Canada’s Supply Of Homes For Sale Lowest On Record As Prices Jump 23%

 Canada needs “a big surge of supply” to stop runaway house price growth, and that might happen when the pandemic ends.

House price growth in Canada is out of control, and the chief economist at the country’s real estate association says that won’t change until the pandemic lets up, and more people list their homes for sale.

The average resale price for all property types in January was $621,525, up 22.8 per cent from a year ago, the Canadian Real Estate Association (CREA) said Tuesday.

The number of home sales was up 35.2 per cent from a year ago, to the highest total for a January on record. Meanwhile, new listings plunged 13.5 per cent nationally, and by around 35 per cent in Toronto and Montreal, creating a record shortage of available homes.

“There were only 1.9 months of inventory on a national basis at the end of January 2021 – the lowest reading on record for this measure,” the Canadian Real Estate Association said in a statement, adding that some 35 Ontario markets have less than one month of inventory.

In Quebec, New Brunswick, Nova Scotia and P.E.I., the ratio of sales to new listings was above 100 in January.

“This means that there were more sales than new units listed last month in these provinces. This is a rare situation, but has occurred before in the Atlantic provinces. However, January marked a first on this front in Quebec,” TD Bank economist Rishi Sondhi wrote in a client note.

Sales-to-new-listings ratios were also very high in Ontario and Manitoba, bringing the national ratio to 90.7, its highest level in 19 years.

Economists credit record-low interest rates with spurring the homebuying boom. Even as prices have soared, monthly mortgage payments have fallen, making home ownership more affordable ― at least for those who can save up the record-high down payment needed to afford a home today.

“A big surge in supply is what so many markets really need this year to get people into the homes they want, and to keep prices from accelerating any more than they already are,” CREA senior economist Shaun Cathcart said in a statement Tuesday.

“We’re unlikely to see a rush of listings until the weather and public health situations improve, and we won’t see buyers until those homes come up for sale.”

TD’s Sondhi predicts that “with sales likely running above fundamentally-supported levels… some cooling in activity will take place, especially in the second half (of the year).”

BMO: ‘Your House Makes More Than You Do’

This can’t last.

If you own a home in Montreal, B.C.’s Fraser Valley or just about anywhere in Ontario, there’s a good chance your house is earning more money than you are.

With home sales on a tear across Canada this winter, “house prices are not only rising faster than family income, they are rising more than total annual income,” Bank of Montreal senior economist Sal Guatieri wrote in a client note Wednesday, titled “Your house earns more than you.”

That’s not necessarily true everywhere. If you live in the Prairie provinces, the single-digit price growth there wouldn’t match a median household income, but it’s true for virtually every market in Ontario, while many places in B.C. ― Chilliwack, Vancouver Island and the Okanagan Valley ― came very close.

In the Hamilton-Burlington real estate market southwest of Toronto, the benchmark house price rose by $154,000 in the past year, to $786,600. That’s double the $75,464 median household income for the area, as reported in the 2016 census.

“It’s clearly unsustainable in the long run, as affordability would deteriorate pretty quickly if it continued,” Guatieri wrote in an email to HuffPost Canada.

Still, Guatieri doesn’t see a correction in the cards this year “as demand is simply too strong relative to limited supply, but we do expect sales levels and price growth to moderate as affordability weakens and pent-up demand from teleworkers ebbs.”

One thing that could take some steam out of house prices would be rising mortgage rates, and there is some chance of that in the coming months. Mortgage rates tend to move with the interest paid on government bonds, and those have jumped in recent weeks.

“We doubt either scenario would send house prices into reverse,” he wrote in a client note, adding that this would reduce the maximum purchase price by only a few percentage points.

BMO’s Guatieri doesn’t expect much of an increase in mortgage rates for one key reason ― the Bank of Canada won’t allow it.

“Central banks are pretty determined to keep the stimulus taps wide open,” he wrote.

