The coronavirus has dealt a blow to Canada’s real estate market and home prices could fall about 7% next year due to high unemployment and lower incomes, according to a forecast by Moody’s Analytics Inc.
The report predicts a 6.7% decrease for detached single-family house prices and a 6.5% decline for condos in 2021.
But the price reductions will vary depending on where you live. In Edmonton and Calgary, prices could drop about 10% due to an oversupply of new homes and a decline in the oil industry, states the report.
The effort to combat the spread of the COVID-19 outbreak left its mark on the Canadian economy.
Abhilasha Singh, Moody’s Analytics Economist
In Montreal, where real estate prices have been catching up with Toronto and Vancouver, the cost of a home is expected to drop a little less than 7%. Over in Ottawa, they expect a reduction of 3%.*
“Ottawa and Montreal have had the hottest housing markets in Canada for the last few years. Market conditions are extremely tight because of robust sales activity and low inventories,” states the report.
Though a decline in the housing market doesn’t sound so bad — especially if you’re a millennial whose dreams of owning property died long ago — it can be really bad for the economy as a whole (think the 2008 recession).
It can also be bad for first-time homeowners who can get trapped in something called negative equity, a situation where the amount of money a person owes for their mortgage is more than the value of their home.
However, the report concludes that if a pandemic-ending vaccine is found, home prices could come roaring back in a big way in 2022.
Editor's note: This article has been updated.