Home sales likely to dive, RBC says

TORONTO — Canada’s housing market could see a significant pullback this year because of the COVID-19 pandemic, but could rebound next year, the Royal Bank of Canada says.

This year’s home resales could dive by 30 per cent to a 20-year low as physical-distancing limits sales while the economic fallout erodes confidence and leaves speculators sitting on the sidelines, bank analyst Robert Hogue said in a report. “Canada’s housing market will slow to a crawl this spring as Canadians follow socialdistancing orders in order to combat the spread of COVID-19.”

Market activity in Toronto is already showing a sharp drop-off.

John Pasalis, of Realosophy Realty, said in a report that while sales were up 50 per cent in the first two weeks of March compared with a year earlier, by last week sales were down 37 per cent compared with a year earlier, while new listings were down 33 per cent. Pasalis said average prices are still up over last year, but moved lower through March.

Hogue said home prices could stay stable in the near-term as both buyers and new listings pull back, but expects the composite benchmark price to fall 2.9 per cent in the second half of this year compared with last year. “In a matter of weeks or months, surging unemployment and the market’s illiquidity will compel a growing number of tight-squeezed sellers to make price concessions.”

The trends could reverse next year as low interest rates, a strengthening job market and a bounce-back in immigration help sales to surge more than 40 per cent in 2021 and price dynamics also return to favouring sellers, Hogue said.