Rising House Prices And Tanking Rental Market Show Pandemic’s Economic Divide

But the weakness in the rental market risks infecting the housing market.

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High-rise condo towers at Humber Bay Park in the Toronto borough of Etobicoke. House prices in many parts of Canada are rising amid the pandemic, even as rental rates drop.

MONTREAL ― The COVID-19 lockdowns have exposed a divide in Canada’s job market, with low-income earners getting hit much harder than high-income earners in the wave of layoffs that has taken place since March.

Now that divide is making itself felt in the housing market. As those on the lower rungs of the income ladder struggle to make rent, middle and higher-income Canadians are jumping back into the housing market.

The result? Rental rates rates are falling steeply across Canada, even as the housing market shows signs of life, with prices even rising in some markets.

Rental rates across Canada have fallen for three straight months and are down 7.8 per cent, on average, from before the pandemic, rental site Rentals.ca reported this week.

“Tenants have been more dramatically impacted by pandemic-related job loss than homeowners, and are not currently looking for apartments or other rental accommodation,” Bullpen Research president Ben Myers said in a statement. “This sharp drop in demand has resulted in landlords dropping their asking rents in most major markets across the country.”

RENTALS.CA
Rental rates have come down in many municipalities, according to this chart from Rentals.ca, with Victoria, B.C., and suburban cities in Greater Toronto leading the way.

Larger cities have been hit particularly hard. Rents per square foot have dropped steeply in Toronto since the pandemic and are now 9.5 per cent below their levels from a year ago, Rentals.ca reported.

Average asking rents jumped 3.8 per cent in May in Vancouver in May, but on a per square foot basis, condo rents fell 2.4 per cent in May, and are 5.4 per cent lower than a year ago, Rentals.ca said.

House prices rising in many markets

It’s a different story in the housing market, where real estate agents say they are seeing a sharp pick-up in activity since lockdowns started lifting. Buyers and sellers have become more comfortable with virtual tours and with social distancing measures taken during viewings, they note.

Many people pulled their houses off the market during the lockdowns, and as buyers come back, pressure is building on the market.

“The story lately has been a lack of overall inventory,” Toronto real estate Doug Vukasovic wrote in a recent report looking at the local housing market.

“For the year to date, a downward trend in pricing has already been corrected. … Even now, most properties are ripe for bidding wars, and many are getting snatched up within a few days of their being listed.”

Will the barrier break?

But the divide between the rental and housing markets could soon break down. That’s because a significant chunk of Canada’s homes, particularly condos, is in the hands of investors who rely on the rental market to pay their mortgages.

That could be a problem, especially for those investors who bought their properties in recent years at high prices. A recent report from TorontoRentals.com found that units in many of Toronto’s new condo buildings are losing money at current rental rates.

Some experts have warned that if this continues long enough, it could lead to forced selling in the housing market, driving up the supply and pushing down prices.

That could also happen if tourists don’t return to Canada’s cities, economists at National Bank of Canada wrote in a report at the end of May.

“Tourism is likely to be slow for some time, and the possibility cannot be excluded that lodgings currently marketed to tourists on short-term-rental platforms such as Airbnb will be put up for sale for lack of revenue,” economists Matthieu Arseneau and Alexandra Ducharme wrote.

Arseneau and Ducharme are forecasting a 10-per-cent drop in the Teranet house price index over the next year, which would make it the steepest one-year drop in Canadian house prices in decades.

NATIONAL BANK FINANCIAL
Economists at National Bank of Canada predict a steeper house price decline in this downturn than in the previous three recessions.

Among major cities, the National Bank economists predict that Toronto will see the steepest price decline, with its price index dropping 13 per cent.

House prices will also fall in Vancouver (down 12 per cent), Calgary (down 10 per cent) and Montreal (down 7 per cent), they forecast.

However, prices could fall more than that if immigration to Canada comes in below expectations after the pandemic, Arseneau and Ducharme wrote. Immigration has fallen after three of the past four recessions, they noted.

