National Bank of Canada Forecasts Sharpest Real Estate Price Decline Ever

One of Canada’s Big Six banks is joining the CMHC and credit risk agencies in forecasting lower prices. National Bank of Canada (NBC) economists expect real estate prices to make a sharp drop this year. The bank is calling what would be the largest price drop in Canada’s history, with Toronto and Vancouver hit hardest.

Canadian Real Estate To Get Biggest Recession Price Drop In Years

The bank’s forecasting the largest recession drop for real estate prices in Canada’s history. Prices are forecasted to fall an average of 9.8% from 2020-2021. To contrast, prices dropped just 6.3% during the 2008 recession. During the 1981 recession, the largest home price correction to date, prices dropped 9.2%. This is on the low end of Canada’s national housing agency’s forecast, and below most risk agencies.

Canadian Real Estate Declines

Canadian home price declines over the past 3 recessions, and National Bank of Canada’s forecast.

Source: National Bank of Canada, Better Dwelling.

The forecast does model region variances, with the largest drops in expensive cities. Toronto real estate prices are forecasted to dip 13% from the end of the year through next year. Vancouver real estate prices are forecasted to fall 12% over the same period. Montreal, which only started to climb quickly recently, is expected to see a 7% price decline. Montreal’s price gains lagged national gains, so a smaller impact wouldn’t be a surprise.

Canadian Real Estate Declines By Region

National Bank of Canada’s forecasted price declines by major market.

Source: National Bank of Canada, Better Dwelling.

Unemployment Is Rising, and Immigration Is Expected To Fall

The biggest contribution to this trend is expected to be unemployment. The bank sees retail, accommodation and restaurants, and the arts impacted longer. They also see unemployment averaging out at 9% by year end. This is lower than most other bank forecasts, but still high enough for a recessionary environment by itself. They expect this to have a big impact on immigration.

The hit to employment is expected to have some fall out when it comes to immigration over the next few years. Canada doesn’t have a plan to lower immigration. In fact, the government plans to stick to its population growth strategy, which would see mild increases. Despite this, the bank’s economists note during recessionary periods, immigration voluntarily declines. This trend is observed in all three previous recessions, and expected to occur in this one.

Canadian Immigration

The rolling 12-month sum of immigrants to Canada.

Source: Stat Can, Better Dwelling.

Low Interest Rates Not Expected To Have The Same Impact

During past recessions, lowering interest rates helped to stabilize real estate markets. This is expected to have a smaller impact this time, since rates were already very low to begin with. The bank notes 5-year mortgage rates only declined 17 bps from the beginning of the pandemic, to now. To contrast, the overnight rate has shed 150 bps over the same period. When home prices are at record highs, and mortgage rates at record lows – lenders now face a high risk and low reward prospect.

NBC’s forecast is mostly in line with Canada’s other Big Six banks, which see declines in this range. CIBC notably stated they expect Toronto and Vancouver to see bigger price corrections than the rest of the country. The big banks, credit agencies, and national housing agencies all have similar timelines though – with significant price declines not showing until the second half of the year.

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  • George 4 years ago

    Personally I see this like the early 90s, where immigrants keep coming, but it has little impact since there’s so much pressure on rents to fall.

    Remember the marginal median gap for rent in Toronto is almost 50%. It’s an outrageous premium, and one-off landlords still can’t make it work with interest rates at almost nothing.

    • Matthew Chappatta 4 years ago

      I think the real issue is going to be why pay rent premiums now? You can convince any company to let you work anywhere. Kids could start working for Toronto tech companies in Calgary if they wanted. Well, probably not Calgary, but somewhere much more rural.

      It makes very little sense for companies to devote large capital to being located in hubs now. The prestige is largely forgotten.

      • Ghl 4 years ago

        Matt you do realize most rural communities are very racist and most tech works are non white. I dont think a brown or Asian person wants to meet the KKK near their homes.

        • Ahmed 4 years ago

          Brown tech worker from the US. I’ve never encountered as much racism in the US, as I have in Toronto.

          Clearly this is a white person, making the assumption Canada isn’t racist, which just lets the racism go untouched.

          • Fred 4 years ago

            In Toronto 90% of Tech workers are people of color. Middle Management is more like 60% and uper tech management 50% people of color and that is not racism but simply those are the people that are 20+ years in industry and they advanced their careers over the time while everyone new coming in tech filed is ‘minority’ nowdays. It would be racism to replace someone just for not being the right skin color at that moment.
            Lets not import USA stupidity into Canada here we are in a tough country with harsh weather solodarity is part of our cultureal genes everyone has equal chance but you cannot jump the queues just because of your skin color ….

