Awh…the month of May when spring gradually blooms into summer and finally some good news to report. Some economists apparently predict home prices to rise 6% this year and we can expect to see rapid price growth once the outbreak passes, several recent forecasts have predicted, even amid massive job losses. Despite a steep drop in sales this year, the average home price in Canada will be 6.1% higher at the end of this year than it was a year earlier, TD Bank said in a forecast issued this week.
Given that incomes are unlikely to rise much during this crisis, affordability will deteriorate when you look at house prices. Sales may be falling, but the supply of homes on the market is falling with them which means the market balance isn’t shifting much. The country won’t see a sudden rush of people who need to sell their homes quickly, thanks to the banks’ new mortgage deferral programs.
And what about the millions of Canadians who have lost work in this crisis? Won’t this affect house prices? Economists think that won’t have as much impact on the housing market as one would think, because, they say the jobs lost in this crisis have disproportionately affected people in service industries ― think customer service reps and Starbucks baristas ― and these people overwhelmingly tend to rent.
TD’s forecast sees Toronto house prices rising 7.8% this year, compared to last year, while Vancouver will see 4.7% growth. Things will look worse out west, TD predicted, where the oil slump will lead to a 4.7% price decline in Alberta. Sales are poised to plunge at a historic pace in April, while gradually recovering in subsequent months as buyers remain cautious, the report states. “We think this recession is going to be deep but quick, and the economy will recover quite quickly as soon as we substantially get through the health crisis”, said chief economist Peter Norman for The Altus Group.