RBC Economics expects housing prices to go up soon

According to RBC Economics, there are no reasons for a possible home prices decline in the nearest future. An increase is more likely.

“We don’t see factors which could stop the growth in real estate values any time soon,” – RBC economist Robert Hogue noted in a recent market update.

The update was released on the same day the Canadian Real Estate Association (CREA) reported record home sales in July 2020.

“Many markets will probably face further price growth,” – Hogue wrote.

As you know, the national housing market was down in April amid the lockdowns and economic influences from COVID-19.

While the pandemic stopped what was expected to be a strong spring market, sales began to go up in May and June.

In Hogue’s opinion, the pandemic did not destroy this year’s spring market, it only delayed it.

He says supply and demand conditions became even tighter last month across the country.

“There are no reasons for prices to stop growing now”, – he believes.

“On the contrary, tight market conditions in Halifax, Montreal, Ottawa, most of southern Ontario, Winnipeg and Victoria, could lead to a further price acceleration in the nearest future,” – Hogue added.

He says there’s still enough demand left to meet.

“As a result, the market will remain active in August and probably September,” – the RBC economist predicted.

Hogue says the sales-to-new listings ratio rose to 0.74 last month, marking the largest number in 18 years.

“In case the trend continues, it will provide upward pressure on home prices,” – he wrote.

In June, Canada Mortgage and Housing Corporation (CVHC) expected home prices to go down by 9-18% during the next year.

“Real estate prices will likely go down because of uncertainty over the economic situation,” – CMHC noted.

RBC’s Hogue update predicts a possible cooling effect on prices, most likely by start of 2021”.

“We believe that lower immigration and growing condo supply in core urban areas will focus any weakness on the high-rise condo sector,” – Hogue pointed.

He thinks other segments of the housing market may also face downward pressure in case the pandemic worsens or the economic recovery slows down.