Home prices are expected to finally level off from the “unsustainable” increases that have been seen over the past year, says the Canada Mortgage and Housing Corporation (CMHC).
“Low mortgage rates, high savings rates and persistent, uneven impacts of the pandemic and low immigration are forecast to continue to support sales of more expensive housing types while limiting rental demand,” the agency said in its latest Housing Market Outlook report. “Existing home sales and price growth will moderate from unsustainable 2020 pace of increase but will remain elevated.”
Home sales topped 550,000 in 2020, but could rise to 602,300 in 2021 before falling back to 547,100 in 2022 and 561,100 in 2023, CMHC noted. It also expects national prices to average $649,400 in 2021, which would mark a 14% rise from last year. CMHC sees prices continuing to march higher over the coming years, with a forecast average of $704,900 by the end of 2023.
“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,” said Bob Dugan, CMHC’s chief economist. “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.”
Big-City Home Prices Fall Back Slightly from March Highs
After soaring to record highs in March, preliminary data from April shows average home sales and prices pulling back on a monthly basis.
There were 13,663 home sales in the Greater Toronto Area in April, a 362% increase from last year’s pandemic-induced drop-off in activity, but a 13% drop compared to March. Similarly, the average price in April was $1,090,992, according to the Toronto Regional Real Estate Board (TRREB), a 33% year-over-year increase, but down slightly from last month.
“It makes sense that we had a pullback in market activity compared to March,” said TRREB President Lisa Patel. “We’ve experienced a torrid pace of home sales since the summer of 2020, while seeing little in the way of population growth. We may be starting to exhaust the pool of potential buyers within the existing GTA population.”
It was a similar story in Greater Vancouver, which saw 4,908 home sales in April, up 342% year-over-year, but down 14% from March. Meanwhile, the MLS Home Price Index composite benchmark price for all property types was $1,152,600, a 12% year-over-year gain and modest 2.6% increase from March.
Montreal’s real estate market saw a similar trend, with its 6,237 home sales representing a 231% annual increase, but a 1.7% decline from March. The median single-family home price came in at $500,000 (up 39% YoY and 4% MoM), while the median condo price was $357,750 (up 23% YoY and 3% MoM).
“The low inventory of single-family homes for sale and the dramatic increase in prices in April continue to drive the demand for condominiums, which are more affordable and have lower maintenance and renovation costs,” said Charles Brant, director of market analysis for The Quebec Professional Association of Real Estate Brokers.
NDP Promises New Foreign Buyers’ Tax
An NDP government would implement a 20% levy on home purchases made by non-residents.
That was one of the pledges made by NDP leader Jagmeet Singh recently, along with a promise to make a “massive” investment in housing supply to ease the price pressures being seen across the country.
“Let’s massively invest in housing as a way to create jobs locally in communities and as a way to ensure people have a place to call home,” Singh said, promising a $14-billion investment in housing construction to build over 500,000 new units over four years.
He also promised a nationwide 20% tax on home purchases by foreign buyers, similar to the 20% Foreign Buyers Tax currently in place in B.C., and Ontario’s 15% Non-Resident Speculation Tax (NRST).
“We know that people are treating Canada like a stock market when it comes to housing and just plopping their money into the housing market, hoping it will continue to grow,” Singh said.
In comparison, the Liberal government recently announced a 1% foreign owner’s tax on vacant properties in its spring budget, a measure TD economics said is “unlikely to significantly dent current activity.”