House prices in Canada not expected to fall dramatically because of pandemic
Would-be homebuyers waiting for a recession to finally lower real estate prices in Canada may want to brace themselves for disappointment.
Experts are now predicting that the housing market won't actually end up experiencing much of a hit from the pandemic, if at all.
Though some aspects of the industry have indeed already changed due to the pandemic — with things like open houses nixed for the time being and buyers acting little more hesitant than usual amid a time of financial uncertainty — projections for how the Canadian market will fare remain optimistic.
National real estate franchiser Royal LePage is the latest group to release some Canadian market forecasts, and according to them, home prices across the country are "expected to remain remarkably stable" despite some level of global economic fallout.
What impacts are expected for the #Canadian real estate market from the #COVID19 pandemic? According to Royal LePage, Canadian #homeprices are forecast to show remarkable resilience in 2020. Learn more about forecast scenarios across Canada’s major markets https://t.co/eYqNHh2YQ2 pic.twitter.com/7s2NX1GEB1— Royal LePage Canada (@Royal_LePage) April 14, 2020
The company expects real estate prices to remain firm through the end of the year — in fact going up by 1 per cent from last year — but does note that this will be in part dependant upon how soon strict social distancing restrictions are loosened.
"If the current tight restrictions on personal movement are sustained through the summer, the negative economic impact is expected to drive home prices down by 3 per cent year-over-year," the forecast states.
If this 3 per cent downturn does happen, that would still make the average Canadian home price $627,900, versus the best-case 1 per cent increase to $653,800.
Though these numbers are lower than pre-COVID-19 projections for 2020, they still show a market that is not much impacted by the crisis long-term — the aggregate price for a home in Canada already rose by 4.4 per cent in the first quarter of the year despite the pandemic.
Royal LePage attributes this largely to the fact that the demographics most affected by things like job loss right now are young and/or part-time workers who can't really afford to buy a home anyway. "The impact of these presumably temporary job losses will be limited as these groups are much less likely to buy and sell real estate," the report reads.
Though there is a fairly low number of both homebuying transactions and homes for sale at the moment, the company does not anticipate these changes to last.
"It is easy to mistakenly equate a handful of transactions at lower prices to a reset in the value of the nation’s housing stock. Distressed sales that occur during an economic crisis are a poor proxy for real estate value,” Royal LePage's CEO said in a release.
But, though prices and sales volumes will likely be remaining normal (read: overpriced in many parts of the country), or returning to that baseline soon, the company doesn't think that all practices around buying and selling property will.
"The popular ‘open house’ gathering of buyers on a spring afternoon is gone, and it won’t be coming back any time soon. The industry is leveraging technologies that allow a home to be shown remotely and social distancing protocols... will continue for months and months," the release reads.
And, if lockdown remains tight for more than just a couple of months and the coronavirus situation does not improve, there could be a more significant blow to the housing market.
"With no semblance of normal business activity allowed, temporary job losses will become permanent and consumer confidence will be harder to repair. This would place downward pressure on both home sales volumes and prices," the company, which does not expect such an outcome, says.
“Low risk” of Toronto home prices collapsing from COVID-19 impact: RBC via @livabl_— Amalia German (@amaliag_remax) April 14, 2020
Overall, the report spells bad news for anyone who was hoping to buy a home for less than the average price of $866,211 in a city like Toronto, for example — but were we really expecting much of a break in a market so notoriously unfriendly to buyers, anyway?
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