Select cities where houses are making more than households:

Greater Toronto

Benchmark house price: $941,100
House price change, Jan. 2020-Jan. 2021: $100,082
Median household income: $78,373

Greater Montreal

Benchmark house price: $434,200
House price change, Jan. 2020-Jan. 2021: $62,000
Median household income: $61,790

Fraser Valley, B.C.

Benchmark house price: $911,300
House price change, Jan. 2020-Jan. 2021: $75,900
Median household income: $69,289

Ottawa, Ont.

Benchmark house price: $561,000
House price change, Jan. 2020-Jan. 2021: $102,000
Median household income: $86,541

Kitchener-Cambridge-Waterloo, Ont.

Benchmark house price: $660,900
House price change, Jan. 2020-Jan. 2021: $126,800
Median household income: $94,057

Mississauga, Ont.

Benchmark house price: $988,500
House price change, Jan. 2020-Jan. 2021: $107,000
Median household income: $83,018

Simcoe, Ont.

Benchmark house price: $478,800
House price change, Jan. 2020-Jan. 2021: $108,100
Median household income: $76,489 
Benchmark house prices from the Canadian Real Estate Association. Household income data from the Canada Census 2016.

Rural Canada Is ‘Getting Its Mojo Back,’ And Here Are The Top Boomtowns Goodbye, Toronto, hello… North Bay?

If you want to know where people are moving these days, just ask U-Haul. The do-it-yourself moving company has developed a system for tracking migration patterns by looking at the pick-up and drop-off locations of its trucks and trailers.

It’s “an effective gauge of how well cities are attracting and maintaining residents,” the company says, and in the pandemic year of 2020, it seems the Canadian city that saw the biggest growth on that front was North Bay.

Yes, that North Bay. The often-overlooked small city in northern Ontario saw the largest increase in inbound U-Haul trucks, compared to outbound trucks, of any place in Canada. It didn’t even place in the top 25 the year before.

“The cost of living is low and the (federal) government is sending jobs in this direction.” said Wayne Curtis, president of U-Haul Company of Central Ontario.

1  North Bay, Ont.
2  North Vancouver, B.C.
3  Kingston, Ont.
4  Belleville, Ont.
5  Barrie/Orillia, Ont.
6  Sudbury, Ont.
7  Vancouver, B.C.
8  Chilliwack, B.C.
9 Chatham, Ont.
10  Sarnia, Ont.
11  Abbotsford, B.C.
12  Peterborough, Ont.
13  St. Thomas, Ont.
14  Lethbridge, Alta.
15  Brantford, Ont.
16  Quebec City
17  Sherbrooke, Que.
18  Nanaimo/Coombs, B.C.
19  Airdrie, Alta.
20  Shawinigan, Que.

In fact, 10 of the top 20 cities on U-Haul’s list of top “growth cities” are smaller cities in Ontario that, until recently, were not exactly considered magnets for migrants. And many of the cities on the list are near one of Canada’s major metro areas ― another sign that city dwellers are packing up and moving amid lockdowns and an economic slowdown.

Notably absent from the list are Canada’s two largest cities, Toronto and Montreal. They clocked the fastest out-migration on record between mid-2019 and mid-2020, though the trend began even before COVID-19 prompted people to look for more spacious homes in less crowded (and more affordable) cities.

It’s a similar situation in the U.S., where U-Haul’s analytics found California, Illinois and New Jersey (i.e., L.A., Chicago and suburban New York) are bleeding residents while the hottest boomtowns are small places, particularly in Florida.

It’s a little different in Vancouver, where the number of people leaving the region accelerated, but so did the number of people moving into the region. For that reason, both Vancouver and North Vancouver ride high among Canada’s “growth cities” on the U-Haul list.

It represents “younger generations who are slowly and quietly abandoning city life,” Sylvain Charlebois, senior director of the Agri-Food Analytics Lab at Dalhousie University, wrote this week.

