The Canadian housing market appears to be on the rebound as April sales hit the biggest year-over-year increase since December 2017. But that doesn’t necessarily mean properties are becoming more affordable.

A five-year forecast on Canadian home prices has found that costs will rise across the country in all but two cities.

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“With the direct and indirect effects of monetary tightening, house price appreciation will slow down in 2020, turn briefly negative in 2021, and only recover in the following years,” Andres Carbacho-Burgos, the lead housing economist at Moody's Analytics, wrote in the report.

The forecast was conducted by Moody’s Analytics using RPS Real Property Solutions data. It predicts that Canadian home prices will increase by 2.2 per cent between Q1 2019 and Q1 2024.

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St. John’s and Guelph will see the biggest jump in prices, climbing 6.1 and 5.5 per cent, respectively. Barrie (5.2 per cent), Edmonton (4.2 per cent), and Toronto (3.3 per cent) then round out the top five cities with the highest increases.

“Over the coming year, only Montréal will have moderate house price appreciation [2.6 per cent] compared with the other large metro areas, but in subsequent years there will be a partial recovery, with Toronto doing somewhat better,” Carbacho-Burgos reported.

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Demand in Toronto will continue to be high, affecting prices. However, rising interest rates and the mortgage stress test will continue to hinder some prospective buyers’ abilities to afford a home, thus reining in that purchasing demand.

As for Vancouver, “house prices will dip over the next year,” the report noted. “The metro area will be lucky to maintain level prices through 2024 given how overvalued house and apartment prices are currently.”

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Prices in the West Coast city will only see a mere 0.9 per cent rise over the next five years, according to the forecast. This makes sense considering Vancouver currently has a buyers’ market and is facing serious challenges of its own.

Sales there are still trending lower as buyers adjust to a cocktail of housing affordability challenges, reduced access to financing due to the mortgage stress-test and housing policy changes implemented by British Columbia’s provincial government,” Gregory Klump, chief economist at CREA, previously explained in a news release.

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So, which two Canadian cities will see a dip in prices over the next five years? That would be Regina and Saskatoon.

“Serious house price corrections are in store only for Saskatchewan, where Regina and Saskatoon have seriously overvalued home prices and do have a history of mean-reversion, in contrast with Ontario metro areas,” Carbacho-Burgos wrote in the report.

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