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