Canada’s National Housing Agency Forecasts Price Drops In Toronto and Vancouver

Canada’s state-owned mortgage insurer sees prices dropping in major real estate markets. The Canada Mortgage and Housing Corporation (CMHC), is forecasting price declines across Canada. This week they provided additional data, showing the expected impact to major markets. The agency sees Toronto and Vancouver falling from last month’s prices, even in a best case. As for Montreal, they see much more potential upside than downside.

About The Data

Today’s data is straightforward, but here’s a quick note on ranges and averages. Professional forecasts tend to include a range, instead of a single number. In this CMHC forecast, they include a lower and upper bound for the price movement. The upper bound is an optimistic scenario. To see this, the economy needs to reopen, and people need to not be concerned what just happened. The lower bound is a pessimistic scenario. In this case, the damage is much worse than people expect, and they’re likely a little shocked. Ranges are tricky for consumers, since they’ll just pick the outcome they most agree with. Instead, you should be watching for how things are actually unfolding. Most people have limited exposure, and end up making assumptions based on their perspective. Depending on how broad that knowledge is, it could skew to under informed for non-analysts.

The prices are also full year averages, so distribution needs to be considered. When using a full year, there will be periods where prices are higher and lower. This kind of volatility is even higher with reduced volumes. There’s also the issue of sales mix – an average can drop because fewer expensive homes are sold. If you believe wealthy people lead the market, that might be something to consider. A slowdown in high end could precede a larger drop for cheaper, more abundant segments. This is something one of Canada’s largest banks is expecting.

Toronto Real Estate Prices Forecasted Lower From May Numbers

Toronto real estate prices are forecasted to fall significantly, or make a small increase. The lower bound of the forecast sees the average price falling to $739,000 in 2021, down 9.83% from 2019’s average price. The upper bound of the forecast sees the lowest average at $840,000 also next year, up 2.49% from 2019’s average. For context, the upper bound would be a decline from the current average price as of May 2020.

Toronto Average Real Estate Price Forecast

The average sale price of Toronto real estate, and the CMHC forecasted projection.

Source: CMHC, Better Dwelling.

Vancouver Real Estate Prices Forecasted To Decline In All Scenarios

Vancouver real estate actually has one of the worst forecasts for a major city, with declines all around. The lower bound would see prices bottom at $809,215 in 2022, down 12.35% from 2019’s average. The upper bound, or best case, would see prices bottom at $888,580 in 2022 as well, down 3.75% from last year. Both of these see the bottom in the last year of the forecast, so that may not even be the bottom. There’s also no forecasted scenario where it goes higher.

Vancouver Average Real Estate Price Forecast

The average sale price of Vancouver real estate, and the CMHC forecasted projection.

Source: CMHC, Better Dwelling.

Montreal Real Estate Prices Have More Upside Than Down

Montreal real estate doesn’t have steep valuations, so the range between the lower and upper bound is tighter. The lower bound would see the average bottom at $392,000 in 2021, down 4.01% from the 2019 average. In the upper bound, the average rises $422,800 in the same year, up 3.53% from 2019. The forecast ends with prices down 2.54% in the lower bound, and up 9.14% in the upper bound. Worth a mention that Montreal is seeing inventory rise very rapidly after reopening, but sales haven’t quite kept up.

Montreal Average Real Estate Price Forecast

The average sale price of Montreal real estate, and the CMHC forecasted projection.

Source: CMHC, Better Dwelling.

One important takeaway should be the range size on these forecasts. Markets more overvalued, tend to have much wider forecast ranges. Wider ranges tend to mean more uncertainty, and are more dependent on how the economy evolves. Ones with smaller ranges are a little less uncertain, and may not be as badly impacted by worse news. The full extent of the economic damage won’t be known until the pandemic lockdown is lifted, and how the public perceives the damage.

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  • GTA Landlord 4 years ago

    Had to look it up. TRREB average for May: $863,599, so upper bound isn’t even huge from here.

    Consider the “bounce” this year is in contrast to last year, which was one of the worst years in decades, there’s a lot of overselling on well the market is doing.

    • Jason Chau 4 years ago

      A detached house is also twice the average cost as a condo, and suffered the biggest sales lost of all of the types. The average, as high as it is, is lower than it would have been if detached volume returned. That’s a big crater to get lower than here.

  • Fazid 4 years ago

    I can’t wait to kick out my tenants, and set a higher rent for the next group. The rent floor is going to soar for people that can’t afford to be first-time buyers.

    • Trader Jim 4 years ago

      The big “what does the economy look like?” issue is going to be how many landlords proceed with evictions. Higher evictions = lower rents, and worse outcomes.

    • Tom Wolfe 4 years ago

      Fazid – your tenants are *people, who are probably busting their humps to pay *your bills. Luckily, you cant kick them out because *you negotiated a bad deal. LTB rules prevent that type of reckless and irresponsible behavior. Apparently your tenants outsmarted you.

      I think you are painfully naive about the future of rents or the economy that would support your pipe dream. I feel sorry for your tenants – current and future.

      • Big Joe 4 years ago

        Good possibility of him not having tenants in the foreseeable future… or a rental property… 😂

  • Pete 4 years ago

    Commercial landlords are sending noticed to tenants that skipped payments, demanding the back payment. This is going to lead to a lot more layoffs. If your business couldn’t afford the rent and asked for a break, the money is going to come from somewhere. Inventory and staff are the obvious decisions.

    • Christopher Barclay 4 years ago

      Commercial real estate isn’t relevant to residential. Clients will pay to be in an area, based on what’s around it. Unless the Eaton Centre shuts down, it’s not important.

  • Rob 4 years ago

    There you have it
    Now we know prices are either going up or down
    Good job analysts 😀

  • Joe 4 years ago

    East and West end of Toronto houses are still climbing strong though…

  • Old Nick 4 years ago

    So does anyone else think vacancy rates are going to Soar? My bet is we are seeing uneducated and overzealous buyers with very little in the way of knowledge or scope of economics buying the absolute top! Rents in my opinion are going to come off 20-30% in bigger cities where I suspect vacancy rates to hit upwards of 10% as I suspect there are building full of short term rentals… FAZID I think the realizations you are about to come to terms with are much different than what you think seeing how Fitch rating agency just downgraded Canada’s bank ratings to AA+ from AAA and this is not the last time I suspect.. Give it six month and we will likely be A if no BBB also known as JUNK!

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