Canadian home prices could fall 5% by July as some owners are forced to sell due to the economic hardship brought on by coronavirus pandemic, Capital Economics has forecast.
While sales activity and price gains remained stable in the first half of March, real estate boards from across the country are reporting a near halt in activity as government shutdowns and physical distancing have people locked down at home.
In a note to clients, Capital Economics said April will see “an even steeper fall” in sales activity to a “small fraction of their normal levels.”
Still, new listings have plunged as well, and prices have held firm. Last week, the Canadian Real Estate Association reported a 14% drop in sales volume from February to March. New listings were down 12.5% from February, while average prices were flat month-over-month and up 12.5% year-over-year.
The economic strains of the pandemic lockdown, however, will likely pressure home prices in the coming months, said Capital Economics.
“Given the huge rise in unemployment and the cash flow problems that restrictions on tourism have caused investors in the short-term rental market, it seems likely that there will be some forced sellers in the coming months.”
With fewer people willing to buy those properties, those forced sellers “will inevitably have to accept lower bids.” That dynamic has Capital Economics “pencilling in a relatively modest fall in house prices of 5% in the coming few months,” the firm said.