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.”

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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.

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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.

Home Sales Returned To Their Booming Ways In June Amid Pandemic

The average cost to buy a home in Canada has climbed to $539,000.

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A real estate agent’s for sale sign is seen here outside a detached home in Vancouver in April 2020. The Canadian Real Estate Association says home sales were up by 150 per cent compared to where they were in April.

OTTAWA — The Canadian Real Estate Association (CREA) says home sales continued to rebound in June after plunging earlier this year due to the pandemic.

The association said Wednesday that sales in June were up 63 per cent on a month-over-month basis, while the number of newly listed properties climbed 49.5 per cent from May to June.

Compared with a year ago, sales in June were up 15.2 per cent.

The actual national average price for homes sold in June was almost $539,000, up 6.5 per cent from the same month last year.

The real estate industry came to a near standstill earlier this year as non-essential businesses closed to help slow the spread of the COVID-19 pandemic.

CREA said the jump in sales returned them to “normal levels” for June, noting they were up 150 per cent from where they were in April.

But while it may be hitting “normal levels,” the overall market is “obviously not back to normal at this point,” said Shaun Cathcart, CREA’s senior economist.

“The market has recovered much faster than many would have thought, but what happens later this year remains a big question mark,” said Cathcart in a statement.

“That said, daily tracking suggests that July, at least, will be even stronger.”

Though the numbers, at a glance, appear to suggest there was not “anything amiss in the economy whatsoever,” BMO chief economist Douglas Porter said the housing market now must keep up its momentum.

Porter said that looking further out, the market will have to balance slowing immigration levels, low interest rates and short housing supply — creating a “tension” with “lasting scars from the shutdowns.”

“Home sales, prices and starts have effectively regained all the ground lost during the shutdown,” Porter wrote in a note to clients.

“However, fair point that some of this outsized strength is simply pent-up demand for the lost sales from the key spring season.”

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.

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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.

Quebec To Allow Public Gatherings Of Up To 250 People Starting Aug. 3

The new guidelines apply to public gatherings both indoors and outdoors.

 MONTREAL — Quebec says it will permit indoor and outdoor public gatherings of up to 250 people across the province beginning Aug. 3.

The directive announced Thursday doesn’t include private gatherings in places such as homes and chalets, where the 10-person limit remains in force.

By increasing the limit to 250 people from 50, the government is hoping to give a revenue boost to venues hosting sports and cultural events, which have been hit hard by the pandemic-induced shutdowns.

The new directive applies to all entertainment venues across Quebec, including concert halls, theatres and movie houses.

It also applies to places of worship, rented halls and amateur sport training and competitions.

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People sit at an outdoor terrace in Montreal on Wednesday as the COVID-19 pandemic continues in Canada and around the world.

Quebecers will still be required to keep a two-metre distance from one another and, when that’s not possible, to wear a mask.

“With this announcement, we are allowing the Quebec population to appreciate in greater numbers the many cultural spaces that delight the young and old,” Culture Minister Nathalie Roy said in a news release.

Anyone participating in an indoor event will need to wear a mask when they are moving around. They will be allowed to remove their mask when sitting down to watch a show or sporting event.

“Our analysis of the situation makes it possible to increase the number of people who can be accommodated in these places,” Masse said.

Quebec reported 142 new COVID-19 cases Thursday, but no additional deaths.

The total number of deaths in the province is 5,662, and total cases rose to 58,080. Health authorities said hospitalizations dropped by 14 to 221. Of those, 14 patients were in intensive care, a reduction of two.

Health officials completed 14,725 tests July 21, the last day for which data is available. At least 50,505 people have recovered from the disease.

Condos May Be On The Way Out, Statistics Canada Predicts

Former Airbnb units are hitting the market at a time when buyers are looking further out of the city.

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A view of high-rises in downtown and mid-town Toronto. Two new reports from Statistics Canada predict a slowdown in condo markets in the wake of the COVID-19 pandemic.

Is the golden age of high-rise condos behind us?

Statistics Canada thinks that might be the case. The agency put out two reports this week in which it predicted that the shift to working from home, and the bust-out of short-term rentals amid the pandemic, will depress demand for condos in the longer run.

