{"id":1256,"date":"2020-06-13T21:18:53","date_gmt":"2020-06-13T21:18:53","guid":{"rendered":"https:\/\/rankmyagent.com\/realestate\/?p=1256"},"modified":"2020-06-13T21:21:16","modified_gmt":"2020-06-13T21:21:16","slug":"what-the-canadian-real-estate-market-could-look-like-after-covid-19","status":"publish","type":"post","link":"https:\/\/rankmyagent.com\/realestate\/what-the-canadian-real-estate-market-could-look-like-after-covid-19\/","title":{"rendered":"What the Canadian Real Estate Market Could Look Like After COVID-19"},"content":{"rendered":"\n

There\u2019s no doubt\nthat the Coronavirus is affecting the Canadian and the global real estate\nmarkets. The Canadian Real Estate Association (CREA) revealed a significant decline\nin the number of residential units sold across the country in April 2020. In\nfact, the volume of sales in April was at its lowest since 1984. <\/p>\n\n\n\n

So, is the real\nestate bubble finally popping? Well\u2026 not necessarily. There may be headlines\nclaiming a real estate armageddon, but everyone has their own thesis. In this\narticle, we reflect on what some of the top experts forecast for the future of\nthe Canadian real estate market. We also review the factors steering us away\nfrom the idea that the real estate market is about to burst. <\/p>\n\n\n\n

What is Everyone Saying About the Future of Canadian Real Estate?<\/h2>\n\n\n\n

There has been no\nshortage of predictions and research reports on what to expect in the near- and\nlong-term of Canada\u2019s residential real estate market. The CEO of Canada\nMortgage and Housing Corporation (CMHC) provided a gloomy outlook<\/a> on what\u2019s to come. In a\ntestimony to the House of Commons, he predicted that home prices could fall\nbetween 9-18% over the next year. One of the major fears that Siddall had was a\n\u201cdebt deferral cliff\u201d, where mortgage deferral programs<\/a> would come to an\nend and Canadians would need to start making payments again \u2014 whether they have\nthe income to or not. <\/p>\n\n\n\n

Not all experts\nagreed with Siddall. RBC forecasted that housing prices may decline 5% compared\nto last year; CIBC forecasted a 5-10% decline<\/a>; and Moody\u2019s,\na financial services and research firm, estimated an 8% decline in Canadian\nreal estate prices. And, in a surprising turn, TD predicted that home prices\nmay increase by as much as 13.8% in some provinces<\/a> by the end of 2020.\nWhile a 5-10% decline in housing prices is still significant, it\u2019s nowhere near\nthe possible 18% that Siddal had in mind. <\/p>\n\n\n\n

Currently, CREA\nand other real estate boards have not reported significant declines in real\nestate prices, despite sales activity plummeting across the country. Not only\nhas the pandemic resulted in fewer Canadians looking to purchase a property,\nbut it has also delayed those looking to sell. Once restrictions of social\ngatherings and the threat of Coronavirus lifts, we may see momentum return to\nthe real estate market on both the buyer and seller side. <\/p>\n\n\n\n

Why We Likely Won\u2019t See the Real Estate Bubble Pop<\/h2>\n\n\n\n

There are plenty\nof uncertain factors. For example, we don\u2019t know how long social distancing\nmeasures will last in each province. We\u2019re also unsure of how long it\u2019ll take\nbefore we find a vaccine for Coronavirus. The longer social distancing is\nrequired and the longer a vaccine takes, the more negative effects we\u2019ll see in\nthe real estate market. <\/p>\n\n\n\n

However, many\nfactors point towards a healthy market once the COVID-19-era passes. This\nincludes pent-up demand and supply, low-interest rates, and delayed housing\ninventory. <\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Pent-Up Demand and Supply<\/h3>\n\n\n\n

