Home prices in Canada expected to drop in 2021 due to COVID-19
Despite the pandemic's negative effect on Canada's economy, home prices increased this summer. Come 2021, though, prices for homes across the country are expected to fall.
As provincial economies reopened and people became more comfortable buying and selling under social distance rules, home sales surged. In fact, demand exceeded supply, driving prices up.
However, a recent study by Moody's Analytics suggests the housing market will no longer be able to escape the poor conditions of the labour market, meaning housing prices will inevitably drop.
"High unemployment and lower income will restrain buyers’ return to the market. So will affordability issues in Vancouver and Toronto," states the report.
"Further, slower in-migration flows to Canada due to COVID-19 disruptions will weigh on housing demand. Not even lower interest rates will be enough to save the housing market."
The average price of a single-detached home in the country will reportedly decrease by 6.7 per cent as prices fall from their current level nationally with the Prairie provinces becoming the most vulnerable.
In Toronto and Vancouver, where housing affordability is a huge issue, rental vacancies will rise, the report says.
"Rental vacancy rates will rise in Toronto and Vancouver as an increased supply of rental units coincides with a fall in demand due to disruption of migration to Canada."
This forecast was echoed by the Canadian Mortgage and Housing Corporation who recently said that the housing market was seeing a "moderate degree of overall vulnerability."
In Q2 2020, the Canadian housing market has been affected by #COVID19 and is seeing a moderate degree of overall vulnerability. Read the full report to learn more: https://t.co/FEHylC9SPY— CMHC (@CMHC_ca) September 21, 2020
Just this summer, national home sales reached 63,355 in July, which is a 26 per cent increase from the previous month and the highest monthly level ever recorded.
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