While the last six months have been filled with uncertainty, one thing that has remained resilient is the Canadian housing market; though not all industry experts expect it to remain that way.
Despite COVID-19 related lockdowns and the economic shutdown, which resulted in record job losses for Canadians, the Canadian housing market has remained exceptionally active, something that RE/MAX believes will continue for the duration of 2020 and into the foreseeable future.
This is despite the fact that the Canadian Mortgage and Housing Corporation (CMHC) continues to say otherwise. (Not to mention a recent report from Moody’s Analytics that forecast prices will fall 7% in 2021.)
In a recent press conference, CMHC’s Chief Economist, Bob Dugan, told reporters that the agency stands by the original forecast it made in May that warned of a decline in Canadian house prices between nine and 18% — a forecast that RE/MAX refers to as “fear-mongering.”
“I’m not convinced that we have a sustainable basis for housing demand in the economic disturbance that’s going on related to COVID-19,” Dugan said. “That’s why I say I stand by the forecasts.”
This isn’t the first time RE/MAX has called out Canada’s federal housing agency for its bold forecast. The real estate company previously called the agency’s initial housing market prediction “panic-inducing and irresponsible.”
As RE/MAX points out in a recent article, CMHC’s forecast no longer aligns with the current state of the Canadian housing market. Presently, activity in Toronto and Vancouver’s real estate markets is continuing on an upward momentum. In the Greater Toronto Area (GTA), the sale of new homes was up a whopping 217% in August — a mark that was 110% over the 10-year average.
Activity in Prairie provinces like Saskatchewan and Alberta, on the other hand, seems to currently be facing a different trajectory due to obstacles brought on by the resources sector. However, RE/MAX says Ontario and BC are expected to offset the slower activity found there.
But even before the current burst of market activity, transactions were up across the country following dramatic declines in March and April when social distancing measures were first set. Subsequently, RE/MAX Canada revised its forecast for national average house prices in 2020, increasing it to +4.6% from its original prediction of +3.6% at the end of last year.
As for declining prices, Benjamin Tal, Chief Economist at CIBC World Markets, said the impact would be felt on “rent as opposed to home ownership.” This currently remains true, as average rent prices for condos in Toronto continue to decline, dropping 16% year-over-year last month.
Canadian economists have also voiced their belief in the strength of the housing market.
RBC Economics recently reported that a large-scale decline was unlikely and that while the pandemic “completely disrupted normal seasonal patterns by shifting activity from the spring to summer,” with pent-up demand now largely exhausted, it believes activity won’t cool until later this fall. “This should let some of the steam out of prices though not to the point of causing outright declines on a large scale.”
TD’s Beata Caranci, Chief Economist and Senior Vice President of TD Economics, recently spoke about Canada’s resilient economic rebound and recovery from the COVID-19 pandemic. Caranci said consumer spending and housing are helping fuel economic recovery, and that even given the current unemployment rate, incomes aren’t behaving like we’re living amid a recession. Caranci said, “incomes are being supported at the same or at higher levels than in previous recessions,” which, in turn, is adding fuel to the housing market.
Homeowners also believe in the strength of the market. The Ontario Real Estate Association recently surveyed Ontarians and found that 60% think housing is an important or somewhat important (32%) contributor to the recovery of the provincial economy.
To add more fuel to the fire, OREA says it’s pushing on governments to help stimulate the market with incentives like a “Land Transfer Tax Holiday” which would make Ontario homes more affordable by temporarily eliminating a punishing tax and bring more homes into the market, and help address the province’s supply shortage.
While COVID-19 continues to pose uncertainty for all facets of life (locally, Ontario is seeing some of its highest-ever COVID-19 numbers this week), Canadians continue to indicate that buying a home is an important investment even amid a global pandemic.
The success of the Canadian economy depends on real estate.
According to OREA CEO Tim Hudak, “real estate saved our economy during the last downturn and it can once again be the locomotive that gets us back on track.” So far, at least, Hudak is right.
But, as anyone who has lived through 2020 can attest, a year can be a very, very, long time — and what can happen between now and the end of 2021 is anyone’s double-digit-percentage guess.