As April unfolded, it became innately clear that COVID-19 had already impacted the local housing market, with Toronto home prices declining for the first time in nearly two years.
But the pandemic isn’t just going to have an impact on a local level but on a national level as well, with some experts already predicting that Canadian home prices could fall in the months to come.
On Monday, Capital Economics said Canada’s house price inflation accelerated to a nearly two-year high in March, but given the disruption already caused by the coronavirus outbreak, prices are set to decrease in the coming months.
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Capital Economics senior Canada economist Stephen Brown says although the housing market was very strong at the start of March, the disruption caused by COVID-19 has since caused home sales to “fall off a cliff” as in-person showings came to a halt in most of the country, which suggests that the 14.3% month-over-month drop in home sales will be followed by a “steeper” decline in April as sales plunge to a small fraction of their normal levels.
And if that wasn’t enough salt in the wound, Brown says new listings have also plunged, despite prices holding up.
“New listings also fell sharply in March, which meant the sales-to-new listing ratio continued to point to strong house price inflation ahead,” said Brown, however, he said “given the huge rise in unemployment and the cashflow problems that restrictions on tourism have caused investors in the short-term rental market, it seems likely that there will be some forced sellers in the coming months. Those sellers will inevitably have to accept lower bids from the few people willing to buy in the current environment.”
As a result, Brown says Capital Economics is “pencilling in a relatively modest fall” in house prices of 5% in the coming few months. “There is clearly a risk that the small number of houses that change hands do so at even lower prices, however,” added Brown.
This comes as the Canadian Real Estate Association (CREA) reported a 14% drop in sales from February to March, while new listings are also down 12.5% from February. Though the the average price in March still managed t0 climb 12.5% year-over-year, buoyed by the success of the first half of March.