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House prices in Canada’s largest cities expected to drop amid ‘severe declines’ in sales, construction: CMHC

Canada Mortgage and Housing Corp. expects a drop in home prices in the country's biggest cities amid ``severe declines'' in home sales and construction.
Canada Mortgage and Housing Corp. expects a drop in home prices in the country's biggest cities amid ``severe declines'' in home sales and construction. Matt Rourke / The Canadian Press

Canada Mortgage and Housing Corp. expects a drop in home prices in the country’s biggest cities amid “severe declines” in home sales and construction.

The federal housing agency says a combination of factors related to the pandemic, such as higher unemployment and lower income, will slow housing starts and push sales and home prices below pre-COVID-19 levels.

READ MORE: Canada’s unemployment rate reaches record 13.7%

CMHC says the market likely won’t see a return to pre-pandemic levels before the end of 2022.

Average home prices in Toronto, Montreal and Ottawa are expected to rebound sooner, starting in late 2020 and rolling into early 2021.

Prices in Vancouver, Edmonton and Calgary likely won’t rebound until later in the forecast period, it added.

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The report found in Vancouver, resale markets will pick up again next year.

Average house prices will decline gradually over the next two years before showing some recovery in late 2022, the report added and the decline in migration to Vancouver is expected to result in an increased supply of rental units.

READ MORE: Canadian homes prices could drop up to 25% in some regions: CMHC

Calgary and Edmonton will see average home prices decline, it said, due to uncertainty around oil prices and economic recovery in the region.

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CMHC deputy chief economist Aled ab Iorwerth says COVID-19 had “unprecedented impacts” on the country’s urban centres.

“Short-term uncertainty will lead to severe declines in sales activity and in new construction,” he said in a statement.

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“As the virus is overcome, cities will bounce back but there is significant uncertainty with respect to the path and timing of the recovery.”

-with files from Janet Brown