Canada

Canada’s Real Estate Industry Is Forecasting Lower Prices From Here

Canada’s national association representing Realtors is forecasting big price gains… but those gains are lower than last month’s average price. The Canadian Real Estate Association (CREA) released a forecast with February sales data. The association sees absolutely mind blowing growth for home prices in every province. Just one minor detail most analysts didn’t catch. The big growth? It’s lower than last month’s prices, indicating things may cool later this year.

Canadian Home Prices Forecast 2% Lower Than Last Month

Canada’s average sale price is forecast to be much higher than last year. The average price is expected to reach $665,329 in 2021, up 16.5% from last year. In 2022, they see prices climbing an additional 2.1%, bringing the average to $679,341. This is huge price growth, especially at the national level. Advanced economies often enact cooling measures when home prices rise higher than 5%.

Canadian Real Estate Price Forecast

The forecast average sale price for 2021 and 2022, compared to the average sale price in February 2021.
Source: CREA, Better Dwelling.

One thing that’s easy to miss in the ambitious forecast — it’s lower than today’s average price. The 2021 full year forecast is 1.88% lower than the average for February sales. The 2022 average is only 0.18% higher than February, showing virtually no growth. This is largely due to the expectation things will normalize and cool a little later this year.

Ontario Real Estate Prices Forecast Lower

In Ontario, the average sale price is expected to rise more than a fifth this year. The average sale price is expected to reach $855,218 in 2021, up 21.2% from last year. In 2022, they expect prices to rise another 3.9%, bringing the average to $888,658. It would have been way too lucky if it was $230 higher, I guess. 

Canadian Real Estate Price Forecast Change

The forecast change in average sale price for 2021 and 2022, compared to the average sale price in February 2021.
Source: CREA, Better Dwelling.

The rest of the year is forecast to average out lower than last month, with a more modest increase in 2022. The average sale price in 2021 is forecast to be 1.03% lower than it was in February. The forecast for 2022 is 2.84% higher than last month. Expect action to taper a little later in the year.

BC Real Estate Prices Will Still Be Lower In 2022

BC real estate is forecast to see double digit growth, but it will be slower than the national average. The average price is expected to reach $861,286 in 2021, up 10.2% from a year before. In 2022, they forecast prices will rise another 1.1%, to an average of $870,480. The average for 2021 is 2.98% lower than last month’s average, and 2022 is still 1.94% lower. This is one of the few provincial forecasts where the average is lower next year than in February. The only other province is PEI.

Quebec Real Estate Prices Expected To Move Much Higher

Quebec real estate is forecast to be an outlier, with prices much higher than last month. The average price is expected to rise to $439,396 in 2021, up 16.6% compared to last year. In 2022, the average is expected to rise another 5.3%, bringing it to $462,685. Compared to February, the 2021 total forecast is 5.06% higher. The 2022 forecast is 10.63% higher than the average that was reported last month.

CREA expects the market to be very tight in the first half of the year, due to low inventory and interest rates. Pressure on prices are expected to ease into the year, as the market is better supplied. Next year is forecast to be a fairly routine year, with much more typical and stable price growth.

The forecast isn’t a negative one, and they are saying they expect prices much higher than last year. Most of the growth appears to already be baked in. The view is similar to what banks and the government have been saying recently. Once the shift of demand to smaller regions normalizes, so should price growth. That’s probably really hard to believe if you’re trying to buy a home, and seeing annualized 1-month price growth at 40%.

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16 Comments

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  • Jason Chau 4 months ago

    Forecasting 16% is now the conservative estimate in Canada. That’s really funny tbh.

    • Ethan Wu 4 months ago

      That’s 16% of money that should have gone into other segments of the economy, to build somewhere worth living. Sad and shortsighted.

  • Kate Wright 4 months ago

    If they didn’t forecast lower prices, would the government be forced to enact cooling measures? That’s the real game of strategy here.

    • Whiskey Foxtrot 4 months ago

      When your economy is a fifth real estate, there’s no other strategy to work. That’s why the Federal government is going full hog on real estate and oil.

      This is what people were complaining about when times were “good.” We should have focused on deleveraging households in 2017, when it started to become a concern. Now we’re need to steal even more long-term growth to recover.

    • SH 4 months ago

      You beat me to it Kate. I said much the same in my comment below (I hadn’t yet read yours).

      This is obviously intentional to get the government to throw even more money at real estate speculators at the expense of middle class workers

    • Paul 4 months ago

      I really hope that’s not the case as it would mean the BOC is taking advice from real estate reports.

      • SH 4 months ago

        Are you new to Canada, Paul?

        I wouldn’t be surprised if Tiff had Brad Lamb on speed dial.

    • Chris 4 months ago

      Umm… someone should let these guys know that material costs are through the roof.
      250 a sq? Please, that ship has sailed.

  • Quon 4 months ago

    How does a government let a “conservative” forecast rise by 16% and think everything is fine?

  • SH 4 months ago

    This is just a trick to get the government to intervene even more in the market to prop up prices.

    Just like the infamous -18% call by the CMHC. It was only done in order to prompt the federal government to throw even more money and marxist interventionist policies at homeowners and mortgage borrowers.

    • Christopher Barclay 4 months ago

      It’s appears very different from that, since they’re saying prices will rise 16%.

  • Max 4 months ago

    I’m curious what sales composition they are forecasting in terms of proportion house/condos. If they expect more condo sales than more expensive detached (semis, towns) homes, then prices may still rise in each component, but average price would technically stay at the same level or even drop slightly if there are too many condos sold vs previous year, when all rushed to buy single family homes/semis and towns..

  • Ashley 4 months ago

    16% increase and that’s just average, great. I guess everybody would be getting a 16% salary increase just like their salaries have increased 20% since last year. Stats Canada must be rigged to not report such household income increase.
    Canada and it’s government are so great, no country would be able to match such growth. It is foolish for anyone to look for growth anywhere, just buy a house in Canada on leverage and free 16% return that too government guaranteed, who would want to miss that.
    The best investment of the century would be to buy a bitcoin and take a loan against it to buy a house. Money quadrupled in no time.

  • Holton 4 months ago

    Guys, lets be honest here. With so much funny money printed in the last year its really hard for prices to go down.

  • Francis 4 months ago

    Maybe Canada is 16% more desirable than it was last year? Though I can’t see how…

    But I just came to send appreciation to the writer for the $888,888 joke.

  • Alex lapukhin 4 months ago

    These forecasts would have been taken a whole lot more seriously had not been so wildly inaccurate in the past.

Comments are closed.