That Bullish Canadian Real Estate Forecast? It’s Actually A Price Drop: BMO

A big Canadian real estate brokerage upgraded its price forecast, despite rising rates. Royal LePage now sees home prices rising 15.0% in 2022, an upgrade from the 10.5% previously forecast. Similar gains are seen for Toronto (16.5%), Montreal (12.5%), and Vancouver (15.0%) real estate, as well. It’s a fairly big jump for home prices that set a few media outlets buzzing. However, they missed a tiny detail — prices need to fall to hit that price target.

Canadian Home Prices Forecast To Climb 15%

“While undoubtedly impressive, note that an average price gain of +15% this year would actually require a moderate pullback in prices through the rest of the year. Wait…what?,” wrote BMO Chief Economist Douglas Porter, in a letter to Capital Markets customers this week. They attached the following chart to compare the target with recent monthly numbers. 

Source: CREA; BMO. 

Canadian Real Estate Rising Just 15% Means Lower Prices

The 15% climb might have come off as enthusiasm, but it’s a bearish call from a very bullish brokerage. “The chart shows that prices in March are already about 20% above last year’s average price (based on the MLS HPI metric) due to the surge in prices late last year and into early 2022,” explained Porter.

“Prices would actually need to retreat from current levels to average ‘just’ a 15% gain this year.”

Higher Interest Rates and More Supply To Ease Housing Crunch

Once again, this is still a fairly bullish call for real estate when other organizations see up to a 30% decline. However, it does appear to recognize easing supply constraints and higher interest rates.

“We suspect this will likely be the case, with interest rates steadily climbing, supplies ramping up, and market sentiment shifting notably,” he said.

6 Comments

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  • GTA Landlord 2 years ago

    I’ll admit I didn’t catch that and it’s insane that slipped by so many articles.

    • Fazid 2 years ago

      You should see how many conversations are on twitter just discussing how prices will rise another 15%. hahaha.

      • Agent bob 2 years ago

        Yes. Prices have started to slip a bit from last month. In some areas prices had already gone up even 25% over last year by the end of April .
        The peak has already come and gone.
        I work in real estate in the GTHA and I have seen this before.
        Looks like April of 89 has come again.

        Prices will fall further this year with the ban on non resident buying but we need more taxes and less writeoffs for investors; higher taxes on vacant homes and tougher laws on money laundering.

  • Jason Van De Wiele 2 years ago

    RENT control is needed, thd result if snyghkng else is to just to increase rent to compensate for loss.

    Rent controlled by the government, banks and owner.

    1st https://www.bcassessment.ca/Property/AssessmentSearch I live in BC
    2nd The banks longest amortization time available. (30 years currently)
    3rd The owners location investment & work completed and assessed.

    A residential unit government property assessment (example $1,000,000.00) divided by the banks longest amortization period currently 360 months (30 years) gives a fair cost/income for BOTH sides

    Example $1,000 000.00 assessment, with a banks mortgage 360 month mortgage, rent would be $2,777.78 MAX! (Strata fee & land tax, sewage, waste, included) & $500,000.00 would be $1,388.00 a month

    The
    You can tell it’s fair as both sides are equally unhappy about the deal.

    https://www.change.org/FairRentControl

  • Patrick 2 years ago

    Good comments @Agent_Bob

    Even actual enforcement of AML would be a terrific start – negating the ever-higher “comparable”

  • Rene Albert 2 years ago

    Prices are now set to drop to about $500,000….

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