While economic growth, employment and net migration in Canada recover from losses incurred during the COVID-19 pandemic, home sales and price growth will moderate from unsustainable 2020 levels but remain elevated. Also will the mortgage rates increase of the next year? This forecast is according to the Canada Mortgage and Housing Corporation (CMHC) Housing Market Outlook (HMO), released today and covering the 2021-23 forecast period. The HMO helps anticipate emerging trends in new home and resale housing markets at the national level and for Canada’s eighteen largest Census Metropolitan Areas (CMAs).
“COVID-19 has had unprecedented impacts on Canada’s urban centres. While some sectors of the economy have struggled to adapt to pandemic conditions, housing activity has been strong and somewhat disconnected from overall economic and employment conditions in many centres,” said Bob Dugan, CMHC’s chief economist. “Economic conditions are expected to return to pre-pandemic levels by the end of 2023, if broad immunity to COVID-19 takes hold by the end of 2021. This includes the pace of home sales and prices, which we expect to see moderate from 2020 highs over the same period. However, significant risks remain with respect to the path, timing, and sustainability of the recovery.”
The outlook assumes the five-year mortgage rate will increase but remain very low by historical standards until the end of 2023. It’s not certain if the shift toward work-from-home arrangements, which is a factor in driving housing demand from more expensive CMAs to less expensive markets, will persist after the pandemic, causing risk to the forecast. With the unprecedented uncertainty caused by the COVID-19 pandemic, CMHC will continue to closely monitor the health of Canadian housing markets and release updates as necessary.
National Highlights:
- Economic growth, employment, and net migration will gradually return to pre-COVID levels over the 2021-23 period, as broad immunity to COVID-19 takes hold and restrictions are lifted in Canada and globally.
- The pace of sales is expected to moderate from recent highs, reflecting high price levels on existing-home markets, the impact of increasing mortgage rates, and low inventories of homes for sale. Slower sales growth will help moderate the pace of price growth.
- The ratio of single-detached housing starts to total starts will increase through 2021, reflecting the shift in preference toward single-detached units on the resale market, as indicated by their current low inventories and strong price growth. Housing starts will stabilize at levels consistent with household formation by the end of 2023.
- Rental demand will recover as both immigration and inter-province migration recover. This recovery in demand will also be driven by the return of international students and in-class learning at universities in the large cities. However, vacancy rates will likely remain elevated, compared to pre-COVID levels.
- The precise timing and speed of the economic recovery in major markets is highly uncertain, and outlooks remain subject to significant risks. These include a slower-than-expected reaching of broad immunity to COVID-19 and stronger-than-expected inflationary pressures leading to higher mortgage rates.
Forecast Range (L) (H): The HMO’s forecast range provides a relatively precise guidance and includes an upper and lower bound established by a set of economic and demographic scenarios.
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