“As working from home becomes more prevalent, we may see an increase in the demand for larger living spaces that single-family homes can offer, causing a shift in demand from condominium apartments towards single houses,” StatCan said in a rare bit of crystal ball-gazing this week.

“Builders may start catering to buyers’ preferences by offering additional office space in the design of their new homes to accommodate remote working arrangements.”

In an outlook published this week, the agency predicted that in the country’s three largest housing markets ― Toronto, Montreal and Vancouver ― condos will come under pressure.

“Prior to the pandemic, Toronto was experiencing an exodus of middle class families to surrounding cities. This population outflow was previously overshadowed by immigration which has now decreased due to the impacts of the pandemic. This will likely also drive down the price of condominiums in the medium to long term,” the agency said.

“Similarly to Toronto, Vancouver has a potential of short term rentals flooding the market and thus causing a decline in condominium prices in the short to medium term.”

Recent data from real estate groups is pointing in the same direction.

An analysis from real estate portal Zoocasa found that in June there was a 257-per-cent spike in available condo rentals in Toronto buildings known to be “Airbnb-friendly.” That compares to an 83-per-cent increase, versus a year ago, in available rentals in the city as a whole.

“A significantly slower tourism industry is forcing many short-term rental investors to consider recalibrating their income strategy to either seek long-term tenants or consider offloading their investment entirely,” Zoocasa’s head of communications, Jannine Rane, wrote on the portal’s blog.

Meanwhile, a large share of homebuyers is looking to purchase on the edges of the city, or outside the city altogether, a phenomenon that seems to be happening in cities around the world, including in New YorkLondon and the San Francisco Bay Area. As with Toronto, in many cases, it’s an acceleration of existing trends.

In a recent Nanos poll for the Ontario Real Estate Association, 60 per cent of respondents said they found rural living more appealing than before the pandemic.

Exodus to cottage country

Near Greater Toronto, real estate agents are reporting a “full-on frenzy” in the Muskoka cottage-country region north of the city. Home sales were up 30 per cent in June at the real estate board that covers the area, compared to the same month a year earlier.

“This is the highest demand we’ve seen for waterfront properties on record, with sales activity bouncing from recent lows to hit the largest sales record for any month in history,” Lakelands Association of Realtors president Catharine Inniss said in a statement.

And while Toronto’s real estate board cheerily reported a rebound in sales and a nearly 12-per-cent increase in the average selling price in June, the condo market there is showing signs of softening.

Condo sales were 16.3 per cent lower in June than a year earlier, while detached home sales were up 5.6 per cent.

The MLS home price index shows condo prices have fallen or stopped growing in the past few months in Toronto, Montreal and Vancouver.

In a recent report, Toronto real estate agent Doug Vukasovic noted that the very high prices in city cores are also driving people to look further outside the city.

“But bang for your buck may no longer be telling the whole story,” Vukasovic wrote. “Anticipating a post-pandemic ‘new normal’ of more flexible work and commuting arrangements, could buyers be prioritizing a bit more space ― and even a bit of backyard ― over being in the midst of the action downtown?

“Time will tell if this trend continues and Toronto’s suburbs continue their growing appeal.”

PPE costs skyrocket

Minister of Health Adrian Dix reveals $114M spent on PPE in BC

British Columbia has invested a whopping $114 million into personal protective equipment (PPE) from January to the end of June, and costs have skyrocketed since the beginning of the pandemic.

Minister of Health Adrian Dix said Monday the province is now focused on stockpiling PPE after the initial COVID-19 outbreak around March, which Dix says “no jurisdiction internationally could have adequately predicted or prepared for.”

“B.C. has had good success. We’ve kept the pace with demand and made sure healthcare workers had the PPE when they need it and where the need it … we are currently rebuilding our pandemic supply that got us through the initial outbreak and we are also including a healthy contingency … based on ramped up surgery plans and in anticipation of a surge or further outbreaks.”

Dix has set a goal of acquiring more than 365 million individual pieces of PPE over the next six to nine months, but it will come at a high cost.