They also noted that prices could fall further than expected if Canada Mortgage and Housing Corp. (CMHC) tightens standards for mortgage insurance.

Days after the report came out, CMHC did just that, tightening the standards for the maximum amount of debt borrowers of insured mortgages can carry.

Experts estimate the change will reduce the maximum purchase price for a home with an insured mortgage by up to 12 per cent. Canada’s two privately-run mortgage insurers, Genworth and Canada Guaranty, have said they will not follow the CMHC’s move.

Mortgage Deferrals ‘Buying Time’ For Canadians, Bank Of Canada Says

The pause in mortgage payments are giving people a chance to get back to work.

ANDREW CHIN/GETTY IMAGES
A view of Metro Vancouver is seen here at twilight on July 18, 2020, from Burnaby, B.C. Softening population growth from immigration could start to weaken house prices in the future.

TORONTO — A Bank of Canada economist says the current economic recovery could be different than the recovery from the financial crisis of 2008.

Mikael Khan, the Bank of Canada’s director of financial stability, said that while the employment rate has fallen due to the pandemic, house prices are recovering and keeping homeowners from filing for insolvency.

Khan said breaks from mortgage payments have bought homeowners some time to get back to work amid the COVID-19 pandemic and economic downturn.

“The fact that these deferrals have been available is really, really important,” said Khan. “Ultimately, what matters most when it comes to defaults is people having a job, having their incomes. What the deferrals are doing is they’re essentially buying time for that process to unfold.”

Khan, who spoke at the Move Smartly Toronto Real Estate Summit on Monday, has been studying mortgage defaults. He compared the COVID-19 pandemic to a natural disaster, such as the 2016 wildfires in Fort McMurray, Alta., which also involved a mortgage deferral recovery plan.

Bank of Canada research found that while the wildfires caused a bigger spike in employment insurance filings than the 2008 recession, the EI trend reversed much faster after the fires than in 2008.

The 2008 conditions set off a lengthy recession due to “an underlying fragility in the global financial system,” the research suggested. But the wildfires, like the COVID-19 pandemic, were a sudden shock.

“One thing that’s always very important when you’re facing a large negative shock is the initial conditions,” said Khan.

“In Fort McMurray, when the wildfires hit, that’s an area that had already been struggling for some time with the decline in oil prices that had occurred about a year or so prior, so financial stress was quite high,” Khan said.

“Now, at the national level, what we’ve been concerned about for many, many years is the high level of household debt. That’s the No. 1 pre-existing condition that was there when the pandemic struck.”

While there are some parallels, the rebuilding process from a pandemic remains more uncertain compared to a wildfire, the research said. Khan cited increased savings rates as an example of a fundamental shift with potential to affect how quickly the economy recovers from COVID-19.

Over the past few months, some have warned that it could lead to a deferral cliff once benefits —such as Canada Emergency Response Benefit and mortgage deferrals — run out.

“When it comes to bumpiness in the recovery … this question that has been in the background of most of our discussions is, ‘To what extent will we see defaults or insolvencies?’” said Khan. “I think it’s reasonable to expect some sort of increase. What we’d be concerned about, there, is a very large-scale increase.”

Khan said that when a mortgage is in default, it can be caused by a “dual trigger” of both unemployment and large decline in house prices. Home prices in many areas have recovered since the start of the pandemic, Khan said. The job market’s recovery will be key to determining the impact of mortgage deferrals, said Bank of Canada research cited by Khan.

Softening population growth from immigration could start to weaken house prices in the future. But for now, Khan said, it wouldn’t make sense for homeowners with healthy home equity to file for insolvency.

“Even in cases where a homeowner simply can’t make their mortgage payments anymore — as long as they have equity in their homes and the housing market is relatively stable — there’s always the option to simply sell without kind of resorting to those sorts of measures,” said Khan.

8001 HAPPY VALLEY ROAD, Summerland Rural

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Presenting the award-winning Heaven’s Gate Winery.

