Cici Cao
the canadian real estate market, hobbled by a lack of housing affordability and high interest rates, is expected to see a 5-percent drop in the fourth quarter, according to an analysis published by Oxford Economics.
Toronto and Vancouver should especially brace for a sharp fall.
The report, written by economists Tony Stillo and Michael Davenport of Oxford Economics, indicates that a lack of affordability and looming mortgage renewals have brought growing strain on the Canadian real estate market and highlighted a need for market adjustment.
The two authors anticipate that Canadian property prices will decline another 5 percent in the fourth quarter of this year following the 18-percent drop in the first quarter of 2022 when home sales peaked.
The report also predicts that property prices in Canada's major metropolitan areas will take big hits in the second half of 2024.
By the end of the year, home prices in Toronto and Vancouver will fall by 7 and 10 percent respectively, due to limited affordability.
The rest of the country - including other major cities such as Halifax, Calgary, Quebec City and Winnipeg - should also expect to see a decline in home prices.
"We think elevated housing unaffordability and the growing strain on households from the wave of mortgage renewals will cause listings to grow faster than demand in the second half of the year," said Stillo.
This will happen "more so in markets where there's been higher indebtedness."
The pair of economists anticipates that interest rate cuts by the Bank of Canada "will breathe life into housing." However, continuing reductions in the benchmark lending rate will not prevent many homeowners from having to renew mortgages at "significantly" higher interest rates.
They predict that housing affordability will not improve until 2035.
However, they do not believe that prices in Toronto and Vancouver will ever return to an affordable range because of their attractiveness.
"Our view is they will only get a temporary reprieve" from an increase in housing supply, said Stillo.
