And the media consensus is the worst economic impacts of COVID-19 are behind us.
Sure, there will be more deaths, according to this narrative. However, the prevailing view is that we should be back on our feet economically in a reasonable amount of time.
And one indication is the high volume of real-estate transactions.
The data crunchers at rennie intelligence even coined the term “Great Suppression” to describe what just happened: a government-induced slowdown to deal with a global health emergency.
It appears in the September-October issue of Foreign Affairs.
In it, the Rienharts point out that the World Bank has forecast a 5.2-percent decline in global economic output in 2020.
“The pandemic has created a massive economic contraction that will be followed by a financial crisis in many parts of the globe, as nonperforming corporate loans accumulate alongside bankruptcies,” they declare. “Sovereign defaults in the developing world are also poised to spike.
“This crisis will follow a path similar to the one the last crisis took, except worse, commensurate with the scale and scope of the collapse in global economic activity. And the crisis will hit lower-income households and countries harder than their wealthier counterparts.”
Foreign Affairs is published by the Council on Foreign Relations, which has been at the heart of elite thinking in the United States dating back to the early 1920s.
Carmen Reinhart is chief economist at the World Bank. Vincent Reinhart is chief economist at Macro Strategist at Mellon.
The Peace Arch crossing and other borders are closed to nonessential travel from the United States.Getty Images
Closed borders elevate economic threat
One of their key points is that a “rebound” should not be confused with a “recovery”. And that’s why they argue in favour of continued fiscal and monetary stimulus packages.
“Public sentiment matters to the economy, and it is hard to imagine that attitudes toward foreign travel or education abroad will rally quickly,” they note. “More generally, trust—a key lubricant for market transactions—is in short supply internationally. Many borders will be difficult to cross, and doubts about the reliability of some foreign partners will fester.”
While that’s no guarantee that this will undermine Metro Vancouver’s housing market, it could elevate the risk over the medium term, given how dependent B.C. is on tourism. Our university and K-12 school systems rely on international students to help balance their budgets.
Prime Minister Justin Trudeau has extended the federal wage subsidy for businesses until December. And going into this crisis, Canada’s debt-to-GDP ratio was far lower than where it was in the mid 1990s.
But as the Reinharts emphasize, we’re still in perilous economic waters. In fact, their piece is one of the most pessimistic that’s been published in a mainstream newspaper or magazine since April.
“Most analyses project that the U.S. unemployment rate will remain near the double-digit mark through the middle of next year,” they write. “And the Bank of England has warned that this year the United Kingdom will face its steepest decline in output since 1706. This situation is so dire that it deserves to be called a ‘depression’—a pandemic depression.
“Unfortunately, the memory of the Great Depression has prevented economists and others from using that word, as the downturn of the 1930s was wrenching in both its depth and its length in a manner not likely to be repeated,” they continue. “But the nineteenth and early twentieth centuries were filled with depressions. It seems disrespectful to the many losing their jobs and shutting their businesses to use a lesser term to describe this affliction.”
Canada’s debt-to-GDP ratio is lower today than it was in the mid 1990s.Trading Economics
Moreover, countries that are more dependent on trade, including Canada, could face an even more uphill struggle.
“The World Trade Organization estimates that global trade is poised to fall by between 13 and 32 percent in 2020,” the two economists write in their article. “If the outcome is somewhere in the midpoint of that wide range, it will be the worst year for globalization since the early 1930s.”
It’s something to keep in mind as you watch the stratospheric rise of several U.S. and Canadian tech stocks and the seemingly insatiable desire for Vancouver housing.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
