RBC says it expects Canada’s housing market will see a significant pullback this year because of both the physical distancing restrictions and economic uncertainty caused by the coronavirus outbreak, but that it could rebound next year.
Bank analyst Robert Hogue says in a report that this year’s home resales could dive by 30% to a 20-year low as the market will “slow to a crawl” this spring, as confidence erodes and speculators sit on the sidelines.
He says he expects home prices to trend lower in the coming weeks or months, to make for a 2.9% composite benchmark drop in the second half of the year compared to last, as tight-squeezed sellers make price concessions.
Hogue, however, expects the trends to reverse next year as low interest rates, a strengthening job market and a bounce-back in immigration help sales to surge more than 40% in 2021 and price dynamics to also return to favouring sellers.
The report says oil-reliant Prairie economies will feel the housing pullback more acutely, with price declines “bound to re-accelerate significantly” and will little prospect of prices rebounding any time soon.
The report also notes that the bank’s affordability measure, defined as the share of median income needed to cover home ownership, was steady at 50% in Canada in the fourth quarter of 2019. Vancouver was highest at 80.4%, Toronto at 68.2%, while Edmonton was 31.6%.