Housing Prices In Canada Immune To COVID-19

Several recent forecasts have predicted that many of Canada’s housing markets can expect to see rapid house price growth once the outbreak passes. Despite a steep drop in sales this year, the average home price in Canada will be 6.1% higher at the end of this year than it was a year earlier, TD Bank said in a forecast issued in the last week of April. Given that incomes are unlikely to rise much during this crisis, “affordability will deteriorate when you look at house prices,” the report’s author, economist Rishi Sondhi, conceded.

Sales may be falling, but the supply of homes on the market is falling with them, Sondhi said, which means the market balance isn’t shifting much. Many people are hesitant to put their house on the market ― either because of concerns about the virus, or concerns about the health of the market. 

Still, TD’s forecast makes a few big assumptions. One is “that provinces take tentative steps towards re-opening their economies over the next month.” Another is that the country won’t see a sudden rush of people who need to sell their homes quickly, thanks to the banks’ new mortgage deferral programs. Not everyone agrees. At least one recent forecast says the country will likely see some “forced selling” in the housing market.

And what about the millions of Canadians who have lost work in this crisis? Won’t their plight affect house prices? Like some other economists, Sondhi says that won’t have as much impact on the housing market as one would think. That’s because, they say, the jobs lost in this crisis have disproportionately affected people in service industries and these people overwhelmingly tend to rent.

“While it is sad that these people skewed strongly to young and to part-time workers, for the housing industry, the impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate,” Phil Soper, president and CEO of real estate agency Royal LePage, said in a report earlier in April.

TD’ s forecast sees Toronto house prices rising 7.8% this year, compared to last year, while Vancouver will see 4.7% growth. Things will look worse on the Prairies, TD predicted, where the oil slump will lead to a 4.7% price decline in Alberta, and a 4.1% drop in Saskatchewan.“Sales are poised to plunge at an historic pace in April, while gradually recovering their lost steps in subsequent months as buyers remain cautious,” the report states.

In a separate report on April 29, real estate services firm Altus Group predicted a more than 50% drop in home sales in the April-June period this year, before bouncing back in the second half of 2020, to end the year at around 10% below the previous year’s sales. Although there is a “broad range of outcomes” possible in these uncertain times, ”it’s very unlikely we’ll see significantly declining house prices,” Altus Group vice-president and chief economist Peter Norman told HuffPost.

“The odds are better that … we might be in a situation where they start to accelerate into the uncomfortable zone.” He predicts price growth in the 5% to 10% range for this year, because there will be many buyers who will be “ready to buy” once shutdown orders are lifted and social distancing rules start to be eased.“We think this recession is going to be deep but quick, and the economy will recover quite quickly as soon as we substantially get through the health crisis,” he said.

Source: Huffingtion Post

Canada’s Housing Market May Soon Face a Bigger Problem Than Just Social Distancing

Home sales in Canada, understandably, have fallen as buyers and sellers stay home in coronavirus lockdowns, but so far prices have held up. Canadian home sales declined 14.3% in March from February, but prices edged up 0.8% as new listings fell as well.

But some economists believe that as the virus’ impact on the Canadian economy deepens it will spread not only to housing sales, but prices as well. “Although the housing market was very strong at the start of March, the disruption caused by COVID-19 has since caused home sales to fall off a cliff,” wrote Capital Economics’s Stephen Brown in a April 20th note. Capital expects home sales may face an even steeper fall this month to a “small fraction of their normal levels.”

The latest data out this week from Toronto Regional Real Estate Board appeared to support that view. Sales in the first half of April in Canada’s biggest market dropped 69% from a year ago. New listings were also down 64%, keeping the market tight.

But Capital believes that mass unemployment and the tourism shutdown will force some owners, especially investors in the short-term rental market, to sell in the months to come. “These sellers will inevitably have to accept lower bids from the few people willing to buy in the current environment,” wrote Brown.

Capital said since a large proportion of homeowners appear to be getting mortgage relief from their banks, it was “for now pencilling in a relatively modest fall in house prices of 5% drop in the coming few months.There is clearly a risk that the small number of houses that change hands do so at even lower prices, however.”

Source: Financial Post

GTA Home Sales Plunge 67% in April as COVID-19 Pandemic Freezes Real Estate Market

Home sales in the Greater Toronto Area plunged 67% in April as unprecedented COVID-19 social distancing measures and economic uncertainty affected sales and new listings, the Toronto Regional Real Estate Board reported on May 5.“Past recessions and recoveries do not necessarily provide the best guide as to how the housing market will recover from the impact of the COVID-19 pandemic,” TRREB chief executive John DiMichele said in a statement.“A key factor for the housing market recovery will be a broader reopening of the economy, which will result in an improving employment picture and a resurgence in consumer confidence.”

Provincial, local and federal officials say they’re making cautious plans to relax or remove restrictions that were put in place in mid-March to slow the spread of the novel coronavirus. In the meantime, Ontario continues to restrict non-essential business activities to reduce the chances of spreading the virus from person to person. TRREB president Michael Collins said members have used live video streaming to replace in-person open houses “and I would expect the use of these innovative techniques to increase as some level of social distancing remains in place for the foreseeable future.” 

TRREB said there were 2,975 residential transactions in the GTA in April, compared with 9,005 transactions in April 2019. New listings fell to 6,174 from 17,212 in April 2019, a decline of 64%. 

On a seasonally adjusted basis, TRREB said April home prices in the GTA fell 11.8% from March. Prices for renters were also down for the month, with the average one-bedroom rent falling 2.7% to $2,107, and the average two-bedroom rent falling 4.1% to $2,705.

April’s sales in the City of Toronto fell nearly 68% year over year, while the average price fell 2.5%, to $881,424 in April 2020 from $904,199 a year earlier. Condo rentals were down on a year-over-year basis in April, falling 57.9% for one-bedroom units and 54.4% for two-bedroom units.

Source: The Star