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Canada Housing Market Outlook: A Needed Pause in Demand

by Joel Bates | May 17, 2019


As reported in today’s RPS - Moody's Analytics Housing Market Outlook, detached single-family home prices are expected to grow by 1.5% across Canada in the coming four quarters.

Andres Carbacho-Burgos, Lead Housing Economist at Moody’s Analytics and author of the report, notes, “The current cooling of the housing market is not really bad news but should be seen more as a necessary consequence of housing market policy interventions.”

 

Canada Housing Market Outlook: A Needed Pause in Demand

The gradual disinflation in Canada’s housing market continues at a steady pace. It has now been more than three years since the first of several policy interventions intended to halt the deterioration in affordability in Toronto and Vancouver. Despite more recent moves to improve affordability for first-time homebuyers, the overall policy stance is still to reduce demand: The short-term monetary policy rate hikes, stress tests for insured and uninsured potential borrowers, and British Columbia and Ontario housing plans have all aimed to push down purchasing power.

With the direct and indirect effects of monetary tightening, house price appreciation is projected to slow down through 2020, turn briefly negative in 2021, and only recover in the following years. Over the coming year, Montréal and to a lesser extent Ottawa and Halifax are projected to have moderate house price appreciation compared with the other large metro areas, but in subsequent years there will be a partial recovery, with Toronto doing somewhat better. Vancouver house prices will likely dip over the next year, and the metro area will be lucky to maintain level prices through 2024 given how overvalued house and apartment prices are currently.

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