A 5-year, city-by-city Canadian house price forecast (and, oh, look at Barrie, Ont.)

TheGlobeAndMail.com
Oct. 20, 2016
Michael Babad

Five-year forecast

Wonder how much more your house might be worth in five years?

Moody’s Analytics and Brookfield RPS have a fresh forecast that looks at Canadian cities, big and small.

And where small is concerned, Barrie, Ont., might just be the place to be, as the forecast from Moody’s Analytics, using Brookfield RPS house price indexes, suggests.

City by city, the forecasts compare incomes and demographics with residential construction.

The projections are for single-family detached homes, from the third quarter of this year to the corresponding quarter of 2021.

The table below lists the forecasts for annualized home price appreciation for each quarter, averaged over the five years.

“It seems to be the happening place,” Moody’s Analytics senior economist Andres Carbacho-Burgos said of Barrie, adding in an interview that the city might be getting spillover demand from Toronto.

Indeed, many areas near Toronto are experiencing their own housing booms.

What you’ve got to keep in mind, though, is that Moody’s Analytics, the sister company to the U.S. rating agency, expects the pace of appreciation to slow over the five-year period, meaning the averages are front-end loaded.

Note how many of those at the top of the list are in Ontario.

“Vancouver house price growth is significantly weak because of the projected effects of the new transfer tax on foreign purchases and the stronger projected residential construction relative to household formation,” Mr. Carbacho-Burgos said in the report, referring to the 15-per-cent provincial levy on foreign buyers of Vancouver-area properties.

“Low housing affordability will at least temporarily slow down purchase demand in the medium term and will thus drag on house price growth.”

He projected slower home price appreciation for Canada as a whole, although, like other economists, his focus is on Vancouver and Toronto.

“The Moody’s Analytics forecast model for the Brookfield RPS house price indexes indicates that overall house price growth in Canada will slow down as some markets, especially Toronto and Vancouver, become overvalued and less affordable, while international capital inflows also slow down,” he said in the report.

“In coming years, the Bank of Canada will raise interest rates in reaction to monetary tightening in the U.S., which will pull up on Canadian mortgage rates. The house price outlook calls for a deceleration of house price growth, not for a serious decline, though there are exceptions for smaller regions.”