The good news: it won’t be as bad as the U.S. housing crash
Credit rating agency Fitch Ratings is predicting that Canadian home prices will fall by up to 5% in 2021 as demand declines due to increasing unemployment and issues with affordability. The agency also expects that declining rents in major cities—which take a bit of the shine off homeownership—and reduced immigration due to the pandemic will also contribute to the demand-induced drops in home prices in the nation. That said, Fitch analysts expect a housing market recovery in Canada in 2022, should the nation’s economy return to its pre-pandemic levels.
A six-month payment holiday, used by as many as 16 per cent of mortgage holders, is coming to an end, meaning payments will have to be made in 2021. And with the unemployment rate expected to decline, yet remain above the average of 6.3 per cent between 2015 and 2019, Fitch expects delinquencies to rise — between 0.35 per cent and 0.5 per cent.
“Although we expect delinquencies to increase in 2021, we do not expect the level of delinquencies, distressed sales or foreclosures to increase to the levels seen in the U.S. during the financial crisis,” the ratings agency said in the report.