          • Cal 4 years ago

            Thanks for pointing that out

        • Jim 4 years ago

          The only racism regarding rural communities is coming from you.Making statements
          that can not be verified in any meaningful way is based on the personal prejudiced view
          of the person making them.Thus racist .
          Is the statement based on that I am driving around a certain area and see mostly white people so therefore this must be a racist community the argument ?

        • Oakville Rob 4 years ago

          Ghl – community colleges in small Canadian towns have been pumping out tech grads for a couple decades, and will continue to do so. Those people will be able to take jobs with big tech companies and work remotely, just dropping in to the big – potentially vacant – city on demand, while enjoying a healthy lifestyle in a less urban setting. Their are many people who want that lifestyle, and many are nice people who are not any more racist than the average Canadian. We all have work to do. You too apparently. No one benefits from your needlessly bigoted attitude.

          • Peter J 4 years ago

            It’s getting exhausting to hear condo investors pretending that everyone that doesn’t want to live in a city is racist.

            Some people just want more space, and to not huff gasoline fumes all day.

        • Gabe 4 years ago

          What? Nice generalization. I’d say you’re completely wrong about this, but then again I grew up rural so what do I know?

        • Nate 4 years ago

          Really Ghl, your labeling whole communities to be racist and also labeling techs as predominately brown or asian. And you went from that to bring the KKK into it……. And your calling out Matt as a racist……. Your an idiot, crawl back in your hole troll.

        • Ajay 4 years ago

          Brown Tech immigrant worker here. Canada and racism are pole apart. There is no racist place in Canada. There may be some racist Canadian, I am yet to encounter one in my 15 years in Canada. Canada and racism does not compute.

  • RW 4 years ago

    Canada’s largest company by market cap wants people to work from home. No need to cram into the City Place to be able to walk to work. Finally starting to look at other provinces as a possibility.

    • Whiskey Foxtrot 4 years ago

      This is an under discussed issue. Companies like Shopify have to spend a ton on prime real estate, and space perks to attract talent to work in a campus. If the perk shifts from muffins and board games to working at home, they need less office space and employees provide less wage pressure.

      We’ve discussed this at my work. Wages have been rising a clip above inflation, but attracting new talent requires double digit wage inflation to get them to accept Toronto real estate prices. Overall, companies are going to be a lot more profitable in the end, but it is absolutely a headwind.

      this is a battle San Francisco had, where it was cheaper for some companies to work out of Texas, and just fly executives in one a week.

  • David Tran 4 years ago

    My university isn’t doing in person classes this fall, so there’s zero chance I’m paying rent in Vancouver for the semester. I can’t imagine how that’s suppose to work out for landlords looking to rent to international students, that can now just work from where they are for at least a semester.

    • Han 4 years ago

      People that do rent arbitrage for foreign students are going to get slaughtered if that happens.

      • Trevor Hare 4 years ago

        Same thing for Airbnb. But who knows, maybe people will keep throwing good money after bad for another year or two. It’s so hard to know until the media seizes the declining prices narrative and everyone starts panicking.

        • Jason Chau 4 years ago

          At least one of those companies is going bankrupt. Real estate agent I know was just asked to represent few condo apartments.

        • Trader Jim 4 years ago

          Technically the marginal seller determines it. So if the owner of multiple condos needed to liquidate in a hurry, they would be lead the decline before narrative.

          • zalzon 4 years ago

            Central banks are buying stocks.

            How long before they are buying houses.

            It’s all about picking winners and losers and dumping losses on taxpayers or inflating, money printing..etc.

            These days the field of economics is running neck to neck with sorcery as a legitimate science. Just about any nonsense can be explained away for “supporting” the economy.

  • LS 4 years ago

    Zero indication from your chart that immigration falls after recessions

    • Trader Jim 4 years ago

      Just because you say it, doesn’t make it true.

      That’s a 36.19% decline peak to trough in the 90s. No policy reduction on immigration. That’s not even including net outflows.

  • Derek 4 years ago

    Goin down like a lead zeppelin

  • Fandorin 4 years ago

    One prices decline forecast after another from serious institutions.. and yet so many realtors keep flooding the web with statements like – the market has rebounded, showings are on the rise, prices are up.. I understand the conflict of interests here but I wish I understood them.. I mean why ruin your reputation like this?

  • Fight Back 4 years ago

    We are at a crossroads, save the housing bubble or save the nation. Canada is a failed state that sucks the blood of young families to feed old unproductive boomers.

    • zalzon 4 years ago

      more so banksters than boomers

    • Ajay 4 years ago

      I have thought long and hard about it. Real estate is Canada’s real export. That and quality life. It attracts well off people from all over them world. Canada needs to find an alternative source of money. Selling houses to Chinese can go on for so long only.

