New analysis says GTA home prices could drop by as much as 26%

New analysis says GTA home prices could drop by as much as 26%

New analysis says GTA home prices could drop by as much as 26%

A potential housing supply shock might send Canadian home prices plunging by up as much as 11% on average, according to equity think-tank Veritas Investment Research.

In a note to institutional clients, Veritas cautioned that inventory might surge once the nation’s remaining mortgage deferrals expire and spending behaviour veers ever closer to the pre-pandemic normal. This is assuming that 5% to 15% of homeowners with deferrals turn into sellers.

At present, approximately 297,000 mortgages with the country’s largest banks remained in some state of deferral as of September 30, according to the Canadian Bankers Association.

September saw the return of 498,000 mortgages to regular payments, accounting for roughly 63% of the total deferred volume during the pandemic. However, 5.97% of mortgages at the CBA’s member institutions were still on payment deferral that month.

Overall, the potential price decline might be anywhere between 4% and 11% on average, excluding additional supply that is already in the process of being built “and is often flipped back into resale markets,” real estate information portal Better Dwelling said.

Of the major urban markets, Toronto is expected to suffer the largest price drops, which may be anywhere between 15% and 26% on average. Veritas also projected prices in Vancouver to post declines between 10% and 17%.

“The firm expects this price movement around six months after the inventory increase,” Better Dwelling said. “The timeline puts it fairly close to when the CMHC has been forecasting. The forecast is a little more aggressive than those of banks and other vested interests. However, it’s similar to what other institutional risk advisory firms have forecasted.”