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Greg Bonnell

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Canadian home prices could fall a “relatively modest” five per cent by July as some owners are forced to sell in the face of the economic hardship brought on by COVID-19, Capital Economics said Monday.

While sales activity and price gains were firm in the first half of March, real estate boards from across the country are reporting a near halt in activity as government shutdowns and physical distancing have people staying home.

In a note Monday, Capital Economics senior Canada economist Stephen Brown said April will see “an even steeper fall” in sales activity to a “small fraction of their normal levels.”

Still, new listings have plunged as well and prices have held up.

Last week, the Canadian Real Estate Association reported a 14 per cent drop in sales volume from February to March. New listings were down 12.5 per cent from February, while average prices were flat month-over-month and up 12.5 per cent year-over-year.

The economic strains of the pandemic lockdown, however, will likely pressure home prices, said Brown.

“Given the huge rise in unemployment and the cash flow problems that restrictions on tourism have caused investors in the short-term rental market, it seems likely that there will be some forced sellers in the coming months,” said Brown.

With fewer people willing to buy those properties, those forced sellers “will inevitably have to accept lower bids.”

That dynamic has Capital Economics “pencilling in a relatively modest fall in house prices of five per cent in the coming few months.”