Canada

Canadians Are MORE Bullish On Real Estate Prices After Record Gains: Bank of Canada

Canadian real estate prices just printed record growth across the country. Apparently it wasn’t enough, as households have increased their expectations for future growth. Bank of Canada (BoC) surveyed consumers on where they see home prices over the next 12 months. Conducted in Q2 2021, the survey found the highest forecast rate of growth in at least half a decade. Unfortunately, households aren’t great at guessing where prices will be in a year.

Canadian Households Are Becoming More Exuberant As Prices Rise

Canadian households are getting more bullish on home prices, after seeing record growth. Households surveyed see home prices rising 5.7% over the next 12-months. For context, the actual CREA benchmark saw 24% annual growth in May. It’s the most bullish household have been in the available survey data, but it only goes back to 2016. Though there’s been a few large bursts of home prices over that short period of time.

Canadian Household Expectations of Price Growth

The median value consumers expect home prices to grow over the next 12 months from the quarter surveyed.

Source: Bank of Canada; Better Dwelling.

Ontario Households Expect The Second Largest Rate of Growth

Breaking the responses down regionally, households in Ontario have the second strongest outlook. People in the province believe home prices will rise 7.0% over the next 12-months. Expectations are the highest for the province since Q2 2017, at the previous peak of growth. As home prices made record gains, so did the belief they would rise at a faster rate.

Canadian Household Expectations of Price Growth

The median value consumers expect home prices to grow over the next 12 months from the quarter surveyed.

Source: Bank of Canada; Better Dwelling.

BC Households Definitely Don’t Think It’s 2016 Again

Over in BC, expectations of price growth are high, but not like they were 5 years ago. Households see prices rising 6.5% over the next 12 months. Higher than recent expectations, which actually fell below zero last year. BC households don’t think it’s anything like the frenzied market of 2016 though.

What does this mean? At first glance, the peaks of expectations and price growth line up. The Canadian mortgage industry also conducts a similar survey, with a similar outcome. The indicators aren’t lagging or leading, but appear to be coincidental. That is, as people see prices rise, they think they’ll rise even further. As prices drop, they lower their expectations as well.

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