Is a concensus finally being reached by economists on where Canada’s housing market is headed? Scotia released a report today forecasting a 10% drop in average prices in the next few years with the greatest impact to be felt in Toronto and Vancouver. While Scotia is not expecting a US-like downturn, they are warning about the risks facing real estate in Canada.
Some excerpts from the report:
In this environment, we expect average Canadian home prices will eventually decline a cumulative 10% over the next 2-3 years, as housing demand softens and buyers’ market conditions re-emerge for the first time in over a decade.
The correction will be concentrated in the Toronto and Vancouver markets, where supply risks and affordability pressures have the potential to trigger larger price adjustments. In contrast, we continue to anticipate relatively more favourable demand and pricing in many other regional markets facing more balanced conditions.
Even beyond mid-decade, Canada’s housing sector faces the likelihood of a prolonged period of relatively modest sales and price gains. Historically, long cycles of rising home prices have been followed by extended periods of persistent softness
There is a widespread consensus that average home prices in Canada have overshot their longer-term fundamental values. The most common adjustment mechanism would be an extended period of relatively flat nominal home prices that over a period of several years gradually restores affordability
You can download the entire report here