Low inventory and high demand will keep house prices moving higher until at least the end of 2020, according to a new report by RE/MAX. After that, the economic fallout from the pandemic are expected to catch up with the market.
“I think what the message is for the rest of this year, we expect prices to do moderately well,” Christopher Alexander, the executive vice president and regional director of RE/MAX, told Yahoo Finance Canada, “But next year… that’s when we’re going to start to see the true effect of the economic challenges due to COVID.”
These remarks followed RE/MAX’s forecast saying that Canadian house prices are anticipated to grow another 4.6 per cent in the third and fourth quarter of 2020, according to feedback from regional brokers. This forecast aims higher than the previous prediction at the beginning of the year, saying prices would grow by 3.7 per cent.
The report added that transactions were driven by lifestyle changes, with 32 per cent of Canadians moving out of urban centres and opting for suburban and rural communities instead. These trends are further supported by changes to work and life dynamics, with 44 per cent of surveyed Canadians saying that they would like a home with more space.
Despite recent housing data breaking records in recent months, the report found Canadians were split with their confidence in the market, with 39 per cent of Canadians being as optimistic about home prices as they were prior to the pandemic, and 37 per cent who are more pessimistic.
Other forecasts maintain that Fall will be the season housing price gains begin to level off and decline, such as the National Bank of Canada’s prediction that house prices will fall by 9.8 per cent between 2020 and 2021 and the report by DBRS Morningstar stating prices could tumble by up to 15 per cent. The Canadian Mortgage Housing Corporation (CMHC) forecast says that prices could fall between 9 per cent and 18 per cent over the next 12 months.
“The bottom line is across Canada, there is an extreme amount of demand that far outweighs the amount of supply that's available today,” Alexander explained, “And if there is an increase in inventory in the third and fourth quarters, we're confident that the amount of demand will be able to absorb most of it, so that even if we end up in balanced market territory, you know, we're going to see prices do reasonably well.”
Alexander added that the inventory problem has been a challenge for housing affordability for years, and it’s an issue expected to follow the market for a while. “We've had we have a serious inventory challenge in the country. There's no real national strategy to solve that.”