Home prices could fall 7 per cent in 2021, hit­ting Prairies hard: Moody’s fore­cast

Medicine Hat News - - NATION -

Home prices across Canada could tum­ble about seven per cent in 2021, as un­em­ploy­ment damp­ens the hot real es­tate mar­ket, ac­cord­ing to a fore­cast by Moody’s An­a­lyt­ics, Inc.

There is a “dan­ger­ous” over­sup­ply of new, sin­gle-fam­ily homes in Cal­gary and Ed­mon­ton, on top of af­ford­abil­ity is­sues in Van­cou­ver and Toronto, the fi­nan­cial in­tel­li­gence com­pany said in a re­port this week.

“The hous­ing mar­ket will no longer be able to es­cape the poor con­di­tion of the la­bor mar­ket,” said the re­port, which used data from a Brookfield As­set Man­age­ment Inc. sub­sidiary, RPS Real Prop­erty So­lu­tions Inc.

“Not even lower in­ter­est rates will be enough to save the hous­ing mar­ket.”

Moody’s re­port did not go into de­tail on how it cre­ated the fore­casts, but said that its 2021 home price in­dex also calls for a 6.7 per cent de­crease for sin­gle-fam­ily homes and a 6.5 per cent de­cline in condo apart­ments.

The pre­dic­tion from Moody’s comes af­ter the Cana­dian Real Es­tate As­so­ci­a­tion re­ported record-shat­ter­ing home sales in July and

Au­gust amid low mort­gage rates.

Some op­ti­mists ex­pect this record run to con­tinue. A sur­vey of RE/MAX bro­kers ear­lier this month sug­gested that av­er­age res­i­den­tial home prices could rise 4.6 per cent by the end of 2020.

But Moody’s fore­cast says the real es­tate sec­tor will lose its mo­men­tum in the first half of 2021, and it’s not alone. Canada Mort­gage and Hous­ing Corp. econ­o­mist Bob Du­gan also pre­dicted ear­lier this week that hous­ing prices will fall go­ing for­ward.

“Moody’s An­a­lyt­ics ex­pects that the short­lived burst of growth in the third quar­ter will pro­duce too few job gains to mean­ing­fully re­duce un­em­ploy­ment,” the re­port said.

For in­stance, Moody’s said hous­ing starts — a closely watched statis­tic that has re­bounded sharply this sum­mer — partly re­flects in­vest­ments made be­fore the pan­demic.

“Builders have spent too much money on the projects to aban­don them,” the re­port said.

While home prices would fall in ev­ery re­gion un­der Moody’s model, the im­pact would be un­even and would favour small, af­ford­able mar­kets.

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