Canadian real estate prices are in for the reverse of last year, according to a Big Six bank. BMO is forecasting home prices will be significantly higher than last year, in the first half of 2021. The second half should cool down though, with prices in Q4 finishing similar to Q1. They’re also forecasting next year will be much slower, as things return to normal. Whatever that looks like.
About The Forecast
BMO’s forecast is a pretty straight-forward, less complicated consumer forecast. It’s based on a few economic assumptions, like employment and rates. They don’t however break it down by worst and best case scenarios. Instead it’s a year-over-year change per quarter, using the national aggregate benchmark price. Not complicated, since they did all of the work for you. Obviously single number forecasts will be more volatile than range forecasts though.
Canadian Real Estate Prices Peak In Q2 This Year
The bank expects a big movement in the first two quarters of the year, before fading to virtually nothing. The bank is forecasting prices will peak at $666,089 in Q2, up 9.50% from a year before. Prices will then slide lower, ending the year just 0.31% higher than Q1. The beginning of the year is going to see a quick climb, but the second half takes back much of the gains. Most forecasts seem to see the second quarter as the peak. The biggest difference is how these forecasts see prices moving after that.
BMO Canadian Real Estate Price Forecast
The national benchmark price for a typical home, as forecasted by BMO Economics.Source: BMO, CREA, Better Dwelling.
Next Year Will Be Much Slower For Price Growth
BMO’s currently forecasting next year things will slow down again, as they return to “normal.” The benchmark price is forecast to reach a peak of $682,741 in 2022, up 2.5% from the previous year. Actually, most of next year is forecast to rise 2.5% currently, which is still an increase. Just not the kind people have become used to over the past few years in Canada.
Canadian Real Estate Price Change Forecast
The 12-month percent change in the national benchmark price for a typical home, as forecasted by BMO Economics.Source: BMO, CREA, Better Dwelling.
There’s a few common themes that appear in other forecasts. First, they make the assumption spring will be the peak for 2022. Almost all forecasts we’ve seen have made this assumption. It also appears price growth falls when most are assuming normalization resumes. In other words, a lot of the current froth is a result of being overstimulated during the recession. This is unusual, since the majority of stimulus is traditionally delivered at the bottom of the markets. Not to maintain the top.
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LMAO! I read these numbers and didn’t think twice about it. Sounds reasonable.
When you chart them the way you did, it shows they clearly think prices are going to fall, but the didn’t want to be the bank that forecast it.
Canada’s dollar is strengthening, which is going to have some interesting implications. Most notably foreign investors would be deterred, and it makes creating new employment in Canada less attractive for foreign firms.
They also said they won’t raise rates until 2023 if I’m not mistaken, so they’re going to have to pump credit as much as possible to prevent the dollar from going “too strong.” Expect government handouts and spending to ramp up.
Canada’s everywhere is getting much more expensive, while US gets a weaker dollar and its coastal cities become cheaper to buy and rent in. Gee, I wonder how this is going to work out.
Flat when cottage country and suburbs are price gainers is probably a loss in Toronto tbh. Doesn’t mean this Spring won’t have people piling in though.
Paper doesn’t refuse ink. I would like to see a chart that compares actual performance to authorities & pundit predictions.
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