By Christopher Alexander

The strength of the Canadian real estate market has continued to prove itself time and time again during the pandemic. While we’re not out of the woods yet, we are expecting continued growth for the duration of 2020, with an active market for the foreseeable future and balanced conditions at the national level into 2021. This is great news for Canadians.

So why all the fear mongering by Canada Mortgage and Housing Corp. (CMHC)?



The CMHC chief economist is Bob Dugan, who told reporters at a press conference recently that the agency stands by its previous forecast in May that warned of a decline in Canadian house prices between nine and 18 per cent.

“I’m not convinced that we have a sustainable basis for housing demand in the economic disturbance that’s going on related to COVID-19,” Dugan said. “That’s why I say I stand by the forecasts.”

We expressed our concerns over CMHC’s predictions in the spring, and Dugan’s latest statement continues to raise eyebrows – ours, and other industry insiders as well, as the Canadian housing market stays on its upward course.

While I can appreciate some of the reasoning that went into CMHC’s prediction, especially in the spring when so much was still unknown, the market data doesn’t support such a steep price decline, especially with the two largest real estate markets of Toronto and Vancouver continuing their upward momentum. The Prairies are facing different circumstances and challenges due to the resources sector. However, Ontario and B.C. are expected to offset slower activity in Saskatchewan and Alberta.

Nobody could have predicted the success of the Canadian real estate market in the wake of COVID-19. At the height of the pandemic, March and April 2020 experienced dramatic declines in activity, but transactions quickly resumed across the country as real estate professionals and consumers alike adapted to social distancing measures and embraced technology to continue transacting, despite disruptions to the economy and every facet of daily life.

Last month we at Re/Max Canada revised our forecast for national average house price in 2020, increasing it to +4.6 per cent from our original expectation of +3.6 per cent at the end of last year.

In terms of declining prices, “the impact was on rent as opposed to home ownership,” said Benjamin Tal, chief economist at CIBC World Markets. His optimism in the Canadian housing market was due to continued low interest rates and strong pent-up demand. “Eighty per cent of jobs lost were in the service sector. Many of them were low-income and many of them were renters. So, the impact was on rent as opposed to home ownership,” he noted.

RBC Economics recently reported that a large-scale decline was unlikely. “The pandemic completely disrupted normal seasonal patterns by shifting activity from the spring to summer. With pent-up demand now largely exhausted, we see activity cooling later this fall. This should let some of the steam out of prices though not to the point of causing outright declines on a large scale.”

TD’s Beata Caranci also commented on Canada’s “swoosh” economic recovery and the housing market. The level of unemployment suggests the housing market should not be as active as it is. However, when you look at income levels, it all makes sense. Incomes today aren’t behaving like we’re in a recession, Caranci explained, and incomes are being supported at the same or at higher levels than in previous recessions. So, there’s a complete disconnect between the employment rate and income levels, which is adding fuel to the housing market.

If the real estate industry disagrees and economists disagree, just where is the CMHC getting its insight to support such a steep decrease?

Recently the Ontario Real Estate Association surveyed Ontarians, finding a strong majority think housing is an important (60 per cent) or somewhat important (32 per cent) contributor to the provincial economy recovery. They are now pushing on governments to help stimulate the market with incentives like a “Land Transfer Tax holiday” to help get more homes on the market and address some of the supply issues the province is currently facing.

I do think we may see a “hangover” from the busy market we’re experiencing right now, but overall as we head into 2021, I think a prediction of more balanced conditions across the Canadian housing market is warranted. But an 18-per-cent decline in prices is highly unlikely.

4 COMMENTS

  1. Agents that live the high life based on debt supported by their cash flow, are the first to enjoy the experience of what happens when market conditions change. Been there, done that and have watched thousands of overextended agents loosing everything when the big cheque’s dry up. Real estate commissions can provide a great life but it is what you do with the commissions that will make you rich and provide a sustainable living.

