Housing prices in Montreal and Ottawa are poised to fare best in the months ahead, while the outlook for other major markets, such as Toronto and Vancouver, are less positive, Statistics Canada says.
A StatsCan study examined Canada’s key housing markets heading into the Covid-19 outbreak and in the months since the pandemic took hold.
“Demand outpaced supply in most key housing markets until mid-March 2020, spurred by economic growth, a low unemployment rate and population increase largely from immigration,” it said.
“Covid-19 changed everything.”
In March, the economy plunged, unemployment surged and immigration ground to a halt. As a result, housing sales dropped by an average 70% through April in Canada’s big housing markets, StatsCan said.
Looking ahead it sees a range of outcomes for the key housing markets.
Ottawa, which boasted the hottest housing market heading into the pandemic is expected to continue outperforming.
It has been less hard hit economically than other regions, given the high proportion of government workers, tech sector employees and other professionals who have held on to their jobs.
“Given the economic stability of Ottawa, and that it has one of the highest population growth rates in the country, house prices will likely continue to rise for the foreseeable future,” StatsCan said.
Montreal enjoyed strong price growth prior to the pandemic, and underlying supply and demand fundamentals continue to support rising prices.
“Given that Montreal is a major immigration hub, it is seen as having enough housing demand to sustain positive price movements for the foreseeable future,” StatsCan said.
In particular, the study said the single home market is expected to perform well, whereas the condo market may be hurt by declining rental prospects, pushing down prices.
The pandemic has transformed the rental market in several major cities, with physical distancing measures and travel restrictions undermining demand.
“There is already evidence of this happening in Toronto, where average rental prices have begun decreasing as new landlords try to attract clients from a diminished pool of potential renters,” the study said.
As a result, StatsCan said the supply of condos in Toronto is expected to increase, as short-term rentals have lost their main sources of income and increased rental construction is boosting competition.
Investors who previously bought condos to serve as short-term rentals may now look to dump those properties amid declining demand.
Additionally, the decline in immigration will likely drive down condo prices in the medium to long term, StatsCan said
At the same time, prices for higher-end housing in Toronto are expected to stagnate, or decline, given the economic downturn, it added.
With a rise in remote working, more buyers may look for larger houses in the suburbs that can accommodate home offices, StatsCan said.
The study sees similar dynamics to Toronto in Vancouver’s housing market, which remains among the most expensive markets in the world.
The high cost of housing, coupled with increased remote working, may push more people to move to outlying areas in Vancouver, StatsCan said.
It also sees the potential for short-term rentals to flood the market in Vancouver, driving down condo prices in the short to medium term.
The market outlook is weakest for Calgary, which was already seeing housing prices decline prior to the pandemic.
“Home prices in Calgary have been falling since the oil price crash in 2014 and with the recent uncertainty surrounding the energy sector,” it said.
This has continued in the wake of the pandemic, as housing inventory continues to accumulate.
“Calgary does not have the economic diversification that Toronto or Montreal have and will continue to suffer from bleak economic prospects for the foreseeable future. This will definitely contribute to the negative pressure on real estate prices,” the study said.