In a report issued last week, RE/MAX took stock of the Canadian housing industry and suggested that the likelihood of a housing market collapse is quite low – at least in the short-term.
Of course, they’re only echoing what others have also been saying, namely that “To burst, or for a real estate market collapse to take place, there would need to be a stagnant demand, with an influx of supply, leading to a sharp drop in prices.” And that doesn’t seem very likely in the country’s hottest markets. In fact, demand remains high and supply remains low in cities like Toronto and Vancouver.
Though COVID-19 has, if anything, succeeded in putting a kind of temporary pause on the industry (as it has done to many industries). Toronto’s most recent real estate insights show that the number of buyers and sellers in the city has shrunk drastically, and in hardly anytime at all. But, again, that doesn’t mean these buyers and sellers no longer exist, rather, they have taken a step back from the housing table, so to speak, to get a better sense of where this is all going to lead.
And that remains the golden question right now – what will the post-COVID world look like?
Well, at least in terms of Canada’s housing market, RE/MAX doesn’t expect it to be all that different. In fact, they’re not even suggesting a noteworthy drop in prices:
“What is more likely to happen, as a result of this public health crisis, is more of a levelling off, rather than significant dips. The prices have been climbing at such a steep, unsustainable rate, that they were bound to be reined in at some point. However, with levels of housing inventory so low in so many of the country’s hottest markets, it’s unlikely that any price change will be jaw-dropping, or even noteworthy.”
The report does suggest the average amount of household debt in Canada will be a defining factor when it comes time to measure how quickly recovery will arrive in Canada. Recent reactionary measures by the Bank of Canada have made it easier for Canadians to gain access to a line of credit or variable rate mortgage, but whether or not “these low-interest rates will entice a population which is already deeply in debt, and face much economic uncertainty in the wake of this crisis,” we’ll have to wait and see. With more people out of work in the country than at any time in the last decade, it’s hard to imagine the demand for housing shooting through the roof (pun intended) anytime soon.
That said, RE/MAX notes, “for those who have the money, real estate has never looked more enticing,” suggesting that the precariousness of the stock market is pushing investors into the more secure area of Canadian real estate. “Over the course of March, the volume of top-tier real estate properties (residential sales over $1 million) sold across Montreal, Toronto, and Vancouver has soared,” according to the report.
Though RE/MAX does not specify whether or not this ‘soaring’ continued throughout March or saw a drastic drop halfway through the month in much the same way Toronto real estate did. In Toronto, overall home sales were still up 12.3% year-over-year, but without context that’s a misleading statistic as the first two weeks of March were up 49% y-o-y and the latter two weeks were down 15.9%.
April’s housing reports will surly deliver further insights into housing markets – both local and national – in the time of COVID-19. And they will also deliver further insights into whether RE/MAX’s belief that “the odds of a bursting bubble are low, at least in the short term” is accurate or quickly becoming outdated.