    The national and provincial debts will force governments to raise the level of taxation. When governments are borrowing for deficit spending they are putting a debt in every worker in the country. The largest capital pool left for them to come for is realestate owned by private citizens. We already hear the warning calls as socialists are claiming property owners have unfair economic advantages over non property owners and as such any capital appreciation they get should be taxed.

    We see all the new property restrictions upon property owners – green belts, municipal tree by-laws, seizure of property for back taxes now after 3 years and not 5, the lust goes on and we as realtors stand back and fail to speak up in defence of property rights.

    So there are four major shocks that can really cause problems affecting consumer views on realestate.: Rising interest rates, rising taxes, a stagnating economy and a decline in the net disposable income caused by inflation.

    We have not felt the impact of these in the burbs as money flees the high rise condo scene in the major urban centres but at 1100$/ sq ft for condo apts plus 10 to 15$/year Condo fees then the municipal taxes with all the utility fees It doesn’t take a genius to realize that law of supply and demand is facing considerable headwinds from the unspoken third factor – affordability –

    So boys continuing living like grasshoppers the winter is coming and being an ant isn’t as glorious but trust me ,”when the. Winter arrives, as it always does, it’s really nice to have cask in the pocket, investments that are recession proof and no one knocking on your door asking for the keys cause you can’t make the payments.

    • Generally speaking REM readers….best to listen to one of the Legends in the business when he speaks. More knowledge found in his words above than probably most of the contents in the REM archives.

      Imagine if this guy was your Broker of Record? Imagine if you listened and your commission cheque was split into Taxes Pre-Paid, Expenses Covered, Retirement Funding and Life Living cheques from your Brokerage accountant.

      Ask yourself why your Brokerage has never demanded as a new agent you are not protected in the manner complicit with the comments of the industry legend speaking above?

      Why is this not taught at realty school, conventions or your local board?

      Why the answer is the same now as it was when this guy got his license. The system is designed to survive on false beliefs of infinite commissions.

      You should find this guy and give him a call.

  2. I can only assume that CMHC has access to information the rest of us do not. It is surprising to see such an active real estate market however supply has been the issue for many years, inflating values with multiple offers and it seems that everyone believes the Southern Ontario Real Estate market represents the country.
    There is no mention in this article of Government support of many corporations and businesses to keep employees on the payroll. Creating a false sense of economic security. We have not yet seen or felt the consequences of this pandemic as Governments scrambled to keep money flowing. And it is inaccurate to boldly state that most jobs lost were that of low paying service sector jobs so who really cares. A good friend of mine just sold his “service sector” business five months before Covid-19 hit after making over 10 million dollars in his business. My brother in-law owns a high end mens store and was easily making $500k plus a year. I know of a sever in a downtown Toronto Bar that was making over $6,000 per month working 12 shifts a month. And the decrease in economic activity, in this apparently unimportant sector of our economy, goes down the line affecting suppliers, manufacturing and landlords that are collecting rents from tenants. Once that tenant leaves what will happen to that landlord? And have you been to a lumber yard recently? I rebuilt a deck last month and went to two suppliers only to find an almost barren lumber yard in both cases. I was told that supplies were coming but they cannot tell you when they will arrive.
    Interest rates of almost zero are not a reflection of a healthy economy and the past six months banks have seen a marked increase of people paying a hefty penalty to refinance and consolidate debt. Resulting in lower costs to service that debt. None the less that debt still exists it, does not go away. So the banks have been busy but is that healthy business? The banks cannot afford any decrease in real estate values.
    The article also mentions that most of these people that lost jobs are renters, so who cares? I bet that landlord cares. My point is that there are currently many moving parts to this situation and for the most part real estate has survived nicely but is this the storm before the calm?

  3. The number of Porsche Mercedes BMW agents is disgusting. Prices of homes doubled and commissions remain at 5-6% for folks who take online courses to get a real estate license. Disgusting display by this crowd especially in these troubled times.

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