Home prices to rise in 2021, Canadian Real Estate Association forecasts
The Canadian Real Estate Association expects the national average home price will rise 9.1 per cent to $620,400 in 2021, in one of the most optimistic forecasts yet for the real estate sector.
The real estate association says it expects home prices to either hold steady or climb in all regions across the country, citing economic improvements from the lows of the COVID-19 pandemic.
“The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties,” the report says.
The group of more than 130,000 real estate agents has one of the cheerier forecasts out there, as the industry tries to make sense of a hot real estate market against a backdrop of lingering unemployment and an uncertain end date to the COVID-19 pandemic’s second wave.
Re/Max is predicting 2021 price increases of four per cent to six per cent, while fellow homeseller Royal LePage is betting on a 5.5 per cent price hike.
Debt market watchers, meanwhile, have a wider range of estimates.
Ratehub, for instance, sees prices rising four to seven per cent next year. But that excludes the condo market, where sales have not grown as quickly this year as more Canadians have shed their commutes in search of space to work and school from home. Fitch Ratings expects home prices to decline three per cent to five per cent next year, predicting borrowers may default on mortgages as unemployment makes homeownership unaffordable.
CREA’s forecast, however, notes that after home sales plunged this spring, the real estate market not only rebounded to record highs in summer, but continued its multi-year trend of demand exceeding supply.
“Over the past several years, record levels of international immigration, low interest rates and an increasing share of millennials entering their homebuying years have helped make the housing market a significant source of strength for the Canadian economy,” the report says.
“The recent government support programs for individuals and businesses have also helped the overall economy through the most severe parts of the pandemic to date.”
Headed into 2021, CREA says even more homes will be sold, although monthly home sales are likely to ease back to more typical levels compared to 2020’s wild swings. Overall, CREA expects 2021 home sales volumes to surge 7.2 per cent to around 584,000.
The report also notes that mortgage rates are expected to stay low next year, supporting borrowing.
CREA does say, however that it expects a shortage of new listings to cap sales activity in Ontario next year, and notes that home prices in the Prairies and Newfoundland and Labrador are not climbing with the same “intensity” seen in markets like British Columbia and Quebec.
On the other hand, CREA expects Alberta and Saskatchewan, which have seen several years of falling prices, to see a pickup in home prices next year.
“Current trends and the outlook for housing market fundamentals suggest activity will remain relatively healthy through 2021,” the report said.
This report by The Canadian Press was first published Dec. 15, 2020.