Is a further real estate market slowdown possible?

The recent poll by Nanos Research Group shows that confidence in Canada’s real estate market is growing sharply, as 45% of respondents expect home prices in their neighborhood to go up during the next six months. Meanwhile, only 13% of consumers predict a decline, which is the lowest number over the same period.

According to Benjamin Tal, deputy chief economist at CIBC, many Canadians are benefitting from the low interest rates during the most housing-friendly-recession on record.

Nevertheless, Tal believes the real estate market will slow down, and economy will follow the suit, as well.

“Even the central bank’s governor asks us not to expect any growth during the next six months. You can’t have a o% economic growth with the housing market continuing to raise activity,” – noted Tal.

In addition to it, Tal pointed to one more factor affecting his forecast – the fact that damage to the labour market will be much more significant in terms of the influence of the economy and the influence on the economy.

“Usually, you would see more higher-wage jobs losses or at least less job security there,” – noted Tal. “That’s why I suppose this optimism will not stay for too long.”

According to Tal, in case you ask any real estate developer or investor in the condo space, they’ll tell you the market isn’t that hot. So, Tal says all the focus is on the low-rise sector of the market with its lack of supply.

“The demand is so high now due to the nature of the crisis and it means we soon will reach a price resistance, even in this market sector.”

It looks like Tal is one of the few economists predicting a future real estate market slowdown, while many other economists provide unclear outlooks on the future of Canada’s market.

During the latest press conference, CMHC’s Chief Economist, Bob Dugan, noted the agency supports the initial May forecast, warning about a drop in Canadian home prices by 9-18%. RE/MAX called this forecast fear mongering.

DLC chief economist Sherry Cooper said the average real estate prices in Canada rose by 1.5% in August, which means the CMHC is excessively pessimistic. In addition to it, Central 1 chief economist Helmut Pastrick noted the prices are growing, and record-low mortgage rates will keep supporting sales and prices increases.

According to C.G. Consulting Group chief economist Carl Gomez, strong fundamental imbalances in the various Canadian housing markets still exist.

“Following a high demand and low interest rates leading to a growing summer activity, these fundamental factors will probably start affecting the market (without the offsetting support of lower rates and growing government support, or stronger population growth),” – noted Gomez.