The ongoing COVID-19 pandemic will not deter Canadian housing prices or sales activity from reaching new heights in 2021, according to RBC Economics.
In its latest housing market forecast, RBC predicted that the national benchmark price will grow by 8.4% to reach $669,000 this year. Only Newfoundland and Labrador is projected to experience a price drop, a scant 0.4%, which will be the province’s sixth consecutive yearly decline.
This trend will build upon the strong forward movement established last year, in defiance of the continuing challenges posed by the global coronavirus outbreak.
“The aggregate benchmark price increased 8.5% in Canada in 2020, or almost five times the rate of 1.8% in 2019,” RBC said in its report. “We expect this solid momentum to be sustained in 2021 … underpinned by tight demand-supply conditions in most regions of the country.”
British Columbia, Central Canada, and parts of Atlantic Canada will see the greatest gains, while the outlook for the Prairies will remain subdued.
“Low housing supply is the main factor driving prices up,” RBC said in its report. “By the end of 2020, the number of average listings had plummeted by between 50% and 61% relative to the ten-year average in Ontario, Quebec and most of Atlantic Canada.”
Home resales across the country are projected to increase by 6.5% to 588,300 units, with almost all provinces expected to show gains.
But the aforementioned lack of supply will likely lead to a cooler housing market “at the end of 2021 and into 2022.”
Other factors that will moderate market dynamism will be “waning pandemic-induced market churn, a modest creep-up in interest rates, and an erosion of affordability.”
“Immigration will also play a factor in cooling the market towards the end of the year,” RBC warned. “So far, the effects of COVID-19 on immigration have been felt on the rental and condo markets in Canada’s major cities but this could spread to other housing categories by the end of the year.”