RBC Revises Canadian Home Sales and Price Growth Higher On Government Inaction

Canada’s largest bank sees much higher home price growth in the near future. RBC shared the update to their national home price forecast for 2021. The bank now expects prices to grow almost twice as much as they previously thought. In their previous forecasts, they had expected significantly more government action. With no new policy tools, the market will be left to manage itself. This may take longer, since they didn’t just leave the market alone — they added more demand.

Canadian Home Sales Now Expected To Rise 16%, Double The Previous Estimate

Canadian home sales are being revised much higher for this year. Sales are expected to reach 636,700 units in 2021, up 16% from the year before. This is a massive revision from the 588,300 home sales they had forecast for this year, back in January. An 8.22% increase in home sales would be scorching hot growth. This is just the upward revision from less than half a year ago. 


They expect things to cool down as the year goes on, as well as a sharp drop in home sales next year. Home sales are now forecast to fall to 505,300 for 2022, down 21% from the forecast for this year’s sales. A sharp drop does lead to a different makeup in revenue for a whole industry. However, these sales numbers are still higher than 2018 or 2019 sales. Down compared to the pandemic boost, but still substantial. 

Canadian Home Price Forecast Revised Much Higher

The bank has also made a substantial revision to its home price forecast. The typical home is expected to rise to $697,400 in 2021, using the RPS House Price Index (HPI). This represents an increase of 13% from 2020,  up from the previous forecast of 8.4% they made in January. Next year’s growth is expected to fall to 3.3%, as the number of sales continues to fall. However, this is still a surprising amount of growth after the amount of pulled forward demand we just saw.

If you took a peek at their macroeconomic assumption forecast, this is a little different. This would be the equivalent of the base case scenario. We won’t get the worst case or best case scenarios until the next quarterly filings.

RBC Revised The Forecast Based On Government Inaction

The bank didn’t mince words when it came to why they revised this forecast — government inaction. “Canadian policy makers mostly ignored calls for forceful action,” said RBC senior economist Robert Hogue.  

Policymakers are treading lightly, relying on the expansion of existing programs. Measures that may have an impact include: the Canada-wide 1% tax on vacant, non-resident owned residential property; the tightening of the mortgage stress test; and the welcome addition of supply. 

The expansion of the First-Time Home Buyer Incentive in Toronto, Vancouver, and Victoria was a sticking point. Canada had been warned by the IMF that programs like this would only push prices higher. RBC appears to agree, saying it, “will only further stoke demand.”   

Self-Correcting Forces Will Take Much Longer

The market lacks a disruptive policy catalyst, like the introduction of the foreign buyer taxes in BC or Ontario. RBC feels this will leave the housing to rebalance using the market process. Rising interest rates, deteriorating affordability, mortgage stress test, and the economic reopening are factors that will work to cool. Together these factors will cool housing using market forces.

RBC also expects high home prices to be the biggest factor in cooling the market. As home prices increase, more sellers are expected to cash out, and reap some of those profits. When prices rise too high, qualified buyers tend to drop out. At the same time, sellers face more incentive to list a home for sale. Until inventory outstrips sales, they don’t expect price growth to cool, but see it rising. 

It appears RBC expected more demand-side cooling pressures, but nothing significant materialized. They actually went the other way technically, implementing demand incentive schemes. Market forces keep trying to cool things down, but that doesn’t appear to be where Canada wants the market to go. This isn’t too much of a surprise considering the scramble to push home prices higher last year.

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  • Vincent Fornelli 3 years ago

    RBC sees the light. Let’s see how high this puppy goes.

    • Omar 3 years ago

      Canada will be really great once you the only people that own homes are people whose parents leveraged their home in an expensive city, so their kids can live in rural Manitoba. It’s a great plan, I can’t see it not working.

      • GTA Landlord 3 years ago

        I know no one believes anyone that lived through the 90s, but this is what it felt like to be an adult then. The government did everything to push home prices higher, and immigration was suppose to be the primary driving factor forever.

        What happened in 1991? Canada was still a nice place. Immigrants still wanted to move to the country. Home prices increased to the point where only a few people could actually care about buying. Then it all slipped with a matter of a few months, and it didn’t require a policy action.

