Royal Bank Just Released Their Canadian Real Estate Forecast, Here’s The Numbers

Royal Bank Just Released Their Canadian Real Estate Forecast, Here’s The Numbers

Canada’s largest bank just released their provincial forecast for home prices across the country. Royal Bank of Canada (RBC) Economics’ forecast isn’t overly optimistic, but not all that bad either. Newfoundland is the only province they predicted will see price declines, although they don’t anticipate the huge price gains we saw last year.

Canadian Home Prices To Rise 2.2%

Royal Bank analysts expect national price growth to taper, and sales to decline. The price of a home across the country is expected to end the year at $490,600, an 11.1% increase from 2016. By the end of 2018, RBC analysts expect the price of a home to rise to $501,400, up just 2.2%. For context, the Bank of Canada (BoC) targets CPI at 2%. This means they expect prices to grow slightly faster than the rate of inflation next year.

Source: Royal Bank of Canada.

Sales are expected to decline nationally, as markets cool down. The country is expected to end with 509,300 sales, down 4.8% from the year before. In 2018, sales are expected to tumble even further to 488,000, a 4.2% decline from 2017’s anticipated end. Declining sales are somewhat expected as prices climb. The country also has a very high rate of homeownership, and growing that number is pretty tough.

Source: Royal Bank of Canada.

Ontario Home Prices To Rise 1.1%

The province of Ontario is expected to keep a substantial amount of gains this year, but next year isn’t looking so rosy. Analysts from the firm expect the year end price to be $578,500, up 18.9% from the year before. In 2018, prices are expected to hit $584,600, a 1.1% increase from this year’s expected end. Growing is better than not, but 1.1% is less than CPI.

Source: Royal Bank of Canada.

Sales are expected to decline across Ontario. The firm’s analysts expect year end sales to be 220,800, a 9% decline from last year. In 2018, they anticipate 210,700 sales, a decline of 4.6% from the year before. This is going to be a large chunk of the national decline.

British Columbia Home Prices To Rise 5%

The province of BC will continue to defy pricing logic according to RBC. They anticipate the year will end with a price of $763,200, a 6.5% increase from last year. In 2018, they’re predicting a year end price of $801,100, a 5% increase from this year’s anticipated end. Regional CPI measures are a little higher in BC, so it’s not a huge surprise that price growth is expected to lead the country.

Source: Royal Bank of Canada.

Sales will continue to slide across the province. The year end is expected to be 101,200, a 9.8% decline from last year. In 2018, it’s anticipated to fall to 93,100, another 8% decline on top of this year’s drop. Declining sales are typical in expensive markets, and BC has the largest affordability gap in the country.

Quebec Home Prices To Rise 2.8%

The province of Quebec is expected to see mild growth. Analysts from RBC expect the year end price to hit $315,900, a 4.2% increase from last year. In 2018, they expect prices to rise to $324,700, 2.8% higher than this year’s expected year end. This is a solid gain, but certainly not the “hot” market we keep hearing about.

Sales are expected to end this year higher, before dropping again. Analysts expect the year to end at 82,200, a 5.2% increase from last year. In 2018, they expect that number to drop to 79,700, a 3% decline.

Bank forecasts tend to be optimistic, and are typically conservative – two odd descriptions to combine, but I’ll explain. It’s not in their best interests to say that mortgage originations would be on the decline. They have a vested interest in that area. Conversely, had they said BC would see an 18% climb in 2016, they would have been considered real estate “pumpers.” That’s what happened, but they couldn’t predict that without being ridiculed. So take this as one opinion, and balance it yourself.

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  • Laura 7 years ago

    Two questions:

    1) Why should we take what the bank says seriously? As you said, don’t the banks have a vested interest in the real estate market remaining strong? Don’t they NEED people to continue buying their stocks, mortgages, etc?

    2) As a novice in this field, I really have a hard time understanding why the number of sales is relevant. When the media reports how sales are down, why does that matter? How is that connected to pricing?