  • Mark 4 years ago

    I could not agree more with @Fight Back’s comment. Canada has become a high cost and high debt nation of fake paper millionaires and foreign speculators ( unproductive rich immigrants) who have been buying up land and funding house building projects across in places like Vancouver and Toronto GTA. Their friends fly in from abroad to buy up floors of appartment with 5-10% deposits during the pre-selling phase and they go back to their countries and wait for the projects to complete.

    As soon as the building occupancy permits are issued, they appoint local realtors who are tasked by the organized real estate machinary (CREA, CMHC, Mortgage Brokers and Bankers and Media) who will lend at 5% down to create a house price illusion by lending to people that ” Canadian House Prices allways go up”. And they flog the appartments under assignments to unsuspecting hardworking Canadians at inflated prices and burden them with life long debt, while the speculators cream off the profits without needing to declare the profits and pay zero taxes.

    Each time there is a recession, like what is unfolding right now the government and the Central bank (BoC) has been bailing out the borrowers with their policies of deffering mortgage payments and shutting down the courts to stop all foreclosures……

    There you have it in a NUTSHELL. It is nothing more than kicking the can down the road.

    • zalzon 4 years ago

      100% correct.

      Crony Capitalism for banksters destroys the productive economy.

  • Oakville Grampa 4 years ago

    The bull case is just “it always goes up,” which you have to be painfully ignorant to buy into.

    My house doubles in price from 2008 to today. There’s zero chance I see it doubling again, especially during the greatest employment shock since the Great DEPRESSION (not recession).

    • Oakville Rob 4 years ago

      So true, and it would cost $50 to ride the bus. I suggest that we meet at the Queens Head for a pint and discuss as soon as that’s legal again..

  • JC 4 years ago

    It’s strange to see the shift in narrative lately, from housing boom to possibly bust. As much as I want to believe there will be a decline in prices.. I just don’t know anymore. I’m in the KW area and have been waiting to get in since 2017, but the market has been hot and still is. Even during this pandemic, people are out and about spending money like crazy. Looks like life is back to normal, and before the pandemic, it was going to be round two of 2017 all over again. And when things look like it might shift and we’re headed for a price decline, the government steps in with CERB, the banks defer mortgage payments. The bears keep saying that the government cannot keep handing out money forever, and the deferred payments will come to an end.. but I just don’t see that happening. I’m late to the party but am starting to believe the Canadian housing market may really be too big to fail at this point. The government will keep handing out money, the banks will keep deferring mortgages, and when they run out of ideas, they’ll bring back the 40yr ammortization option. And people don’t care, everyone is living paycheck to paycheck, and when they run out of money, they will use their HELOC. The savers keep getting burned.

    • ELF 4 years ago

      The government propping up housing prices is the problem, time to organize and fight back.

    • RainCityRyan 4 years ago

      Hi JC, It’s an interesting issue, the government keeps stepping in to bailout the housing sector. Minting new looneys and taking on more government debt can continue only so long as it’s not out of line with what ALL (or most) governments around the world are doing.

      If we keep up the loose monetary and fiscal policy when other governments start to tighten we could see the CAD fall in value and a corresponding spike in inflation. Since the BoC has a range of acceptable inflation it’d likely result in increasing target interest rates.

      Given our level of household indebtedness it’s a bit of a three bears kind of dynamic going on.
      Don’t support house prices enough = negative wealth effect and loss of jobs in supporting fields
      Support them too much = increase bubble and then crash even harder when the world tightens

      We’ve got to strike a balance while we deleverage …

      • zalzon 4 years ago

        the idea of Capitalism where the market determines prices has gone out the window.

        these days some dude sitting in an office is apparently setting price targets like a Soviet central planning bureau

    • Mark 4 years ago

      @JC, you are not alone. I have been waiting since 2013 and keep being setback by the constant government intervention. This mentality the politicians seem to have formed of treating the savers like sheep, can only change when the pendulum shifts. When there are more renters than home owners and it is their agenda to make sure that shift does not occur. They will keep inflating the bubble and it does not matter which stripe of government comes in next at the Fed and Provincial levels. Make no mistake, they are all in it together. They only take care of themselves!

    • Mike 4 years ago

      Great comment, I understand completely. I think the reason you (and I) feel a bit like this is because when I moved to area (just outside in small town) 2 years ago the prices just started going up. At the time they were still significantly lower than guelph, milton, hamilton, and even elora and fergus.
      I think there still going up because the price of KW area going up slowly appears lower than guelph area going down, if they are.

      I know there is alot of moving parts here but Its just a generalization of what I think the general population habits are.

  • Ash 4 years ago

    Hmm I keep hearing from my realtor that there are multiple offers and the houses are selling above the asking. is this really true or hype?

    • The Silver Schnauzer 4 years ago


    • Joseph 4 years ago

      Ash, when realtors put houses up for sale under market value, you get multiple offers with the house selling above asking.

