Moody’s 2021 house price index predicts that single-family homes will fall by 6.7% and apartments will fall by 6.5%
According to the forecast of Moody’s Analytics, Inc., as unemployment has slowed the boom in the real estate market, house prices in Canada may fall by 7% by 2021.
In a report this week, the financial intelligence company said that, in addition to the affordability issues in Vancouver and Toronto, new single-family houses in Calgary and Edmonton are “in short supply.”
The report said: “The housing market can no longer escape the harsh conditions of the labor market.” The report uses data from RPS Real Property Solutions Inc., a subsidiary of Brookfield Asset Management.
“Even lower interest rates are not enough to save the real estate market.”
Moody’s report did not detail how to create forecasts but said that its 2021 house price index also requires single-family housing prices to fall by 6.7% and condominium prices by 6.5%.
Moody’s forecast is based on a Canadian Real Estate Association report that home sales broke records in July and August due to lower mortgage interest rates.
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Some optimists expect this record to continue. A survey of ReMax brokers earlier this month revealed that by the end of 2020, average residential house prices could rise by 4.6%.
CMHC Echo Prediction
But Moody’s forecasts that the real estate industry will lose momentum in the first half of 2021, and it is not alone. Bob Dugan, an economist at the Canadian Mortgage and Housing Corp, also predicted that house prices would continue to fall earlier this week.
The report said: “Moody’s Analytics predicts that the short-term growth in the third quarter will not generate too many jobs and will not effectively reduce unemployment.”
For example, Moody’s said that housing starts, a closely watched statistic, rebounded sharply this summer, partially reflecting investment before the pandemic.
The report said: “Builders spent too much money on these projects and abandoned them.”
CMHC stated in its first-quarter report since the beginning of COVID-19 that Canada’s housing market is in a moderately weak position
Under Moody’s model, although housing prices in each region will fall, the impact will be uneven and benefit small, affordable markets.
The Grasslands Were Hit Hard
Moody’s forecasts hit the Prairie region particularly hard, as government support is waning, mortgage payment delays are ending, and the ongoing struggle with consumer debt and unemployment.
Moody’s report said: “The pandemic will lead to further expansion of economic inequality, including housing.”
“Although the demand for single-family homes with sufficient space and large kitchens may rise, given the difficulties of many families in saving down payments, the demand for small apartments and apartments may also rise.”
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If the COVID-19 vaccine is introduced in the second half of 2021, the report suggests that housing prices will rebound in 2022.
The report said: “This fall and winter, the second drop in labor and financial markets caused by the new wave of COVID-19 may stimulate housing prices to fall more than expected.”
“The development and widespread deployment of highly effective coronavirus therapies or vaccines is still the biggest common problem in the forecast. If the vaccine is delayed, so will the timing of recovery.”