- Yes, I do, Anthony. Thanks for having me on, again, by the way. So thus far in 2021, we have seen that take place. We've seen a continued sales gains and continued price gains. So the robust environment that we saw sort of starting in the second half of last year has continued and maintained through the early part of this year.
That said, in the back half of this year, a little bit later on a few months moving forward, we do expect sales to come off the boil a little bit as well as prices. But the level of sales and the level of prices we expect to remain elevated.
So perhaps, slower rates of growth and indeed some modest declines in sales and prices in the second half of this year and perhaps early next year. But the level of sales, level of activity, and the level of prices will remain elevated. So still hot markets overall.
- Yeah, you talk about level of prices being elevated. They seem to be blazing. The average price in Toronto for a home has topped $1 million. Do you think this is sustainable going forward?
- Yeah, we do think those levels are going to be sustained and moving forward. As I mentioned, we do expect some easing in price activity or price levels moving forward. And that's a function of a few things.
First of all, we expect sales to come off the boil in the second half of this year as interest rates grind lower from their record lows. There's a few other factors I could point to. One of them being the fact that we're just selling way too many homes relative to what the fundamentals such as population and household incomes can support. So you'd expect some downside pressure from that source.
And finally, inventories are very, very low relative to trend sales pace. So at the current record sales pace that we're observing right now, the available inventory on the market would be exhausted very quickly. So there's just not much supply in the market that continue to maintain this very robust sales pace.
We do expect some easing moving forward, and that easing will take some of the wind out of prices, we think. Couple that with the fact that supply, we think, is going to pick up a little bit too. So people are going to be-- we think people will list their homes in sort of a greater frequency in back half of this year and even earlier, in fact, in this robust price backdrop.
And also, one fact we think that will slow sales moving forward is we think that there will be a greater rotation into condos. So condo sales, we think, will have a better year this year than they did in 2020. And because condo units are lower valued on average, that's going to weigh on average prices.
- What are the drivers contributing to the robust housing prices?
- There's a few factors. I'll just preface this by saying in January, we saw another record level for Canadian prices. So it's a very, very hot market as you touched on. And there are a few factors that could explain it.
According to us or in our view, I think, firstly, sales growth and housing demand has been very, very strong. There's been a shift in preference. I think this is a bit of a well-worn story at this point. But it's an important part of the pricing story, so I'll say it again.
There's been tremendous demand for detached housing in markets outside of the larger urban centers, in cottage country, and the like. And those units tend to be higher-priced so they have a-- they tend to boost average prices just because they're higher-priced themselves on average. So that's yet another factor.
The third factor is that markets are extremely tight from a supply and demand perspective. The tightest impact that had been in history. So again, there's not that much supply out there. So that means there's more bidders bidding for a given unit, particularly in the detached space.
- Do you see some potential headwinds in the future for home prices?
- Yeah. I wouldn't necessarily call them headwinds. I would just say that there are more potential risks or factors. I would say that we think will take some of the edge out of the rapid price increases that we're seeing.
I sort of alluded to them before. But just to reiterate a little bit, we do think supply is going to creep higher over the next little while. And that's a function of the fact that the price environment is quite robust, and we think people will list their properties take advantage of that.
Another factor is that as the vaccines get rolled out, we think people are going to be a little more comfortable listing their properties. So it'll be some upward pressure on supply. As I mentioned before, we expect sales to kind of come off the boil and remain elevated, mind you. But come off the boil particularly in the second half of this year as interest rates sort of grind higher from the record lows and supply constraints weigh on the pace of sales.
So we're going to have sale come off the boil coupled with some increases in supply. At the same time, we think that there's going to be a rotation in this or lower-valued condos. And the combination of this new factors, we think, will take some of the froth out of the market that we're seeing right now. But we're certainly not-- we're not anticipating a huge plunge in prices or anything like that.
- And finally, based on your assessments, what are the risks of a potential housing market crash?
- Well, there's always a non-zero risk. But we view it as sort of a small risk-- relatively low risk, and there's a few factors that answer that, in our view. First of all, we think that there's going to be robust demand coming from the sheer demographics of the countries. That's one factor.
Another factor is we expect population growth to pick up. So that'll boost the rental market, rents. And that's positive for condo investor-demand. That's yet another factor. A third factor is that although we expect rates to grind higher from the record lows, they are going to remain low, so supportive overall. So that's yet another factor.
And finally, households, in our estimation, are sitting on an accumulated savings or excess savings of about $200 billion as of the last quarter of last year. So they're sitting on a pile of cash-- Canadian households. So we think some of that money will funnel into the housing market and down payments and the like, and that'll help mitigate against any sort of crash.
- Rishi, thank you very much for your time.
- Thanks, Anthony.