“Of course, the cost of city dwelling is a cruel barrier. … Real estate is now out of reach for many households with low incomes. CIBC’s latest report on income gaps clearly demonstrates how COVID has made the poor poorer. Leaving cities is more tempting than ever.”

Charlebois says the migration out of cities offers new economic opportunities for businesses in rural areas ― even if urban-focused chains like Starbucks suffer in the meantime.

“Unique restaurants and retailers could see more people give these remotely located outlets a second wind,” he wrote.

“With what’s happening, rural Canada may be getting its mojo back, which is not necessarily a bad thing.”

‘Saving For A Down Payment Has Never Been Worse,’ Says National Bank Of Canada

The threshold every buyer has to meet to own a home ― the minimum down payment ― has reached Canada’s highest level on record, a new report says.

With house prices rising at their fastest pace in 11 years, it would take a median-earning household 60 months to save up a minimum down payment on a house today, according to National Bank of Canada’s latest housing affordability monitor.

That’s the longest it has been in 40 years of home-affordability records, topping the previous peak at the height of the 1990 housing bubble.

“At a national level, there has never been a worse time to accumulate the minimum down payment,” economists Kyle Dahms and Camille Baillargeon wrote.

The time needed to save for a down payment on a house in Canada has reached a record high, even above that seen during the 1990 housing bubble.

National Bank’s estimates assume a 10-per-cent savings rate, and a 6-per-cent down payment.

Broken down by city, famously unaffordable Vancouver takes top spot for the country’s least accessible housing market. At the median household income, it takes 58 months to save up for a condo down payment there, or 409 months for a detached home ― roughly 34 years.

In Toronto, it would take 51 months to save up for a condo or 289 months (roughly 24 years) for a detached house. Contrast that with Edmonton, where a condo takes 15 months and a detached home 28 months.

Months needed for down payment

What these numbers really mean is that you can’t actually buy a home in these markets on an average income, unless you are trading up from a home you bought when prices were lower, or get help with the down payment.

But if you’re already in the market, you may be finding it easier to pay your mortgage these days. Thanks to falling interest rates in the pandemic, mortgage payments have come down for three straight quarters, the National Bank report said.

And the forecasts aren’t calling for much relief for homebuyers soon. In a report in mid-January, Royal Bank of Canada predicted that the benchmark price of a home in Canada will rise another 8.9 per cent this year, to $669,000.

“The pandemic changed some dynamics — it drove many buyers to the suburbs, exurbs and beyond, ground immigration to virtual halt, triggered a downturn in big cities’ rental markets and caused households to build up their savings—but it didn’t dial down the market’s heat,” RBC economist Robert Hogue wrote.

National Bank’s economists expect rising prices will soon overtake falling mortgage rates, and monthly mortgage payments will likely start to rise again.

However, most forecasts of rising house prices came out before the latest Statistics Canada data showing the country’s economy accelerating more than expected.

The possibility that Canada’s economy could return to normal faster than expected has many experts saying Canada could see interest rate hikes sooner than expected, which could dampen the housing market’s strength going forward.

Canada 2021 Housing Forecasts Call For A Boom … Or The Worst Crash in 40 Years

Amid an unpredictable pandemic, forecasts for the housing market are pretty much all over the map.

Amid the worst economic slowdown in decades, home sales and prices soared in many Canadian cities in 2020, along with housing markets in many other countries. The average house price in Canada has shot up by 13.8 per cent over the past year, and by 14.6 per cent in the U.S.

No wonder this year’s batch of year-end forecasts for Canada’s housing market are all over the map. From predictions of rapid price growth and housing shortages to warnings of a market crash, there’s a forecast out there for every taste. Which, admittedly, isn’t very helpful.

Broadly speaking, there are two camps: Those who see this year’s hot housing conditions continuing into next year, thanks to low mortgage rates and a lack of housing supply, and those who see trouble coming once mortgage deferrals and government income supports stop.

