The Royal Bank of Canada expects the coronavirus to take a big bite out of the country’s spring real estate market, but the chill will be temporary.
Social distancing has forced the closure of open houses and private showings are on the decline.
“There will be plenty of reasons for sellers to wait and see as well,” said Robert Hogue, senior economist at RBC, in a new report.
“A shock like this one is an inauspicious time to get full value for a property.”
He expects sales to dive by nearly 30 per cent compared to last year to a 20-year low and prices to fall 2.9 per cent.
A temporary situation
Hogue says low interest rates and government incentives will help provide temporary downside protection.
“This won’t last. In a matter of weeks or months, surging unemployment and the market’s illiquidity will compel a growing number of tight-squeezed sellers to make price concessions,” he said.
Hogue expects sales to bounce back in most markets in a big way.
“Exceptionally low interest rates, strengthening job markets and bounce-back in migration will generate substantial tailwind,” he said.
“We project home resales to surge more than 40% to 491,000 units in 2021.”
The surge in activity would mean prices would also bounce back.
A tale of two cities
The outlook for oil-producing regions isn’t as bright though.
“Price declines are bound to re-accelerate significantly in Prairie markets,” said Hogue.
“High inventories have been an issue for some time and the situation is likely to get worse. We see little prospects for prices to rebound anytime soon.”
Before the COVID-19 pandemic, RBC says housing affordability was stable overall in the fourth quarter of 2019. Vancouver was the most unaffordable Canadian city.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.