The price per unit for PPE including freight costs skyrocketed as a result of the pandemic, in some cases increasing up to 10 times from the pre-COVID cost.

For example, the pre-COVID average unit price of an N95 or equivalent respirator was 62 cents. In the peak of the pandemic, that increased to $5-8 per unit, and recently has decreased to $3.19-$6.80 per unit.

That’s a pre-COVID to peak-COVID difference of six to 10 times the original cost.

The same applied for surgical/procedure masks, which increased in cost by 1.5 to 8.5 times from pre-COVID to peak-COVID, and gowns which increased in cost by 2 to 3.5 times from pre-COVID to peak-COVID.

“The international market for PPE, and by extension the cost of PPE, has been very dynamic since the start of the pandemic,” says Dix.

“Overall from January to the end of June the B.C. health system has spent over $114M on PPE as a result of the pandemic … because it involved protecting people in acute care and in long-term care and protecting our health care workers, it was money well spent, but it was expensive.”

He’s calling on B.C. residents to recommit to using “COVID sense” following 102 new cases announced on Monday, and recent outbreaks stemming from multiple gatherings in Kelowna.

“The past few days have reminded us of how COVID-19 can spread, even here in B.C., how quickly things can change, how rapidly anxiety can re-enter our lives in a pandemic.

“It is a sobering reminder of how fleeting success can be when we turn our back on COVID-19, when we let our skills slide, our focus waver and our commitment slip … in B.C. our drive to bend the curve and then flatten it worked, but let’s be clear. In our B.C. pandemic, we must not let those be our best days. We know each day matters. We know that with COVID-19 each moment of each day matters. We know that being 100% all in means remembering, respecting and ritualizing the skills Dr. Henry and public health officials have told us.”

Innovation centre open soon

The brand-new innovation centre in downtown Vernon is set to open in less than two months.

Accelerate Okanagan and Community Futures Okanagan will be opening The VIEW, which stands for Vernon Innovation & Entrepreneur Workspace, on September 1st. The new centre aims to bring together local entrepreneurs, innovators and creators in the North Okanagan.

“In order to fully serve entrepreneurs and community members, we need to create more connection opportunities to the broader innovation ecosystem,” says Brea Lake, CEO of Accelerate Okanagan. “By leveraging the existing organizations in our networks, we can help to accelerate economic growth in the North Okanagan.”

The VIEW will offer support services, flexible office space and collaboration opportunities for members of the community. There is also hope that the new space will benefit other downtown businesses as well.

“Something that has been front-of-mind for us is the positive impact we’re hoping to see on surrounding businesses,” says, Leigha Horsfield, general manager, Community Futures North Okanagan. “Our hope is that we’ll see more organizations benefit from the increased activity around the VIEW.”

The new innovation centre will be located at the old Naked Pig restaurant, attached to the Marten Brewpub. There is currently a waitlist available to reserve workspaces. For more information, you can visit www.vernoninnovation.ca.

Science World to reopen

Science World to reopen on August 1

Science World has announced that it will reopen Saturday, August 1 with enhanced safety protocols and physical distancing measures in place.

Prior to that, the iconic science center will welcome essential workers and their families will be able to attend the dome for free from July 23 to 26. Ticketing will be done through timed ticketed entry at scienceworld.ca, space is limited due to operating at a reduced capacity.

Earlier this month, Science World launched a fundraising campaign named “The World Needs More Nerds,” calling for its followers to help fundraise to keep the geodesic dome’s doors open.Imagery features a 7-year old Dr. Bonnie Henry. Astronaut Chris Hadfield has also agreed to be featured in the campaign, amongst other notable “nerds”.

In April, the beloved waterfront science centre stated that it might be forced to permanently close doors due to a lack of revenue during the COVID-19 pandemic. After closing doors on March 13, it lost a whopping 85 per cent of its revenue immediately. As of April 6, the organization had to temporarily lay off its part-time staff and that all of its full-time staff have taken at least a 20% pay cut.

In order to ensure the next generation of nerds–someone who loves what they love, no matter what–the dome is asking for support from its followers in the form of a donation or by starting a personal fundraising page to ensure a future of critical science thinkers.

