Home sales in Montreal and Quebec City spiked to record highs in June, two more major cities that have seen real estate rebound and boom quickly after the novel coronavirus pandemic slashed activity in April. But economists don’t expect the national home buying frenzy to last while the economic recovery remains uncertain and unemployment high.
Last month, 4,980 homes sold in Montreal, a 16-per-cent increase over June, 2019, while 924 residential properties sold in Quebec City, a 47-per-cent gain over last year, according to the Quebec Professional Association of Real Estate Brokers. Sales volumes set a record for June in both cities.
The recovery in home sales is also strong in other major cities – including Toronto, Vancouver and Ottawa – that were showing signs of overheating before the pandemic spread in March. But economists predict the furious pace will not last.
“This catch-up phase might run for another month or two, but we expect high unemployment will restrain demand thereafter,” said Robert Hogue, senior economist with Royal Bank of Canada.
In the Toronto region, the biggest real estate market in the country, sales volumes last month almost matched June of last year, while the average home price climbed 12 per cent year over year. In the Vancouver area, Canada’s most expensive market, sales rose 18 per cent year over year. In Ottawa, sales were similar to June, 2019, and the average selling price of a house was up 15 per cent.
Even in Calgary, which has shouldered two oil price crashes over the past seven years, sales recovered to prepandemic levels. Meanwhile, Toronto suburbs and other cities in Southern Ontario reported strong sales, in part because of increased demand from Torontonians searching outside the city for more space, according to local realtors.
The median selling price in Montreal rose by 12 per cent for houses and 17 per cent for condos, year over year. In Quebec City, the median selling price climbed 2 per cent for houses, but fell 6 per cent for condos, according to the association.
Across most major real estate markets, a lower volume of properties for sale has spurred bidding wars and price inflation. One realtor called buyers who have not lost work during the pandemic “brazen” with their willingness to take out mortgages and make purchases.
Benjamin Tal, the deputy chief economist with Canadian Imperial Bank of Commerce, said June was the delayed spring buying season, which is typically the busiest time of the year for real estate transactions. But this year’s April and May sales were weak after governments restricted many sectors of the economy to stop the spread of the virus.
“You cannot sustain this kind of activity,” Mr. Tal said. “The real test is going to be the winter, the possibility of a second wave [of coronavirus cases] and increased economic uncertainty, and increased in duration of unemployment, more permanent job loss – that’s when we might see the market softening,” he said.
Since mid-March, millions of Canadian residents have lost work and income because of the pandemic. In the interim, the federal government and banks have provided a buffer to the economic hardship.
Ottawa has extended its Canada Emergency Response Benefit (CERB) for individuals. The $2,000 in taxable income a month can be tapped for a maximum total payout of $12,000.
As well, banks have deferred mortgage payments for about 15 per cent of their residential loan portfolios and recently extended the deadline for mortgage deferral applications.
“The expiry of mortgage payment deferrals and the possible phasing out of government support programs, including CERB, later this year could prompt more people to sell their property,” RBC’s Mr. Hogue said. “Any material rise in supply could lead to price declines in some markets down the road,” he said.
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