Not surprisingly, real-estate groups are aboard the boom train. The Canadian Real Estate Association, an umbrella group of local real estate boards, is forecasting a 9.1 per cent jump in house prices in 2021, with Ontario leading the way with a 16.3 per cent jump in prices, followed by Quebec at 13.6 per cent.

“Current trends and the outlook for housing market fundamentals suggest activity will remain relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions,” CREA said in a forecast published in mid-December.

Mortgage rates have fallen, including the rate on the Bank of Canada’s stress test for borrowers, CREA noted. On top of that, record levels of migration into Canada in recent years have pushed up demand for housing, and CREA expects that to continue once the pandemic ends.

‘Supply shocks’ could hit market

But right now, with border shutdowns in effect, immigration into Canada is at historic lows, and several provinces ― including Ontario and British Columbia ― saw their populations decline in 2020, the first time that has happened in records going back to 1946.

That’s one reason why some forecasts are calling for a decline in house prices in 2021.

In a forecast this month, investment research group Veritas said there are two possible “supply shocks” headed for Canada’s housing market, which could flood the new market with new listings and push prices down.

The first is from the tanking rental market, which has seen double-digit declines in the largest cities this year. Renters in lower-income jobs were the most affected by business shutdowns amid the COVID-19 pandemic, and the result has been rental markets in free fall in many major cities. In a survey of its investor clients, Veritas found signs a growing number of investors are planning to sell.

The other “supply shock” could come from the wrap-up of mortgage deferral programs. According to Canada Mortgage and Housing Corp., as many as 16 per cent of Canada’s mortgage borrowers got a six-month payment holiday in 2020, the result of a program set up by the major lenders to prevent a wave of defaults in the pandemic’s first wave.

Veritas looked at three scenarios in which 5 per cent, 10 per cent or 15 per cent of houses with a mortgage in deferral were put on the market after the deferrals ended. Excluding other factors, this would bring real estate prices down by 4 per cent to 11 per cent across Canada, including a 10 to 17 per cent decline in Vancouver and a 15 to 26 per cent decline in Toronto, Veritas predicted.

Downturn triggered by a ‘return to normal’?

In fact, some analysts fear that a “return to normal” could be the trigger for a housing correction. With emergency government and lender supports in place, the market has fared well. But what happens when the pandemic passes, and the support ends? Financial reality could make a sudden comeback.

Royal Bank of Canada’s chief risk officer told listeners on the bank’s quarterly earnings call this fall that its baseline scenario is for an 8-per-cent drop in house prices over the next year, with prices remaining depressed “until late 2023.” In regulatory filings, the bank’s best-case scenario calls for a 6.1-per-cent increase in house prices, while its worst-case scenario calls for a whopping 29.6-per-cent drop.

“Canada hasn’t seen such a significant decline at the national level since the early 80s,” noted Better Dwelling, which first reported on RBC’s forecast.

Detached homes beat condos, small cities beat large

RBC isn’t the only one saying Canada faces a potentially historic housing correction. Ratings agency Moody’s put out a report this fall where it warned of falling house prices in 2021, though with big regional differences.

“We expect greater resilience in lower-density markets outside Canada’s large urban cores,” Moody’s economist Abhilasha Singh wrote. “The pandemic has boosted demand for properties offering more space for working from home and fewer shared areas with neighbours. Smaller markets where such properties are more affordable will particularly benefit from this trend.”

Within large cities, condos will fare worse than single-family homes because of the problems in the rental market, the Moody’s economist predicted.

All of this means “the pandemic will lead to even further widening in economic inequality, including housing,” Singh added.

But one thing the forecasts seem to agree on, all in all, is that whatever happens in the next few years, the long-term outlook for Canada’s housing markets is bright. And Canadian homeowners are unlikely to see the sort of financial hardships Americans saw during their housing market bust a decade ago.