•  5177 sqft , 3 bath , 3 bdrm 2 storey – FOR SALE  CAD3,995,000 . Home to handcrafted, small-batch wines. MLS® 184670

In the Heart of Summerland lies a place so peaceful and alluring that it can only be described as Heaven on Earth. Once a thriving peach orchard, it is now home to handcrafted, small-batch wines made from 100% BC VQA grapes. The volcanic soils of Giant’s Head Mountain, hot summer days & the lake breeze consistently rolling through the vineyard help to create a distinct experience trapped in every bottle just waiting to be released. Presenting the award-winning Heaven’s Gate Winery, a stunning 10-acre, panoramic lake view property on popular Summerland Bottleneck Wine Route. Includes quality log constructed principal residence, detached log carriage home, BBQ gazebo perfect for events/entertaining & a welcoming tasting & sales building with public patio area. In addition, there is a fully licensed winery/manufacturing building; the upper level, a workshop /garage that holds all your toys & equipment & at the lower level you will find the infamous wine making room.Dup List 184672 SF. Listed By: ROYAL LEPAGE LOCATIONS WEST

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106-253 NORTON STREET, Penticton Main North

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Refined Kitchens with upmarket Whirlpool stainless-steel appliance

•  1680 sqft , 3 bath , 3 bdrm townhouse – FOR SALE  CAD489,000 . MODERN & UNIQUE DESIGN “UPLANDS RIDGE  MLS® 184412

Contingent MODERN & UNIQUE DESIGN “UPLANDS RIDGE”. Stylish Bathrooms, Refined Kitchens with upmarket Whirlpool stainless-steel appliance package including washer/dryer, 9′ ceilings, double-pain windows matched with blackout roller shade blinds, Moen chrome faucets, solid quartz kitchen counter-tops, and let’s not forget free smart home technology package. This interior 1,680 sq. ft. townhome comprises 3bedrooms/3bathrooms, Great Room concept on main floor, very spacious Rec Room in the walk-out basement. Enjoy your own fenced in yards for kids/pets. Uplands Ridge is only steps away from retail along Main Street, cafes, restaurants, boutiques, Okanagan Lake/Marina for beach/boating days or The Kettle Valley Trail for biking, walking/hiking enthusiasts, evening entertainment or other essential professional services that make for a full life. Contact listing agent for complete package.

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105-253 NORTON STREET, Penticton Main North

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Refined Kitchens with upmarket Whirlpool stainless-steel appliance

•  1636 sqft , 3 bath , 3 bdrm townhouse – FOR SALE  CAD499,000 . MODERN & UNIQUE DESIGN “UPLANDS RIDGE” MLS® 184413

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118 SUNDIAL ROAD in Rural, Oliver

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Rural beauty highlights this Vaseux Lake four-plex

•  2700 sqft , 1 bath , 1 bdrm fourplex – FOR SALE  CAD1,175,000 . Four Townhomes on Vaseux Lake  – MLS® 184629

Beautiful Waterfront – Four Townhomes on Vaseux Lake, in Oliver BC. 2 storey, 1 bedroom & 1 bathroom per unit approx. 750 sq ft per unit. Rural beauty highlights this Vaseux Lake four-plex which sits on approximately 75 feet of lakefront. Located on a quiet, pleasant street, these charming townhomes are surrounded by Vaseux Lakes’s beautiful bird sanctuary. Entertain or simple relax on the comfortable deck. Count on even more ideal features such as tile flooring,vaulted ceilings up, open living area, manicured lawn. Everything you desire is right here for you from solid construction to lots of enticing extras. Each unit is stratified and can be sold separately. Owners want to sell all 4 at once. Move right in and start living the ultimate Okanagan lakefront dream! Air BnB perhaps, principal use include tourist accommodation. Once in a lifetime, a property like this comes available! Get your Okanagan business started here. you tube https://youtu.be/_9XwEVZ4OfE

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Disruption To Canada’s Immigration In Pandemic Will ‘Reverberate’ Through Economy: RBC

COVID-19 has “for all intents and purposes shut down immigration.”

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Fence in front of Canadian flag. Illegal immigration concept. Horizontal composition with copy space.

