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Canadian home prices have a long road ahead as they fall and then gradually recover from the shock of the COVID-19 pandemic.

A new report published by the Canada Mortgage and Housing Corporation (CMHC) provided fresh insight into what to expect from the country’s housing market over the next two and a half years as it grapples with the pandemic fallout.

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Among the key takeaways from the report, which explored performance in the resale, new construction and rental housing markets, was that Canadian home prices are unlikely to recover until past 2022.

While there is some regional variation, most of the country’s major housing markets are likely to see average prices remain at lower levels at the end of 2022 compared to when the pandemic began, the CMHC report said.

Only by the end of 2022 and in the uppermost bound of the CMHC’s price forecast do average Toronto home prices recover and post a slight increase compared to their pre-pandemic levels. The average home price for the Toronto region had stood at $892,464 in March 2020 before the pandemic’s effects were fully felt.

In the best case scenario, Toronto prices surpass the $900,000 mark by the end of 2022. In a more pessimistic scenario, they do not even crack the $800,000 mark by the same point.

“The upside risk to the forecast is a milder price correction with sustained resilience in the ground-oriented home market (detached and townhomes) and persistent demand for more affordable condominium apartment units,” wrote CMHC Senior Specialist Dana Senagama.

“The downside risk to the forecast is a more severe and prolonged adjustment to the pandemic that will have far reaching economic consequences,” she added.

There is no scenario in the CMHC’s forecast in which Vancouver home prices recover to their pre-pandemic levels by the end of 2022.

The CMHC’s Braden Batch and Eric Bond wrote that a gradual price decline will play out over the next two years before a recovery begins in late 2022.

“Average house prices will decline with weaker household budgets and the uncertain nature of the economic reopening,” they wrote.

“In addition, the uneven impact on buyers at different levels of income will result in a change to the share of condominium and single detached sales, creating additional uncertainty for the path of the average price decline,” Batch and Bond added.

In Calgary, price declines will continue through most of 2022 before stabilizing by the end of that year. Ottawa prices will decline through 2021, but could end up slightly higher than their pre-pandemic level by the end of 2022 in the CMHC’s optimistic scenario. Montreal is expected to see a steep price decline over the next year, but is forecast to bounce back quicker than other major markets.

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