increases for the two provinces that exceed the national average and strong demographic-driven demand for housing.
2. After national declines in 2019, home prices will begin marching upward again
Like home sales, Canadian home price growth has taken a hit over the last two years. That said, the decline in prices was not as pronounced and the bounce back is expected to play out quicker than what’s anticipated on the sales front. Unlike home sales, the CMHC believes it will be strength in Ontario and Quebec that leads to elevated growth through 2020. But by the time 2021 rolls around, the BC market will be playing in the big leagues again and knocking Quebec into third place for price growth. For the CMHC, it’s really a tale of three provinces driving home prices upward while only “modest gains” are expected for other regions.
3. New home building won’t gain strength, but it will stabilize
Canadian home building hit a 10-year high in 2017 but has declined sharply since then. The CMHC says the total number of homes that started construction in 2019 is about the same ballpark total we should expect for both 2020 and 2021, which is in line with the historical average for annual home construction. The economic outlook for Canada is positive over the next couple of years and that generally leads to builders feeling good about picking up the pace of home construction. However, the CMHC believes household formation will slow during that same period, meaning the strong labour market and income increases that come with it won’t positively impact the homebuilding picture as much as one might expect.