“Although we expect delinquencies to increase in 2021, we do not expect the level of delinquencies, distressed sales or foreclosures to increase to the levels seen in the U.S. during the financial crisis,” wrote Susan Hosterman, a senior director at Fitch Ratings.

“This is due to (lenders) having strong relationships with their borrowers and their close monitoring of their borrowers’ financial situations after putting them on payment plans. Historically, the (lenders) have been proactive in offering modifications or working with borrowers to make payments affordable. We forecast delinquencies to return to the pre-pandemic levels in 2022 as the economy improves.”

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

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

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 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.”

Rental rates have come down in many municipalities, according to this chart from, 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, 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, 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 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.

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.

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.

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.”

Banning Foreign Home Buyers Would Get Backing Of 78% Of British Columbians

Support for a ban cuts across all demographics, Research Co. says

The vast majority of British Columbians would follow in New Zealand’s footsteps and ban most foreigners from buying homes in Canada, a new poll from Research Co. finds.

In an online survey of 800 adults in British Columbia, 78 per cent of respondents said they were in favour of a New Zealand-style ban on foreign buyers, while 15 per cent opposed the idea and 7 per cent were undecided.

“The notion of forbidding most foreigners from owning real estate in Canada is popular among all demographics in British Columbia,” Research Co. president Mario Canseco said in a statement.

Canseco said the highest support came from Vancouver Island residents and those aged 35 to 54, with 88 per cent support among both groups.

An influx of foreign buyers has been one of the most commonly cited reasons for Vancouver’s high house prices. The metro area typically ranks among one of the three least affordable housing markets in a survey of hundreds of cities around the world.

New Zealand, which has struggled with similar affordability issues as Canada’s larger cities, moved in 2018 to forbid foreigners from buying residential real estate. The law exempts citizens of Australia and Singapore, because of free trade agreements.

Foreign buying limited in numerous countries

But though the debate has focused recently on New Zealand’s move, many countries around the world limit the ability of non-residents or non-citizens to purchase housing.

Australia moved several years ago to limit foreign buyers to newly-built properties. Switzerland ― a popular destination for the world’s rich ― sets quotas for foreign home buyers, and those can vary from one canton (county) to another.

Mexico forbids foreigners from owning land in specially designated zones, which include many of the most popular seaside areas of the country. Malaysia limits foreign buying with a minimum purchase price for foreigners.

A number of other countries limit foreign buyers to condos, and sometimes limit the number of foreign condo owners in a building.

Vancouver saw years of rapid house price growth that came to an end around 2016, when the province introduced a 15-per-cent foreign buyers’ tax that temporarily took the wind out of the markets’ sails. The province hiked that tax to 20 per cent in 2018, when home sales again began to accelerate.

As in all parts of Canada, home sales tanked in B.C. during the COVID-19 lockdown, but prices have remained steady.

Though sales were down 42.5 per cent in May from a year earlier, the average resale price was up 3.2 per cent from a year ago, at $728,898, the British Columbia Real Estate Association reported.

The Research Co. poll found widespread support for a variety of moves the province and city of Vancouver have made over the past few years to improve affordability, including the increase to the foreign buyers’ tax, as well as the “vacant home tax” on unused properties and a new tax on properties valued above $3 million. All got the support of at least three-quarters of respondents.

The poll has a margin of error of +/-3.5 percentage points, 19 times out of 20.

Canadian Mortgage Rates Hit All-Time Low

Too bad it comes at a time of monumental uncertainty.

MONTREAL ― Interest rates around the world have fallen sharply amid a pandemic-induced economic crisis, and the result is that it has never cost less to borrow money to buy a house in Canada.

Rates on Canadian mortgages have fallen to their lowest levels ever, with one bank ― HSBC Canada ― now offering a five-year, fixed-rate mortgage at 1.99 per cent.

HSBC’s offer is “Canada’s lowest bank-advertised five-year fixed rate ever, according to our records,” mortgage comparison site RateSpy wrote on its blog, noting also that it’s the first time this type of mortgage has been offered below 2 per cent.

