Earlier this year, CMHC claimed that the housing market could experience as much as an 18% fall. This dire prediction was once again confirmed by Bob Dugan, the chief economist at CHMC, who still believes that what they predicted in May still stands and that house prices in Canada will decrease from 9% to 18%.
However, real estate agencies in Toronto such as CondoMapper don’t agree with that prediction. RE/MAX was highly vocal in their disagreement with the bold predictions made by Canada’s federal housing agency. RE/MAX labeled CMHC’s prediction as “panic-inducing and irresponsible” and “fear-mongering.”
Helmut Pastrick, the chief economist at Central 1, says that house prices are not declining, but rising, and that is a data-driven conclusion. Nationwide, house prices increased by 1.5% and that was in August. He also mentioned that the low-interest rates will drive the demand and because of that, the CHMC’s prediction is overly pessimistic.
Carl Gomez, the chief economist at C.G Consulting Group, pointed to the fact that there are big differences between the different housing markets all over Canada.
The local real estate markets in Alberta and Saskatchewan were sampled out as markets experiencing a slowdown. On the other hand, the Toronto real estate market seems to be steaming on all cylinders. According to TRREB’s data from September, 11,083 homes were sold in the GTA averaging 960,772. That’s approximately a 14% increase, year-over-year. RE/MAX believes that the growth in the Ontario real estate market will offset the slowdown in some other regions such as Alberta and Saskatchewan.
The economists that still support the dire CMHC prediction, do recognize that the real estate market has proven to be very resilient amid the coronavirus crisis. However, they also highlighted that job insecurity, historic loss of income, uncertainty related to the coronavirus, the impact of the second wave of infections, the low immigration, and the decline in tourism. All that can lead to a sharper fall in the real estate market, nationwide.
At the same time, everyone agreed that the rental segment of the real estate market is bound for tough times as demand experienced a sharp decline. Economists predict that the decline will be felt throughout 2024 as well. The condo market was also pointed for its massive exposure and its imminent decline.
In Conclusion
Truth is CHMC’s predictions are overwhelmingly cautious and maybe unfairly pessimistic, especially considering the stream of data and trends during this summer. Another truth is that the rental market is slowing down, the same as the condo market. These are two important parts of the real estate markets in the country. But the housing market is going quite strong, especially in the GTA.
So yes, some regions might experience a decline in activity in many segments of their local real estate markets. But in some regions such as the GTA, almost all economists predict solid growth. When it comes to the housing market, many economists and real estate experts believe that the average house prices in the GTA will increase by 5% this year, whereas nationwide the average house price increase is predicted at 3%.
