5 Mortgage and Housing Market Predictions for 2021

predictions
Shutterstock

After a year unlike any other, naturally, activity in the Canadian housing market has also been operating unlike any other year. And, as we look to the months to come, it’s safe to say that 2021 is shaping up to be another unprecedented year — at least based off of new housing market predictions.

After briefly being put on hold during the outbreak this spring, Canada’s housing market has seen record-breaking growth since the summer. And yet, despite looming economic uncertainty and the aggravated spread of the pandemic, Canadian home buyers continue to snatch up the homes listed for sale.

And now that 2021 is just around the corner, James Laird, co-founder of Ratehub.ca, has shared his predictions for what to expect in Canada’s mortgage and housing markets.

READ: Everyone Was Wrong: How Toronto Real Estate Defied All Expectations in 2020

From overnight lending rates remaining unchanged to real estate prices increasing in value, these are Laird’s five mortgage and housing predictions for 2021.

1. The Bank of Canada will leave the overnight lending rate unchanged for the entire year

As the COVID-19 vaccine rolls out across the county, Laird says it will still take time to translate into a full economic recovery. As a result, Laird says he thinks The Bank will be “patient” in raising rates until pre-pandemic economic indicators are achieved. Therefore, the prime lending rate for variable-rate mortgages and HELOCs will remain unchanged.

2. Real estate prices (other than condos) will appreciate by 4 to 7%

A housing segment that’s shown no signs of slowing down in 2020 is detached homes, and this momentum is expected to continue into the new year, with the strongest growth in the suburbs around major urban centres. As such, Laird expects that real estate prices, for all housing types other than condos, will appreciate between 4 to 7%. “With Canadians working from home, the demand will continue to be strong for more space. Larger homes outside of the city centre will see the strongest demand,” said Laird.

3. Condo prices in downtown urban centres will fall in the first half of the year

Laird predicts that more university students learning remotely, the lack of immigration, and the crackdown on Airbnb will all continue to weigh on condo prices in downtown urban centres in the first half of the year before stabilizing in the second half of 2021.

“When students return to campus and borders reopen for new Canadians, demand will return to the condo market. With home values surging, condominiums will be the only option for priced out first-time homebuyers,” says Laird.

This prediction is in line with forecasts from other Canadian economists, with RBC Senior Economist Robert Hogue saying he also expects condo prices to weaken in larger markets next year.

4. Fixed rates will be modestly higher at the end of 2021

As the vaccine rolls out across the country and there is optimism that the worst of the pandemic is behind us, Laird predicts that Canadians can expect bond yields to rise which will cause mortgage providers to modestly increase fixed rates, particularly at the end of 2021.

This comes as mortgage rates in the country remain low as a result of the Bank of Canada dropping its overnight rate amid the COVID-19 economic downturn. Earlier this month, HSBC announced it would be offering rates of 0.99% for new five-year variable closed term mortgages, with the annual percentage rate (APR), based on a $200,000 mortgage. Previously, HSBC was offering a rate of 1.44% for mortgages of this kind.

5. There will be no new mortgage regulation introduced in 2021

Finally, Laird says he believes that as the government and regulators focus on the pandemic recovery, they will likely not introduce any new rules which would make it any harder for homebuyers to qualify for a mortgage — meaning that 2021 might be the perfect time to refinance your home or apply for a mortgage.

While predictions such as these help paint an optimistic outlook for what’s to come, just like the pandemic, the Canadian housing market remains largely unpredictable, and only time will tell how the year will actually pan out.