        • CANADIAN LAND REFORM 3 years ago



          (All “free market” thinking, 101)

        • Average Man 3 years ago

          I’ve given up expecting real estate to have a “correction.” I’m now expecting the rest of the economy to collapse under the weight of real estate, which is much worse. So many people in this industry, who are eventually gonna be stuck selling houses to… each other?

          And before any one says “but immigrants!” What are these immigrants gonna DO when they get here, other than buy a house? Become realtors? In order for these immigrants to buy your house, they have to have a job DOING something. Ideally something that makes a lot of money. What is that?

          Unless when you say “immigrants” you don’t actually mean immigrants, you mean money launderers.

          • Average Man 3 years ago

            GTA Landlord. Not speaking to you directly, just to some of these folks on here. You seem cool

          • RWZM 3 years ago

            You’d think that immigrants would need jobs to buy the houses, wouldn’t you.

            But put it this way. If the government increases the influx high enough (and they have), it doesn’t really matter what anyone is doing–the ratio of people to decent places to live goes up. The immigration rate has been raised so high that the top few percentile of immigrants could absorb the entire resale housing stock in Toronto in a given year.

            You have to assume that about 5% of the yearly influx will have a bunch of wealth. And that’s all you need to keep this going. They don’t even need to launder any money (although that will keep happening, of course).

          • RWZM 3 years ago

            The immigration rate has been raised so high that it is only necessary for a small fraction of them to be wealthy in order to absorb the entire resale stock of decent places to live. They don’t have to launder money (although that will certainly continue).

          • Zaheer Jilani 3 years ago

            I like the average man’s comments especially about “immigrants” you don’t actually immigrants, you mean money launders.

  • George L 3 years ago

    This is a game of inflation now. Home prices will keep being pushed higher, so people can manage their rising bills. Working people will get inflation wages increases, and everything will work out fine.

    It’s just uncomfortable for a while.

    • Trader Jim 3 years ago

      Some truth to that, except for the part that inflation also increases interest rates, acting as its own demand cooling measure.

    • Paul 3 years ago

      How do rising house prices help people pay their bills?

      • GTA Landlord 3 years ago

        I’m guessing they mean because people refinance their home and withdraw equity. More equity is withdrawn on refinances than HELOCs.

    • Alex 3 years ago

      Unchecked inflation never, in the history of ever, has led to things working out fine.

      Our current path essentially leads to massive wealth inequality, and even homeowners will start to get affected as the costs of living soar past the amount of equity they can take from their homes.

      As other posters have said, real estate will eventually cannibalize so much of the Canadian economy that it will collapse under its own weight at this current pace.

  • Winnie The Pooh 3 years ago

    I seriously don’t know how people keep voting for this government. It’s like watching insanity in action.

  • Van YIMBY 3 years ago

    The government places a lot of focus on ownership, and not enough on shelter being a competitive factor. If you built sustainable rental buildings (maybe state-owned?), and people were comfortable in them, they wouldn’t in such a rush to buy a home.

    • GTA Landlord 3 years ago

      Raise interest rates and rental buildings will pop up everywhere. If they keep dropping interest rates faster than income, then people have more money to buy homes than pay rent. If mortgage size stayed stable, people would hunt for yield through interest rates.

    • Average Man 3 years ago

      PUBLIC HOUSING BABY! It’s not all old Regent Park and Jane & Shoreham. I have a friend who lives in a “market rate” TCHC unit that most “middle class” renters would KILL to get into

  • Little Birdie 3 years ago

    This government is borderline incompetent when it comes to meeting the needs of Canadians (borderline only due to current homeowners).

    The rise in cost of living paired with stagnant wages means more and more of the working class (both younger generations and older millennials) are leaving the country. The government is supporting the real estate sector at the cost of our future economy – brain drain will have some of our future doctors, teachers, engineers, lawyers, trades, etc etc etc leaving the country so they can actually have a decent quality of life (aka decent wage with home ownership, both of which are needed if you want to retire comfortably).

    The government needs to put the needs of Canadians and our future first. Limit ownership to individual Canadians / those who file income tax (individuals so corporations cannot purchase residential properties). Impose taxes on owning multi properties. DO SOMETHING USEFUL for a change.

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