Economic uncertainty stemming from containment measures of COVID-19 and falling oil prices is affecting all sectors. Canada’s housing market will see declines in 2020, and should start to improve by this time next year. Housing starts, sales and prices are likely to stay below their pre-COVID-19 levels into 2022. The Housing Market Outlook — Special Edition (HMO) released today by Canada Mortgage and Housing Corporation (CMHC) forecasts Canadian housing market activity for 2020 and 2021.
“Following large declines in 2020, housing starts, sales and prices are expected to start to recover by mid-2021 as pandemic containment measures are lifted and economic conditions gradually improve,” said Bob Dugan, CMHC’s Chief Economist. “Sales and prices are likely to remain below their pre-COVID-19 levels by the end of our forecast horizon in 2022. The precise timing and speed of the recovery is highly uncertain because the virus’s future path is not yet known.”
Severe disruptions to the economy due to the COVID-19 pandemic have placed unprecedented pressures on employment, incomes, migration and financial markets, while lower oil prices are likely to exacerbate declines in Canada’s oil-producing provinces. CMHC’s HMO — Special Edition considers these factors to provide national and provincial housing forecasts and insights into the trajectory of the Canadian housing market as well as the risks affecting housing activity.
- House prices could fall by as much as 9% to 18% from their Q1 2020 levels before beginning to recover in 2021. Our forecast reflects different potential outcomes for price growth that could see home prices return to their pre-COVID-19 levels by the end of the 2022.
- Regional disparities in economic conditions lead to varying impacts on house prices. In oil producing Alberta and Saskatchewan, housing prices could experience close to 25% declines from pre-COVID-19 levels.
- Restrictions on construction activity are leading to a sharp decline in housing starts. Our forecast indicates that housing starts could decline by as much as 75% from the Q1 2020 level before starting to recover by the second half of 2021.
- Home sales in Canada could experience as much as a 29% decline from pre-COVID-19 levels before slowly recovering post 2022.
Understanding our Forecast:
Our outlook covers a range of plausible scenarios. The HMO — Special Edition incorporates a wider range for housing indicators than we normally publish, reflecting the heightened risks and uncertainties of the current context. The high end of the forecast depicts a more optimistic scenario while the low end shows a more significant and protracted downturn in the economy and housing market. Our framework is based on key drivers of the housing market activity, including gross domestic product (GDP), trends in the labour market, demography, incomes and mortgage-lending conditions.
Starting in 2020, we moved the release of the HMO to the spring to align with the annual needs of our clients, data availability and our corporate reporting. Because COVID-19 impacts are insufficiently documented at the local level, the 2020 release provides only national and provincial level outlooks.
CMHC supports the housing market and financial system stability by providing support for Canadians in housing need, and by offering housing research and advice to all levels of Canadian government, consumers and the housing industry.
Information on this release:
CMHC Media Relations