MONTREAL ― Canada will miss its immigration targets by a wide margin this year, and potentially in future years, a disruption that “will reverberate across the economy,” Royal Bank of Canada has warned in a new report

The federal government had set a record-high target of 350,000 new permanent residents for 2020, up from 341,000 last year, also a record high.

But restrictions on travel meant to slow the spread of COVID-19 have “for all intents and purposes shut down immigration,” RBC senior economist Andrew Agopsowicz wrote.

If the current restrictions stay in place through the summer, the country will fall short of its target by 170,000 people, he predicted.

Among the “potential casualties,” Agopsowicz wrote, are industries with labour shortages, the rental and housing markets in urban areas, universities and deficit-laden governments.

“Canada will need a younger and growing population to maintain growth and support the unprecedented expansion of the fiscal deficit that came in response to the crisis,” he wrote.

Without immigration, Canada in recent years would have looked a lot like Japan in the 1990s, the RBC economist argued. That country has struggled with a moribund economy for decades due to a rapidly aging population, running up the developed world’s largest public debt.

A squeeze on the housing market

Agopsowicz noted that the country’s three largest metro areas ― Toronto, Montreal and Vancouver ― would see shrinking populations today were it not for immigrants. That’s because young adults are leaving these cities primarily due to rising housing costs.

“A slowdown in immigrant-related demand for homes could squeeze the rental and housing markets,” Agopsowicz wrote.

That’s what Capital Economics is predicting. It expects Canadian house prices to fall a relatively mild 5 per cent in the crisis, but then stay down “for years” because of reduced immigration.

Trouble on the farm

Canada’s agricultural industry is facing serious pressures due to a lack of temporary foreign workers. Although TFWs were exempted from the travel ban, the number of arrivals was down 35 per cent in March, and down 45 per cent for agricultural workers, the RBC report stated.

One reason for the drop could be that arriving workers have to self-quarantine for 14 days, which might make it less lucrative to come to Canada, Agopsowicz suggested ― even more so if those workers have to self-quarantine again when they get home.

“The agriculture industry already struggles with labour shortages — so additional frictions on this front (are) definitely worrisome,” he said in an email to HuffPost Canada.

The federal government will need to think carefully over the next little bit how to adapt our immigration system to again start allowing immigrants to flow into Canada.Andrew Agopsowicz, senior economist, RBC

Universities could also suffer, as they’ve grown increasingly dependent on the high tuitions paid by international students.

The number of people entering the country on student visas dropped by 45 per cent in March, the RBC report noted.

But the wild card is how many students return for the fall semester ― especially given many schools are moving to online classes.

If just one-fifth of foreign students don’t show up, the University of Toronto alone will face a $200-million hole in its $3-billion budget, Agopsowicz wrote.

Rising debt

Then there is the question of paying off the massive debt governments and others are taking on in the pandemic. Canada has historically relied on population growth to make its public debt easier to pay over time. But with slower population growth, the country could be headed towards a “fiscal cliff,” Agopsowicz warned.

In a report at the end of April, the Parliamentary Budget Office said the federal government was on track for a $252-billion deficit in this fiscal year, equivalent to 12.7 per cent of the country’s annual economic output. That is by far the largest in comparable records going back to 1966.

The federal Liberals recently announced slightly lower immigration targets, with the 2020 target set to the same level as last year, at 341,000. But the government has not offered a timeline for when restrictions on international travel will be lifted, and any recovery “will depend in part on the course of the pandemic,” Agopsowicz wrote.

“The travel restrictions are a necessary response to this crisis, but we need to keep in mind that long-lasting restrictions to immigration will hurt the Canadian economy in the long run,” he said.

“The federal government will need to think carefully over the next little bit how to adapt our immigration system to again start allowing immigrants to flow into Canada.”

He expects Canada will have to take a “phased approach” to reopening immigration, starting with migrants needed in key areas of the economy that have labour shortages.

“A large influx of immigrants while the labour market is trying to absorb the loss of so many jobs may not be the most prudent.”