      I see this being done nowadays with realtors writing “Sold above asking” right onto the for sale sign.

      Just feeds into a mirage of home sales being strong.

  • DB 4 years ago

    let the reckoning begin…

  • Kevin 4 years ago

    How does this forecasted price decline affect the Suburbs like Markham, Richmond Hill and Vaughan? Would these areas also be subject to a 10% price decrease or is there an exception…

    • harv 4 years ago

      That would be interesting to know… I suspect the greatest decline to affect the Toronto condo market.

    • Gabriele Di Bernardo 4 years ago

      I believe the places which saw the greatest increase in price over the last 20 years will also see the greatest decline. So in areas like say Port Credit and others you mentioned where people purchased homes that were under 300k in 2000 but recently commanded prices upwards of 2 or 3 million (+/- 700-1000% increase over the 20 years) will have corrections bringing those homes down to under a million (50-65%) whereas areas like say Hamilton where homes barely rose (perhaps 150-200% over the same period) will see reductions of only 100s of thousands (correction of 15-25%). Don’t forget the decrease is based on averages so the larger homes which are few and far between might see a correction of 50-65% total and others which make up the majority of the home segment might see a decrease of only 10% (thus getting the up to 20% correction the CMHC has mentioned). I personally think their numbers are conservative however. I believe there will be an average correction in Toronto to the tune of over 30% (average).

  • Peter 4 years ago

    In my area (MTL suburb) there is a huge drop in active listings, nothing really to chose from. For the prices to drop there should be a lot of foreclosure sales to match the demand at least. That’s not happening at the moment, may be in fall, who knows. I also believe that most of unemployment is among low-income workers who rather rent than own, and they have limited effect on the housing market. Housing market has high momentum, so if situation with covid and employment starts to improve there will be no sharp decline at all.

  • Snarky 4 years ago

    The reason homes are still having multiple offers and going above asking is because of the new CMHC rules. This will affect buying power. Some irrationally want to buy because they want to get in prior to losing their jobs etc.
    I do think with all the deficits going on they may allow this bubble to deflate once CERB and deferrals end. Winter is going to reveal where the housing sector will head.

  • Mark 4 years ago

    One thing you must understand is there is no such thing as a measurement of House Price change…. period. This is just an illusion that is used by home owners and the entire organized realestate machinery use to come up with numbers and percentages. Forecasting House Prices is no different to Forecasting the Weather (there are so many variables involved and there is NO WAY one can come up with a formula to forecast either) 🙂

    Yes, the multiple offers are a result of a last minute surge in home purchases to beat the CMHC deadline for changing the loan service ration to i think 35% some number. So there will be a temporary frenzy of activity which the CREA will be quick to put out in the Media that house prices have risen narrative.

    The on going situation we find ourselves in post 2000 era, is the Central Bankers will do anything to keep their Ponzi scheme going for as long as they can. As mentioned by “Zalzon” in the above posts about the Central Bankers have the ability to manipulate virtually any market that has been perceived by the originary public as being a “Free Market”. This includes, the Stock Market, Housing, Precious Metals, Oil and Commodities etc. They are active in all the above markets either directly or indirectly through their bankster associates. Billions of $$ are being printed and handed to the Central Banks of the entire planet to buy up debt at any cost to keep the bankrupt companies alive and they are providing liquidity to the banks to continue lending even when the entire worlds economy has been shutdown and millions of people have lost their jobs.

    You might wonder how people could qualify for borrowing such high price properties without any income. What you have to understand is this free flowing funds are not being lent to you and me and or the savers who have a saved a deposit but may be in hardship due to loosing their jobs or reduction in incomes. Instead what the banks are doing is lending to borrowers who are already their customers i.e holding mortgages secured on the existing home(s). So the same risk takers who are laden with debt and many are on the verge of bankruptcy are being kept solvent with the mortgage deferals and the same folks are being lent more money on HELOCs etc to fund the purchase of even more real estate.

    I am in the same boat as many of the folks posting on this blogs, I have been waiting since 2013 for getting my foot into the property ladder, but each time there is some possibility of entering the market with the least amount of leverage, the banksters and the politicians interfere with the price discovery in the market by flooding cheap capital into the market for the wealthy borrowers to out bid folks like us out of the market while the CREA and the Realtors are quick to report “Sold over asking” and “Multiple Bids”.

    All we can do is continue waiting and keep your powder dry and so long as you have an affordable rental or parental place to live you will be okay. The new economy that is about to emerge will change the requirements to live closer to your workplaces. This will open up opportunities to by something affordable further away from the town centers and work remotely without needing to commute.

    Good luck and keep yourselves informed by NOT listening to the PROPOGANDA by the likes of CREA, CMHC and Bank Economists, Realtors and or the MainStream Media.

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