2020 has been a particularly stressful year for the global economy and all sectors have been badly affected. RBC Economics has some good news for the Canadian real estate sector for the New Year 2021. According to RBC, the pandemic which is yet ongoing, will not hamper the prospects of Canada's real estate and says the housing prices and even the sales activity will reach new milestones in the New Year. RBC, in its new forecast for 2021 has foreseen the national benchmark price to reach $669,000 in 2021 indicating a growth rate of 8.4 percent. However, Labrador and Newfoundland could experience a tiny drop in pricing of about 0.4 percent, and this will be for the sixth year in a row.
This forecast indicates a strong buzz in the sector notwithstanding any of the hurdles due to the Covid-19 outbreak. The RBC report mentioned that “The aggregate benchmark price increased 8.5% in Canada in 2020, or almost five times the rate of 1.8% in 2019. We expect this solid momentum to be sustained in 2021…underpinned by tight demand-supply conditions in most regions.”
RBC has also predicted the strongest gains for Central Canada, BC and parts of Atlantic Canada, but the Prairie Provinces will remain weak. Alberta is poised to see a 0.9% rise after five consecutive years of remaining weak. Low supply of available housing is the main cause for property values to remain on an upward trend. During the last half of 2020, the active listings came down to 50-61% in Atlantic Canada, Quebec, as well as Ontario relative to the 10-year average.
As the buyers have less choice to pick from outside downtown condos, they will continue competing and be in the race to outbid each other as opposed to those in Prairie Provinces, and Newfoundland and Labrador, who will see much less of this pressure as the supply there isn't so low.
The RBC also projected house re-sales across Canada to go up by 6.5% to 588,300 units. This supercharged demand for homes arises from a number of factors including historically low-interest rates, high household savings, changing housing needs, boosted consumer confidence, etc.
But due to lack of supply, cooling signs are bound to emerge eventually during the end of 2021 and will drive into 2022 as well. The cooling signs will further emerge due to factors such as Covid-induced market churn, a small rise in long-term interest rates, as well as material erosion of affordability. Till now immigration has been a strong factor in driving housing demand. The pandemic has also caused a dent in the immigration levels and that could be a factor in cooling the market as per RBC. Till now low immigration has impacted the rental market and the condo market to some extent.
It is also to be noted that the real estate market is prone to several risks. Further lockdowns and the course of the pandemic will hamper market activity. Right now globally vaccination drives continue to provide a ray of hope.