Canada’s housing market may be heading for a soft landing at the end of the year after what could be a record-breaking 2021, a new report by RBC Economics said.
The report published Wednesday said “supercharged” demand driven in part by low rates, high household savings and improving consumer confidence will continue to push housing market activity in Canada to record highs. The increase is set to take place after a 2020 that was likely the strongest year ever for the market despite the COVID-19 pandemic stalling activity in the spring.
In the report, RBC Senior Economist Robert Hogue estimated that home resale activity will reach 588,300 units in 2021, up from 552,300 units in 2020. The national benchmark price will rise 8.4 per cent to $669,000, driven mainly by low supply, Hogue wrote.
But signs of a cooling down will also start to emerge at the end of the year, he said.
“Call it a 2022 soft landing,” Hogue wrote, leaving open the possibility of a worse slowdown should the pandemic remain a threat to the Canadian economy despite large-scale vaccine distribution.
RBC forecasted seasonally adjusted and annualized resales will be down from the December 2020 peak of almost 700,000 units to a “still solid” 515,000 units by the end of 2021.
The report said low housing supply, the fading of COVID-induced market churn, an increase in interest rates and an erosion of affordability would be the main factors behind the Canadian housing market cooling down.
The report also said the impact of low immigration levels resulting from the pandemic, which to date has only been felt in the rental and condo markets in Canada’s largest cities, could begin to spread out to the rest of the housing market by the end of the year.