“HSBC’s move not only reflects historically low funding costs, but its continued drive to brand itself as Canada’s most competitive lender,” RateSpy said. “The likes of RBC, TD, Scotiabank, BMO and CIBC could easily undercut this rate if they wanted to, but they likely won’t near-term.”

But with interest rates falling around the world, other lenders are also cutting their rates, and mortgages in general are “at an all-time low now,” said James Laird, co-founder of Ratehub.

That, coupled with emergency lockdowns lifting, has Laird expecting to see a pick-up in home sales in June.

“We’re seeing a ‘mini’ spring home-purchase market emerging right now, which is interesting to watch,” he said. “It’s going to be a far better month from a home sales perspective than the last two months have been.”

New rules cut maximum purchase price

Unfortunately for buyers, those rock-bottom rates come just as new mortgage insurance rules come into place that will reduce the maximum purchase price for those who have less than 20 per cent for a down payment.

The new rules to qualify for mortgage insurance from Canada Mortgage and Housing Corp. (CMHC) are expected to cut the maximum purchase price for borrowers of insured mortgages by up to 12 per cent, more than offsetting the drop in mortgage rates for those who can’t come up with a 20-per-cent down payment.

CMHC head Evan Siddall recently warned that Canada risks financial instability because of high and rising household debt levels.

With hundreds of thousands of unpaid mortgages piling up, Canadian households are headed for their highest ever debt levels, Siddall told parliamentarians in May. Household debt could be as high as $2.30 for every dollar of disposable income by the end of this year, well above the record $1.78 set several years ago.

Siddall said one in eight Canadian mortgages are currently in deferral, and that could rise to one in five.

Laird noted that Canada Guaranty ― a private mortgage insurer ― is almost there already, with 17 per cent of the mortgages it insures in deferral.

Mortgage deferrals soared in Canada this spring, after the major lenders put in place emergency programs that allow borrowers to halt payments for six months. The payments are then tacked on to the end of the mortgage term, and borrowers are on the hook for interest during the deferral period.

Many of those six-month deferrals will end in the fall, and the question on everyone’s mind is how many of those people will be able to start paying again.

“That’s going to be the story for the second half of 2020,” Laird said.

Falling prices ahead?

Siddall ruffled some feathers in May with a forecast predicting the average house price would fall by 9 to 18 per cent this year ― a forecast many in the industry saw as too pessimistic.

Some forecasts issued in April predicted rising prices this year, despite the economic crisis.

But more recently, others have added their voice to the pessimistic argument, with economists at National Bank of Canada predicting a “sharp decline in Canadian home prices” over the next year.

They predicted the Teranet house price index ― a different measure than the average resale price cited by CMHC ― would fall “in the neighbourhood of 9 per cent this year.”

They don’t see lower mortgage rates helping much.

“In past recessions, substantial declines in interest rates have favoured stabilization of the housing market, but this time the effect … could be much smaller,” economists Matthieu Arseneau and Alexandra Ducharme wrote.

“Interest rates were already very low before the crisis, and (central banks around the world) have very little room to maneuver.”

Real Estate Industry Criticizes CMHC’s ‘Irresponsible,’ ‘Panic-Inducing’ House Price Forecast

“We are concerned that some damage may already have been done.”

MONTREAL ― Members of Canada’s real estate and mortgage lending industries have lashed out at the head of the country’s government-run mortgage insurer for a forecast they say is far too pessimistic.

Evan Siddall, CEO of Canada Mortgage and Housing Corp. (CMHC), told a parliamentary finance committee last week that he expects the Canadian Real Estate Association’s (CREA) house price index to fall between 9 and 18 per cent in the wake of the COVID-19 pandemic.

Despite criticism from industry, the CMHC reiterated its house-price prediction in a report issued this week.

