Home prices, sales to moderate but remain high

OTTAWA — Canada's home sales and price growth will moderate over the coming years from the unsustainable levels of 2020, but remain elevated, with housing starts expected to stabilize by the end of 2023, the national housing agency said.

While the pace of price growth is expected to ease as mortgage rates increase and buyers face already high prices, home prices could climb 14.4 per cent on average in 2021, the Canada Mortgage and Housing Corporation (CMHC) forecast in its spring market outlook.

Its report does not forecast any annual price declines in the 2021-2023 period.

“Economic conditions are expected to return to prepandemic levels by the end of 2023 … This includes the pace of home sales and prices, which we expect to see moderate from 2020 highs over the same period,” Bob Dugan, chief economist at the CMHC, said in a statement.

Dugan warned that significant risks that could impact the forecast include the path of the COVID-19 pandemic, a faster-than-expected increase in mortgage rates, and a reversal of the urban exodus that has driven up prices outside large cities.

The CMHC said last May that it expected housing starts, sales and prices to plunge amid the pandemic, with prices not expected to recover to pre-pandemic levels until 2022.

But home sales and prices soared to record levels, with the average selling price up 31.6 per cent in March 2021 from a year ago.

Housing starts also hit a record high in March.

Rental demand is also expected to recover through 2023 as immigration and inter-provincial migration resume, and as students return to campus, the agency said.