Pandemic housing market to stay hot in 2021, but economists expect a hangover later in the year
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It’s been very strong, and that strength can’t be sustained forever
Stephen Brown, Capital Economics
Yet those trends won’t last forever. Cities such as Halifax and Montreal have absorbed the effects of lower mortgage rates quickly, Brown said, and others such as Toronto and Vancouver are still dealing with weaker immigration levels, which weigh on rents and investor interest.
“It’s been very strong, and that strength can’t be sustained forever,” Brown said. “So, the housing market will start to lose some momentum for that reason.”
The economics unit at Bank of Montreal said it sees housing sales cooling nationally, but home prices being supported by the lack of supply and still-low interest rates.
BMO’s economists forecast the MLS Home Price Index would increase seven per cent this year, “with the first half of the year still characterized by outsized strength in single-detached homes, especially in smaller markets, partly offset by sluggish condo prices,” they wrote.
A lot of demand is being pulled forward due to low rates and distorted buyer psychology
Shaun Hildebrand, Urbanation
“Whether or not that rotation persists after the vaccine is widely administered is probably a question for the 2022 outlook, but we suspect core urban markets will ultimately find a solid footing again after further underperformance in the meantime,” they added in their Dec. 23 outlook.
Downtown Toronto condo sales actually rose in December to their highest level since May 2019, increasing by 26 per cent month-over-month and 102 per cent year-over-year, according to Shaun Hildebrand, president of research firm Urbanation Inc.
Yet for the Greater Toronto Area housing market more broadly, Urbanation also sees a slowdown coming later this year.
“A lot of demand is being pulled forward due to low rates and distorted buyer psychology as many that weren’t planning on moving are now wanting a change and others think they need to get into the market now before it’s ‘too late,’” Hildebrand said in an email. “An eventual recovery in the economy and immigration will be important for the market as vaccines are introduced — but they will have a lagged effect and we could be dealing with a bit of a hangover later this year, specifically for (Toronto’s suburban) houses.”
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