Unemployment and lower immigration due to the novel coronavirus pandemic will slow housing activity in Canada’s major cities for at least the next year, with Calgary and Edmonton taking the biggest blows thanks to a drop in oil prices, according to the national housing agency.
A two-year forecast from Canada Mortgage and Housing Corporation says housing starts, sales and prices will fall in most of the six major cities this year and its data suggest Toronto, Ottawa and Montreal will recover faster than Vancouver, Edmonton and Calgary.
“Short-term uncertainty will lead to severe declines in sales activity and in new construction,” Aled ab Iorwerth, CMHC’s deputy chief economist, said in the outlook released on Tuesday. “There is significant uncertainty with respect to the path and timing of the recovery.”
The report builds on CMHC’s national forecast, released in May, that predicted home building across the country could drop by 75 per cent from prepandemic levels, while sales could fall as much as 30 per cent and home prices could sink by 18 per cent.
Since the pandemic hit in March, millions of Canadian residents have lost jobs and income, as governments restricted non-essential activity to slow the spread of the virus. Although provinces are starting to allow businesses to reopen and some jobs are returning, both the path of COVID-19 and the economic recovery is unpredictable.
“Such large employment and income declines, coupled with uncertainty over the future trajectory of the virus, will lower demand for housing,” Mr. ab Iorwerth said.
The report provided a wide range of forecasts for this year through 2022. Over all, the housing agency expects Edmonton and Calgary to shoulder the steepest declines in home prices, sales and home building over the next few years. Housing starts in both cities could fall more than 60 per cent, as demand for new homes slows because of economic hardship, along with declining immigration and migration from other provinces.
In Vancouver, the country’s priciest real estate market, CMHC does not expect home building and sales to begin recovering until 2022 and predicts the average selling price will remain below last year’s $923,195 until at least the same year.
But in Toronto, the country’s biggest real estate market, CMHC said housing starts could begin to recover as soon as next year and prices could increase this year and the following two years. But sales are expected to remain below 2019 levels. Its forecast for home values showed the average selling price could fall by 6 per cent or could climb by 7 per cent from 2019 through 2022, depending on the health of the economy.
In its most pessimistic scenario, the agency forecasts Calgary and Edmonton’s average selling prices could fall by as much as 25 per cent from last year through 2022, Vancouver might be down by 12 per cent and Toronto off by 6 per cent over the same time period. In Ottawa and Montreal, home prices could hit a low next year, for a decline of 8 per cent and 4 per cent, respectively.
CMHC said it was difficult to forecast the pandemic’s effect on the rental market, except to note that vacancy rates in the tightest markets of Toronto and Vancouver would likely rise in part because of the new supply of condos and apartments.
CMHC’s wide-ranging forecast reflects the unpredictability of the pandemic and economic recovery. Currently, Ottawa is propping up huge swaths of the economy through loans and financial aid, and banks have deferred mortgage payments for about 15 per cent of their residential loan portfolio.
The uncertainty has caused the national real estate association to cancel its forecast twice during the course of the pandemic. Meanwhile, bank estimates for home prices vary, with an expected decline anywhere between 5 per cent and 10 per cent.
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