Royal Bank of Canada's regulatory filings for Q2 2021 reported home prices in Canada could decline by a massive 30% under certain conditions. For this, Canada would have to return to the beginning of the pandemic, with a rise in unemployment, a prolonged recession and plummeting growth.
A sudden drop to that extent would be catastrophic for any recent homebuyers who were able to cobble together only a minimum down payment of 5%. Bank of Montreal also saw real estate prices decrease by 28.7% between March 2021 - Dec 2022. CMHC's nightmare situation involved home prices decrease by 50% and unemployment reaching a peak of 25%. However, there are several reasons the housing market is unlikely to falter:
- Immigration
- Low mortgage rates
- Unquenched demand
- Rigorous underwriting
If some unforeseen economic calamity were to take place, sellers desperately will race to get out of their mortgages.Until then, though, the real worst-case scenario Canadian homebuyers have to worry about is RBC's best, one where most properties in the country are worth over $1M.