Canadian home prices could climb 14% in pandemic’s second year as low rates stoke demand, CMHC says

Canada’s national housing agency is predicting home prices could rise as much as 14 per cent during the second year of the pandemic as low interest rates continue to stoke demand across the country.

Over the course of the pandemic, home prices have jumped over 30 per cent, with suburbs, smaller cities and rural areas leading the way.

Canada Mortgage and Housing Corp said the average selling price of a home could increase to $649,400 this year from $567,699 in 2020 and that home resales could climb as much as 9 per cent to 602,300 units year over year.

The prediction is slightly lower than the real estate industry’s forecast for the average selling price to increase by 17 per cent to $665,000 and resales to rise by 27 per cent to 702,000 units.However, the housing agency and Canadian Real Estate Association see the pace of price increases and resales slowing next year, with interest rates expected to rise and unaffordability increasing.

“The pace of sales is expected to moderate from recent highs, reflecting the impact of increasing mortgage rates and high price levels on existing-home markets,” the agency said in its annual Housing Marking Outlook.

CMHC’s forecast is a sharp contrast to its first outlook, issued during the first few months of the pandemic, when it said home prices could fall as much as 18 per cent. The CEO of CMHC, then Evan Siddall, admitted the agency erred and said no one foresaw the extreme inequity of the virus, where higher paid workers continued working and were able to benefit from low borrowing costs, while lower-paid workers lost their jobs.

“Higher-income households have generally been better able to maintain their income, since their jobs are more likely to allow them to adapt by working from home,” the agency’s report said on Thursday. The low mortgage rates and higher savings “encouraged some households that adapted to pandemic employment conditions to fund home purchases.”

The Globe and Mail

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