canada housing market Photo: Tobias / Unsplash

Home sales in many Canadian markets broke records in December while prices soared as supply couldn’t keep up with robust demand.

Toronto, Vancouver, Calgary, Edmonton, Ottawa and Montreal all saw home sales rise above 30 percent in December compared to year-ago levels, according to data released this week by local real estate boards in these cities.

It was, as RBC Senior Economist Robert Hogue put it, “a spectacular end to a spectacular year for Canada’s housing markets.”

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In a note this week, Hogue shared a chart that showcased the latest sales-to-new listings ratio from Toronto, Vancouver and Calgary, showing the markets all comfortably in seller’s territory. To drive the point home, the economist titled the chart “Sellers are in full control of Canada’s housing markets.”

Meantime, Hogue noted that demand-supply conditions are “exceedingly tight” in Ottawa and Montreal, with prices continuing to rise quickly in December.

While some forecasters appeared certain earlier in 2020 that Canadian home prices would eventually suffer price declines amid persistently high unemployment and a slow economic recovery, there’s little sign that falling prices are imminent in 2021.

This week Capital Economics’ Stephen Brown predicted that home prices would continue to climb through 2021.

“The wide range of forecasts for house prices in 2021 shows that there is still a lot of uncertainty ahead. Nevertheless, given strong demand and low mortgage rates, our view is that prices will continue to rise,” he wrote.

Brown pointed to two reasons why analysts were forecasting price declines for Canada’s housing market. First, those with pessimistic views of the country’s economic recovery amid a second wave of the pandemic believe there’s a housing supply spike looming as homeowners, no longer able to defer their mortgage any longer, are forced to sell.

Second is the group that has a more optimistic view, believing that mortgage rates will rise on the back of strong economic recovery. With higher mortgage rates, demand will slow as affordability suffers and buyers are less motivated to enter the market.

Neither scenario is likely to negatively impact prices though, wrote Brown. According to Canadian bank regulatory filings from the fall, only 70,000 mortgages with the country’s big banks are currently in deferral, down significantly from the spring.

Mortgage rates are expected to sit at rock bottom levels through 2021, as many economists anticipate that the Bank of Canada won’t increase its mortgage-market influencing key interest rate until 2023.

Brown is predicting Canadian home prices to rise by five percent in 2021 and two percent in 2022.

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