Canadian House Prices, Housing Inequality Set To Jump In Wake Of Pandemic: Experts

  • Buyers can afford 24% more house than they could just two years ago, thanks to falling mortgage rates
  • But housing inequality will rise as condos struggle and detached homes boom, Moody’s predicts
  • Smaller, cheaper markets could benefit from an exodus from the cities

The COVID-19 pandemic has shuttered thousands of businesses, saddled the federal government with a record jump in debt and left the country with 1.1 million fewer jobs than at the start of the year.

But some market experts say that won’t be enough to keep Canada’s housing market down. They say the country’s chronic big-city housing shortage has combined with dropping mortgage rates to create a recipe for rising prices.

And that has some experts worried about rising inequality in Canadians’ housing conditions.

Even after hitting a record high this summer, the average resale price of a home in Canada will jump 12 per cent in the next two years, U.K.-based Capital Economics predicted in a client note Monday. The average price already jumped 18.5 per cent in the past year, according to the Canadian Real Estate Association.

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That’s a far cry from Capital’s forecast this spring, when they predicted the pandemic would push house prices down marginally. But a string of hot months for the housing market post-lockdown has seemingly convinced them otherwise.

“Despite challenges for apartment prices in Toronto and Vancouver, there is still scope for overall home prices to rise sharply, primarily due to much lower borrowing costs,” senior Canada economist Stephen Brown wrote.

Mortgage rates have come down over the past few years, and amid the pandemic they have hit all-time lows, with five-year fixed-rate mortgages now being advertised for under 2 per cent.

Brown estimates that buyers’ maximum purchase price has jumped 24 per cent in the past few years, thanks to falling mortgage rates, but the average house price has risen 4 per cent in that time.

Houses, condos moving in different directions

Still, the condo part of the housing market could be in for a rougher ride than detached homes in the next few years, because the economy is changing.

“First, the pandemic has led to higher demand for more spacious houses, due to health concerns and increased working from home,” Brown wrote. 

“Second, the larger rise in unemployment among lower-wage service sector workers has weighed more heavily on the apartment rental market. Finally, lower immigration has also reduced apartment rental demand.”

Brown noted that rental rates have fallen in many major cities, including Toronto, Vancouver, Montreal and Calgary.

Capital Economics doesn’t issue a separate forecast for condo prices, but Brown said the ratio of sales to new listings in Greater Toronto points to a 5-per-cent price decline in condo prices in Canada’s largest housing market over the next few years.

He doesn’t see the exodus from the cities as a permanent new trend ― though he does expect it to last a few years.

“Our theory is that the pandemic has accelerated normal life choices for a key cohort of people,” he wrote in an email to HuffPost Canada. “Say for example a certain (percentage) of 30-35 year olds move to the suburbs each year to start a family. The pandemic has encouraged a much bigger share to move this year….”

Housing inequality on the rise

Still, not all forecasts agree Canada will see the sort of rising prices in the coming years that it has seen in recent months. In a report last week, credit ratings agency Moody’s predicted house prices in Canada would fall nearly 7 per cent in 2021, and prices won’t return to pre-pandemic levels until around 2023.

“The pandemic will lead to even further widening in economic inequality, including housing,’ Singh wrote. 

“While demand for single-family homes with ample space and large pantries may rise, so too might demand for smaller apartments and condos given the struggle many families will face in saving for a down payment.”


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The housing market has been strong so far because of mortgage deferrals, as well as low mortgage rates and strong population growth, Singh said, but “the housing market’s vigor will fade as high unemployment and lower incomes will restrain buyers’ return to the market.”

The Moody’s report sees the largest house prices declines in Calgary and Edmonton, because of those cities’ exposure to the struggling oil and gas industry.

“We expect greater resilience in lower-density markets outside Canada’s large urban cores,” SIngh wrote. 

“The pandemic has boosted demand for properties offering more space for working from home and fewer shared areas with neighbors. Smaller markets where such properties are more affordable will particularly benefit from this trend.”

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