New report says home prices in Canada could drop as much as 30%
With the health crisis palpably impacting the Canadian housing market, many would-be homeowners are wondering if prices in some of the country's most notoriously expensive cities will be dropping to more affordable levels anytime soon.
Many experts predicted a cooler than usual spring market for real estate in Canada due to COVID-19, and the number of listings and real estate transactions has indeed been down substantially year-over-year.
Though forecasters were hesitant to say that prices would be swayed by the pandemic — and in cities like Toronto, they have not been thus far — it seems that some research is now indicating that prospective buyers may be in for some luck in what is otherwise a very unfortunate time.
Financial services company Moody's Analytics has released its updated forecast for the Canadian economy in Q2 of 2020 — in addition to a housing market outlook it released earlier this month, subtitled "Tough Times Ahead" — and it says that house prices could go down by as much as 30 per cent, depending on when lockdown restrictions are loosened and the economy re-opens.
#Canada #BC #covid19 #housingmarket #realestate— SherrylJacobs (@SherrylJacobs) May 1, 2020
Canada Housing Market Outlook: Canadian Real Estate Prices Could Drop Up To 30%, Moody’s Advises Institutions
Shelter-in-place orders and social distancing have brought house hunting to a virtual halt.https://t.co/rvSV3KknEI
"Canada's housing market vigor will fade as the COVID-19 pandemic will hurt economic growth in 2020. Housing data from February painted a rosy picture for the Canadian housing market, but that was before COVID-19 fears settled in," the projections, which predict a concerning dip in Canadian dollar value and national GDP, read.
"Shelter-in-place orders and social distancing have brought house hunting to a virtual halt while layoffs, the collapse in oil prices, and the plunge in equity prices have kept prospective buyers at bay."
With the above factors, along with things like higher unemployment rates and lighter consumer spending amid an economic recession, Moody's expects the housing market to continue to "experience a steep and severe decline" in volume of listings, as well as actual purchases. More mortgage delinquencies are also expected.
(This is despite things like lower key interest rates to encourage buying and the flow of money through borrowing and investing.)
The documents offer multiple future scenarios where home prices fall anywhere between 8 per cent at best and 30 per cent at worst in the next quarter, taking anywhere from one year to two years to recover.
Though there is no way to fully and perfectly predict buyer and overall market behaviour, the firm anticipates that the unemployment rate will play a huge role in the future of Canadian real estate when emergency federal financial aid comes to an end and all industries (and the economy at large) struggle to get back on their feet.
There is also the fact that the pandemic brings with it a whole suite of unknowns, including timelines for when life can start returning to normal. Any slight changes, including the extension of lockdown, could put us in a whole different scenario for Q2 and beyond.
"In the long run, the housing market will depend on several factors, including consumer preferences for homeownership and the ability for families to save for a down payment," the outlook reads.
"Both factors could change radically in the aftermath of the pandemic putting Canada’s housing market at risk."
Some economists argue that Canada's housing market won't be markedly impacted by the virus, and that prices are set to increase, as they tend to do.
Home Prices In Canada Immune To #COVID__19 ?— Mat (@Mat_NEA) May 2, 2020
Economic crisis has shuttered our cinemas & airlines, thrown restaurants & bars into disarray; is currently busy running up a heck of a government deficit. But apparently it can’t derail housing markets.https://t.co/VkjCfVQ7Qb
But other recent studies, like the one released by TD earlier this week, likewise project a considerable drop in house prices — one that will vary coast-to-coast, with oil-producing provinces suffering the most — but say that they will rise again and proceed at a "positive, but subdued" pace later in 2020.
Given that property in some Canadian cities has been ridiculously overvalued for some time now, some of this news might be welcomed by those who would usually be priced out of a given market. But, it is not a good sign for an already floundering economy.
Join the conversation Load comments