  • Gregory 7 years ago

    ** Previously , “RBC economist predicts home price declines in 2016 as rates rise ”

    Oops – got that wrong. On rates and home prices.

  • M. 7 years ago

    Seems to me your just regurgitating information these days,with no real input.think you’ve gone to the other side.the big bad machine get to you.


  • Maurice 7 years ago

    Royal Bank is doing thier best to keep thier morgage book solid.Bank stress testing is just around the corner and foriegn buyers tax as well as riseing interest rates will deflate the bubble in 2018 ,a downturn is imminent..less greater fools to to qualify

  • Chad 7 years ago

    The feds are “raising” immigration in 2018 by 40%. That means instead of 250k people coming into the country we will no see 350k people coming for 2018,2019 and 2020. Likely will keep it at that number past 2020 but for now, they have only committed to the next three years. So with that many more people coming then in past years where exactly are they going to find homes? Prices most likely will rise as per usual, hopefully not as bad as this year but they will continue upwards and like most things real estate the banks and their economists will be wrong as to by how much

    • MH 7 years ago

      Of course! It’s newcomers. That’s what they do upon arrival – they buy real estate! Let me strengthen your argument with some numbers:

      “Royal Bank of Canada economist Robert Hogue […] points to a Statistics Canada study released in December that showed how the earning power of immigrants begins to rise over time and, while it didn’t address housing, it’s easy to see how increased income could translate into home ownership. The median employment income of immigrant tax filers who landed in 2004 was estimated at $16,800 in 2005 (one year after landing). The same cohort’s median income increased to $26,000 in 2009 and $33,000 in 2014.”

      So these are the folks driving Toronto real estate prices up? Makes perfect sense.

      • Chad 7 years ago

        LOL…you are generous with your help. I never said all immigrants buy homes when they arrive, did I??? What I stated was they were coming and the resulting effect would be not enough homes for people to live. Whether people rent or own they will need a place to live and there currently are not enough places to live, hence the ultra low vacancy rates. Some current renters will buy putting more pressure on the demand side while the rental side will get even worse driving prices for rentals higher as well unfortunately. The end result will likely be higher prices for all types of residential dwellings including purchased homes of all types.

      • BB 7 years ago

        Totally correct … some people just hate reading.

        • Tommy 7 years ago

          There is not enough housing available for the 75k – 100k people immigrating to the GTA each year, and this number will be higher going forward. Overbuilding leads to decreases in prices and that hasn’t happened because despite BD’s article, demand is HIGHER than supply.

    • Tom Gr 7 years ago

      Well there already tons of brand new houses that are sitting empty!!!

      • Tom Gr 7 years ago

        To be clear, they are sitting empty but have been purchased.

    • Inna 7 years ago

      Immigrants rarely buy houses. Foreign investors, however, do. And even more so local speculators.

  • Tommy 7 years ago

    Following 2018, home prices expected to rise in Toronto, Vancouver

    • Ham 7 years ago

      Now, from non-debt peddlers/property peddlers:

      Fundamentals such as income and
      population growth are not catching
      up to the strong growth in house
      prices observed in most major markets
      such as Vancouver, Toronto and
      surrounding markets. This adds
      considerable uncertainty over how
      the housing market will adjust to
      these imbalances. A sharper and
      quicker-than-expected unwinding
      of imbalances between observed
      house prices and those that would be
      supported by underlying fundamentals
      could impact forecasts negatively, and
      result in outcomes in the lower part
      of the forecast range.

      Source: CMHC

      • Chad 7 years ago

        Lovely accusation considering you likely don’t know anyone commenting. All the articles are true….until they are not. Most would agree with the imbalance, it is the cause and therefore the cure we disagree with I see. I will not classify or name call but rather agree to disagree

      • Tommy 7 years ago

        The same imbalance is observed in all major cities across the world. It is only the wealthy that own, and everyone else rents. Toronto has a lot of catching up to do, in this regard.

  • willy 7 years ago

    Does anyone know of or recommend a non biased and reliable short, medium and long term real estate forecasting firm or source?

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