“We look forward to welcoming our community back to the iconic dome,” said Janet Wood, President and CEO. “We’ve missed the energy and excitement around Science World and while we’ve seen a huge uptick in our online activity and programming, we can’t wait to welcome the public back in a safe and engaging manner. COVID-19 has brought to light the importance of science literacy to public health and we look forward to nurturing the next generation of scientists, mathematicians, epidemiologists and more.”

Enhanced safety protocols include

  • Visitors will be able to book their advanced, timed entry tickets at scienceworld.ca
  • Physical distancing protocols are in place to ensure all visitors stay at least 2 metres apart, with timed entry at a reduced capacity to allow for this
  • Mandatory masks or face shields for visitors 6 years of age and over and all staff will wear masks or face shields
  • Hand sanitizer is available at entry and exit and throughout the building
  • Visitors are asked to leave their food at home (but bring their water bottles!). No food options will be available for purchase onsite
  • Enhanced cleaning protocols set out by the CDC will also be in place throughout the facility
  • Directional signage will safely guide visitors through the dome
  • Certain galleries will operate with limited capacity. The Wonder Gallery and Birdly® VR are closed. The OMNIMAX® Theatre and Towers of Tomorrow with LEGO® Bricks can be reserved for a specific time, when guests purchase their tickets online
  • Additionally, there will be three live science shows per hour around the building for all visitors to enjoy

Originally constructed as part of the Expo 86 World Fair, Vancouver’s iconic geodesic dome opened its doors in 1986. The fair attracted a whopping 22 million visitors and put Vancouver on the world stage. Since then, the beloved science centre has welcomed 18 million visitors and counting.

Essential workers can book their free, advanced entry starting today. Starting July 27, the general public can book their timed visits for August 1 and beyond.

BC will end its ban on evictions for unpaid rent in September

On Thursday, the BC government announced it will lift the ban on evictions for non-payment of rent on Sept. 1.

The ban was first implemented in March due to the COVID-19 crisis, covering evictions, a ban on rent increases, and a rental benefit worth up to $500 a month due to the COVID-19 crisis.

The government is implementing a repayment framework to ensure renters have a reasonable timeframe to pay back any rent they owe.

Landlords have to give tenants until July 2021 to repay any outstanding rent, as long as monthly instalments are paid.

“Recognizing that many renters and landlords worked together to make arrangements during this crisis, the framework will also leave some flexibility for landlords to work with renters to further adjust the payment amounts,” the ministry said in a statement.

“For example, allowing lower payments in the beginning of the agreement and gradually increasing the payment amounts over time or extending the duration of the payment process past July 2021.”

The rental supplement provides $500 per month for eligible households with dependents and $300 per month for eligible households with no dependents.

Eligible roommates are also able to apply for the supplement.

The ban on rent increases will remain in place until December.

BC real estate sales ‘surged back’ to pre-COVID-19 levels in June

Following several months of steep sale declines due to COVID-19, there were nearly 8,200 residential sales in BC last month, representing a 17% increase from the same time last year.

According to the British Columbia Real Estate Association, sales rose the most in Chilliwack (30.2%), the Fraser Valley (30.1%), South Okanagan (25.7%) and Greater Vancouver (19%).

In June, the value of residential sales rose year-over-year in nearly all of BC’s markets, with Chilliwack (30.2%), the Fraser Valley (31.1%), South Okanagan (25.7%) and Greater Vancouver (19%) leading the way.

Compared to the same time last year, the South Okanagan has seen the largest average price increase at 23.6%, with the average home price jumping to $496,000 from $401,500.

Similar price jumps were seen in Victoria with a 14.4% gain and in greater Vancouver at 7%.

“Sales around the province surged back to pre-COVID-19 levels in June,” said BCREA chief economist Brendon Ogmundson in a news release.

“While there are some temporary factors that may have pushed demand forward, we are cautiously optimistic that market activity will remain firm,” noted Ogmundson.

Last week, the BCREA announced a new set of safety measures for realtors to practice while conducting open house tours.

Those include wearing masks, minimizing physical contact with the home and using a line up outside the home to maintain physical distancing.