A report that was released by Scotiabank on Friday has everyone talking. And they’re talking about whether home prices will fall, rise, or hold steady over the next several years. Despite consumer confidence in the housing market right now, Scotiabank believes that prices will fall over the next several years, as the global economy continues to experience weakness and condo markets in key areas, such as Toronto and Vancouver, continue to falter.
“There is some risk that single family home prices could fall but we see more risk on the condo market,” Scotiabank economist, Adrienne Warren, said on Friday.
That risk is already evident. Toronto prices have already leveled off, and Vancouver prices have already seen an actual decline – a drop of 5 per cent. However, it’s important to remember that even though these are two of the busiest markets in Canada, the other markets within the country are currently relatively stable.
But Ms. Warren says that it’s not just these two markets that are cause for concern; it’s also the fact that Scotiabank foresees international activity lessening as the global economy continues to deal with this down cycle.
“Right now we’re in a period of slow, sort of steady growth, but there are risks primarily from the international front so I think that will be a key determining factor on whether we would have a harder landing or see a sort of steady decline,” she continued on in her report.
But Ryerson University business professor, Murtaza Haider, says that while price declines are a risk, it still remains to be seen how much they will fall. And if they only fall one to three per cent, he says, there really is no cause for concern. And he also reiterates that while Toronto and Vancouver are hot right now, they are only two markets out of several stable markets.
“The question to be concerned about it not that they might go down, it’s by how much,” says Haider. “If you take Toronto and Vancouver out, our housing prices are pretty stable.”
He points to those other markets, mainly Calgary and Saskatchewan, where the economy is booming and prices keep going up. He also looks towards Montreal, which has been seeing declines in the past while, but is now stabilizing and starting to see price increases again.
And, he says, those hot markets like Toronto and Vancouver? There may be no need to worry. Haider believes that key factors such as immigration will continue to support these markets.
Jason Mercer, senior manager market analysis, agrees with this and says that while the condo market is cooling off in these hot markets, there are still other types of properties that will support the real estate market. And that single family homes and low-rises will continue to boost prices.
“Until that situation changes, it’s difficult to predict anything but price increases over the next couple of years,” he said in his most recent analysis.
What do you think? Will housing prices cool off for a soft landing, or will things keep chugging along, even if only certain properties will continue to support it?