Many individuals\nhoping to buy or sell their home are waiting until Coronavirus ends. With the\npandemic in place, it\u2019s much harder to go through the whole process of hosting\nopen houses and finding a home\/buyer. This is one of the reasons why the price\nof residential units sold did not drop significantly or at all \u2014 because supply\nand demand for real estate declined in equal parts. As a result, it\u2019s\nreasonable that sales activity will skyrocket once social distancing measures\nloosen up. <\/p>\n\n\n\n

Further, the high\ncost of properties in cities such as Toronto and Vancouver is the result of a\nlimited housing supply and high demand. The COVID-19 situation is neither\nreducing the demand nor increasing the supply \u2014 the ingredients required to pop\nthe bubble. Instead, COVID-19 is reducing both demand and supply.<\/p>\n\n\n\n

Low-Interest Rates Mean More Demand<\/h3>\n\n\n\n

When interest\nrates are low, demand for property goes up as it\u2019s now cheaper to borrow money\nand purchase a property. Due to the Coronavirus pandemic, the Bank of Canada in\nMarch cut interest rates significantly<\/a> and is\ncurrently holding it at 0.25%. This results in less costly mortgages (for the\nmost part). Although we continue to see more uncertainty, these low-interest\nrates could drive even more demand in a post-COVID-19 world, meaning prices\nwill only go higher if supply remains the same. <\/p>\n\n\n\n

COVID-19 Has Also Stalled the Supply of New Homes<\/h3>\n\n\n\n

The construction\nof new homes is one way that the market can increase its supply of residential\nhomes.  Although most construction is\nstill permitted, the requirement for construction workers to socially distance\nthemselves onsite has ultimately reduced productivity. In the prior mentioned\nreport from CIBC, it estimates that social distancing regulations and the lag\nin overseas shipments have reduced construction productivity by 40%. This will\nultimately result in a reduced supply of new housing. <\/p>\n\n\n\n

What Factors Could Lead to Weaker Real Estate Prices?<\/h2>\n\n\n\n

Coronavirus has\nalso birthed factors that could reduce demand to the point that prices may fall\nin the future. Due to the mass unemployment and rustles in the stock market,\nCanadians might prefer to delay their purchase of significant investments such\nas a home. Further, buyers who think that real estate prices will crash could\nbe holding off until prices come down. Both of these factors could result in\nless demand. Although the unemployment numbers may point to a weaker economy,\nmany of these jobs are layoffs. Companies that did lay off employees will\nlikely rehire them once society recovers from the pandemic. <\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Many of the large Canadian banks predict that real estate prices will decline a few percentage points. This decline is possibly a market correction but not the bursting of a real estate bubble. Pent up demand, low-interest rates, and delayed new constructions could even result in higher real estate prices \u2014 not lower. There\u2019s likely still time before a Coronavirus vaccine is found, but when it is, both buyers and sellers will be back in action!<\/p>\n","protected":false},"excerpt":{"rendered":"

There\u2019s no doubt that the Coronavirus is affecting the Canadian and the global real estate markets. The Canadian Real Estate Association (CREA) revealed a significant decline in the number of residential units sold across the country in April 2020. In fact, the volume of sales in April was at its lowest since 1984. So, is […]<\/p>\n","protected":false},"author":1,"featured_media":1260,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[39,43,37],"tags":[138,274,396,411,410,220,394,182,70,139],"class_list":["post-1256","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying","category-investing-in-real-estate","category-selling","tag-buying","tag-canada","tag-canada-real-estate","tag-coronavirus","tag-covid-19","tag-homeowners","tag-investing-in-the-canadian-real-estate-market","tag-market-value","tag-real-estate","tag-selling"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts\/1256","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/comments?post=1256"}],"version-history":[{"count":3,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts\/1256\/revisions"}],"predecessor-version":[{"id":1266,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts\/1256\/revisions\/1266"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/media\/1260"}],"wp:attachment":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/media?parent=1256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/categories?post=1256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/tags?post=1256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}