That forecast also predicts home sales will be down 19 to 29 per cent after the pandemic, and it sees a massive decline in new housing construction of between 51 and 75 per cent, before starting to recover early next year.

These scenarios have many industry insiders and analysts worried that the CMHC could be panicking the public into a housing crash.

“The worry … is that the very public warning from the crown corporation becomes self-fulfilling,” Stephen Brown, senior Canada economist at Capital Economics, wrote in a client note.

Christopher Alexander, an executive vice-president and regional manager at Re/Max of Ontario Atlantic Canada, put it more harshly.

“Sellers simply won’t accept that kind of discount on their listings. A statement of this nature is panic-inducing and irresponsible,” he said in a statement issued Friday.

Re/Max, which has called for a 2.9-per-cent decrease in house prices nationally this year, noted that other experts aren’t forecasting such large drops, with most forecasts calling for a short-term decline of 5 to 10 per cent.

Siddall strikes back

Siddall took aim at his critics in the industry in a series of tweets coinciding with the release of the CMHC’s forecast.

“They’re whistling past the graveyard and offering no analysis,” the CMHC chief quipped.

Please question the motivation of anyone who wants you to believe prices will go up (yes, up) with our economy in slow motion, oil being given away, millions of Canadians on income support and a greater % of mortgages not being paid than we’ve seen since the Great Depression.

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Here’s more on our house price outlook. Some vocal real estate advisors have labelled us “panic-inducing and irresponsible,’ saying essentially that house prices don’t go down. They’re whistling past the graveyard and offering no analysis. Here’s ours. You decide. 



We looked at the recent financial & economic developments in Canada, including the impacts of the #COVID19 pandemic. Check out the national highlights on the #housing market ⬇️ & learn more in the full report: 

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Damage done?

Capital Economics’ Brown forecast earlier this month that the Teranet house price index would fall 5 per cent, but would stay below its peak levels “for years” as he expects there to be drag from lower immigration and higher debt levels.

But the CMHC’s forecast may have changed the situation, Brown argued.

“We are concerned that some damage may already have been done. As the history of boom-and-bust cycles shows, individuals’ expectations play a big role in how house prices develop.

“With the CMHC’s alarming forecasts covered by all the major news outlets this week, some Canadians have probably become far more concerned about prospects for the housing market.”

A consumer confidence survey taken in the week ending May 22 found that confidence in the housing market is the lowest on record.

The Bloomberg-Nanos consumer confidence index for real estate was 9.89, out of a possible 100. Any score below 50 suggests that more people are pessimistic than optimistic about the market.

That came even as Canadians’ confidence in other parts of the economy began to rebound. The overall consumer confidence index rose to 39.32 from around 37 four weeks earlier. However, that is still close to the worst level in records going back to 2008, worse than at any point during the financial crisis a decade ago.

The Bloomberg/Nanos index of Canadian consumer confidence has been recording its lowest levels ever amid the COVID-19 pandemic.

Siddall also warned that Canada risks falling off a “debt deferral cliff” this fall, when homeowners will have to start making payments again on hundreds of thousands of deferred mortgages.

According to the Canadian Bankers Association, some 716,000 Canadian mortgages, or some 15 per cent of the total, are now in deferral, and 391,000 credit card accounts are in the process of being deferred.

But many in the industry believe the strength of Canada’s housing markets going into the crisis will pull them through the other side.

“Markets are in a better position than people think to absorb that,” CREA chief economist Shaun Cathcart told the Financial Post.

Brown isn’t so sure.

“Rents in the big cities already appear to be falling fast,” he wrote. “With rental yields already very low, that is a big risk to house prices.”

Rents have risen sharply in recent years, so many condo investors will still be able to pay their mortgage if they cut their asking rents, Brown wrote.

“But it is likely to be a problem for investors taking delivery of new condos this year. If rents in Toronto and Vancouver fall by 5 per cent to 10 per cent as we expect, many of these investors will face negative cashflows and may decide to sell their properties.”