Residential Markets Hot … Maybe Too Hot: Canada’s Two-Year Housing Outlook—April 2021

The Conference Board of Canada, 16 pages, April 13, 2021
Issue briefing
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This quarterly economic forecast presents the medium-term outlook for the Canadian economy. This release focuses on housing. For an overview of all major components of the economy, go to the Canadian Outlook main page.

Document Highlights

  • Canadian resale markets are in a frenzy, fuelled mainly by record-low interest rates and a desire for more living space.
  • Some analysts warn that price increases are “feeding on themselves” and warn of a housing bubble whose collapse would have wide-ranging and negative economic effects. Calls for regulatory action are growing.
  • Work-from-home provisions have led many big-city commuters to seek bigger homes away from major cities. This has bolstered resale markets outside of large cities but curbed demand for smaller units downtown.
  • We expect housing starts to edge higher to 220,400 units in 2021, up from 217,800 in 2020, but then to pull back to just under 212,000 units in 2022. Starts will erode only modestly thereafter as household formation remains solid.
  • Canada’s national average resale price rose nearly 12 per cent in 2020. Continuing strength in early 2021 suggests a further 12 per cent rise this year if no regulatory action is taken. This pace is unsustainable, and we expect price declines of 6.5 per cent in 2022 and 2.1 per cent in 2023 even without regulatory action.
  • Current heat has bolstered weak pre-pandemic housing markets in Alberta and Saskatchewan, but we expect them to soften disproportionately as the national market cools.

Table of Contents

Key findings

Housing snapshot

Markets on the verge of overheating

Forecast underpinnings: Interest rates and job market both cloudy

Markets move past support measures, now need cooling

New construction: Backlogs low, but apartment volumes no longer falling

Housing starts set for another strong year

Existing housing markets: Current heat invites regulatory response

Residential investment continues gains


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