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05/21/2019 16:36 EDT | Updated 05/21/2019 17:35 EDT

Canadian House Price Forecast: What The Next 5 Years Will Look Like In 33 Cities

Whether you're a homebuyer or a homeowner, there's something for you to be unhappy about in this forecast.

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A row of new single family houses in a neighbourhood in Saskatoon, which Moody's Analytics says will have one of the weakest housing markets in Canada over the next five years.

The latest Canadian house price forecast from Moody’s Analytics really has no good news for anyone.

If you’re a homeowner hoping to make big equity gains, forget it. And if you’re an aspiring homebuyer hoping for a reprieve from astronomical urban house prices, forget that too.

The forecast calls for house prices nationwide to grow by an average of 2.2 per cent per year over the next five years. Given that the Bank of Canada is predicting inflation at 2 per cent in the coming years, this means that inflation-adjusted house prices will likely see no net growth.

Watch: This office space is what passes for a one-bedroom rental in Toronto. Story continues below.

 

With Canada’s economy bouncing back from a slowdown at the start of the year, Moody’s expects mortgage rates to rise by a full percentage point over the next two years. That increase in monthly housing costs, combined with high prices and high debt levels, will keep prices in check, the research firm predicts.

“House price appreciation will slow down in 2020, turn briefly negative in 2021, and only recover in the following years,” wrote Andres Carbacho-Burgos, a director and head housing economist at Moody’s Analytics.

The upshot is that this will improve affordability by giving people’s incomes a chance to catch up to house prices. But given that wages are growing only a little faster than inflation, improvements in affordability are likely to be minor.

 

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Toronto should avoid any further house price declines, thanks to heavy demand for housing, but price growth will be limited to an average of 3.3 per cent in the coming years, the forecast said.

And Vancouver “will be lucky to maintain level prices through 2024 given how overvalued house and apartment prices are currently,” Carbacho-Burgos wrote.

He sees house prices falling in the metro area by 0.8 per cent  over the next year, which would mark a considerable improvement from the 7.3-per-cent price decline Vancouver has seen in the past year. Moody’s longer-term forecast of 0.9-per-cent price growth for Vancouver is practically a rounding error.

Biggest problems in Western Canada

Some of the weakest housing markets in the coming years will be on the Prairies, where a struggling oil industry will keep real estate weak, the Moody’s report predicted.

Saskatchewan’s two largest cities ― Regina and Saskatoon ― will see outright price declines over the next five years. Regina’s prices are forecast to fall 3.1 per cent per year, implying a more than 15-per-cent decline by 2024.

“Over the coming year, only Montréal will have moderate house price appreciation compared with the other large metro areas, but in subsequent years there will be a partial recovery, with Toronto doing somewhat better,” Carbacho-Burgos predicted.

Like many other analysts, Carbacho-Burgos points the finger at tougher housing market regulations for the slowdown. But he says it would be a mistake to think the rules hobbled what was once a strong market. Rather, they prevented an even worse correction down the road “if affordability had become unsustainable and mortgage debt (costs) had climbed even higher,” he wrote.

“The current cooling of the housing market is therefore not really bad news, but should be seen more as a necessary consequence.”