Apartment For Sale in Main North, Penticton

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Natural lighting in this home is splendid owing to 9 ft ceilings

•  1194 sqft , 2 bath , 2 bdrm apartment – FOR SALE  CAD299,900 . 1194 sq ft the rooms are spacious MLS® 183768

Top floor north facing unit with great mountain views at the Scottsdale offers a central location. At 1194 sq ft the rooms are spacious & professionally freshly painted. Lovely gas fireplace and cozy in floor radiant heat which is included in the strata fee. The natural lighting in this home is splendid owing to 9 ft ceilings & vaulted ceiling in the kitchen eating areas. There is also a separate formal dining area. A generous master bedroom with walk-in closet and en-suite bathroom. Second BD is at the opposite side of the suite which adds to the privacy as well as another full bathroom. Laundry room w front loading washer/dryer. All appliances & window coverings included. Large north facing patio is cool enough in the evenings that you can fire up your gas barbecue with the hook up provided. Storage locker is just down the hall. Guest suite available for your out of town visitors. One underground secured parking included. 55+ with no Rentals & small pet allowed upon approval.

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A Water Quality Advisory has been issued for the Lakeview/Rose Valley Water System

A Water Quality Advisory has been issued for the Lakeview/Rose Valley Water System, due to higher than normal turbidity in the Rose Valley Reservoir.

The advisory, issued by the City of West Kelowna in consultation with Interior Health Authority, is effective immediately until further notice, and is in addition to the ones issued in the West Kelowna Estates and Sunnyside/Pritchard Systems.

“According to the City’s Reservoir Consultant, an algal bloom, that is not harmful to human health, is causing the turbidity, which may affect the performance of the chlorine disinfection process,” reads the City’s announcement.

“Increased turbidity can mean bacteria, viruses and microorganisms can attach themselves to the suspended particles in the turbid water. These particles can interfere with disinfection by shielding the microorganisms from the chlorine.”

Children, the elderly and those with weakened immunity must use water brought to a rolling boil for a minimum of one minute, or seek an alternative safe source, for drinking, brushing teeth, washing or preparing food, making baby formula and ice.

Asafe alternate water source is available at the bulk filling station at Shannon Lake and Asquith Roads, and the tap is located on the Asquith Road side. Water is free throughout the duration of Water Quality Advisories and residents must bring their own clean bottles for filling.

To keep in line with COVID-19 social distancing recommendations, crews have installed a touch-free system for filling bottles. Residents using the facility are asked to wash hands regularly, avoid touching their faces and maintain a two meter distance between themselves and other users.

All three advisories will remain in effect until further notice. Residents will be notified when the advisory ends through the media, via the City’s eNotification system, social media platforms and website.

To determine if you are in the Lakeview/Rose Valley, West Kelowna Estates or Sunnyside/Pritchard Water Systems, view the Water Quality Advisory Map on the City’s website.

Apartment For Sale in Main North, Penticton

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Apartment #710 occupies the full front side of the 7 storey building

•  2077 sqft , 2 bath , 2 bdrm single story – FOR SALE  CAD2,450,000 . Phenomenal Lakeview/lakefront Penthouse MLS® 183685

Phenomenal Lakeview/lakefront Penthouse, solid concrete construction, 3 parking stalls, over 2000 square feet. Largest condo in Penticton with panoramic lakeview! Apartment #710 occupies the full front side of the 7 storey building at 100 Lakeshore Drive. Enjoy the lakeview from the master bedroom, living room, dining room, den and even the foyer. Quality custom unit features the building’s only private hot tub, beautiful master ensuite with lakeview soaker tub, 3 parking stalls plus a car wash all underground. 2 storage spaces, natural gas BBQ outlet and CAT 5 cable in each room. Building amenities include 2 lounges/upscale amenity rooms, 2 exercise rooms, sauna, public outdoor pool and hot tub. Have your guests stay in the 100 Lakeshore guest suite and invite them to your home to enjoy the view from your private hot tub and wrap around deck overlooking Okanagan Lake! The only one of its kind. Pets are allowed, maximum 70 lbs, Rentals also allowed, minimum 3 month rental.

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