British Columbia’s real estate market is bracing for a major hit from the COVID-19 pandemic, but experts are split on how serious the downturn will be.
The B.C. Real Estate Association is predicting the pandemic will cause an initial deep recession leading to sharp decline in home sales, but a rebound by next summer driven by pent-up demand if the pandemic has not dragged on too long.
The consequences of a major real estate slowdown could be pronounced.
The B.C. government’s 2020-2021 budget envisioned about $1.6 billion in revenue from the property transfer tax, and the real estate sector, which employs tens of thousands of people, is worth more than $22 billion annually to the province’s GDP, according to the industry non-profit, the Urban Development Institute.
Signs of trouble are already appearing in Metro Vancouver, which put up reasonably strong home sales in March that have since dropped off sharply — despite April traditionally being one of the hottest months of the year.
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“I suspect you’ll probably see sales volumes for April down about 70 per cent from last year,” said Vancouver Realtor Steve Saretsky.
1:55 Real estate agents continue work with virtual tours and heightened safety measures
Real estate agents continue work with virtual tours and heightened safety measures
Economist Tom Davidoff with UBC’s Sauder School of Business said Metro Vancouver’s market had been building up to a strong spring after a several-year slump, when the pandemic hit.
Further complicating the picture are the pandemic’s complex effects on industry financing.
Cameron McNeill, a partner with Vancouver real estate marketing firm MLA Canada Ltd., said that while construction is visibly continuing on existing projects, most of those units are already sold.
But he said a noticeable decrease in presale activity means developers won’t have the resources or the incentive to break ground on new projects, cutting off future supply.
The mortgage picture has also changed. The Bank of Canada has lowered its overnight lending rate, but banks have actually hiked rates on fixed-term mortgages.
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2:12 Coronavirus: Okanagan real estate market braces for slowdown
Coronavirus: Okanagan real estate market braces for slowdown
Vancouver mortgage broker Sherlock Yam said the hikes reflect what banks see as growing risk in the housing market.
“They’re expecting that there will be a few defaults, and a few people that won’t be able to afford their mortgage payments after this pandemic and after that six-month deferral program,” said Yam.
About 20 per cent of his clients are investors sitting on the sidelines, he said, waiting for homeowners to panic.
“When people realize the end is not in sight, and this could last for a few months to a year, people will start to get a little worried,” he said.
“I know that there are investors waiting for that to happen, when they smell the blood they will start picking up some of those properties, but they’re just waiting.”
Davidoff agreed.
“It can’t slow down forever, because I think some people are going to have to sell,” he said.
“If we have a prolonged downturn in the economy, it’s very unlikely to me that people who have great businesses and are starved for cash aren’t going to find it attractive to sell a home to finance those other investments that are cash-short.”
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4:54 Montreal’s real estate market goes up against COVID-19
Montreal’s real estate market goes up against COVID-19
McNeill, on the other hand, predicted a pricing trend more in line with the real estate association: A short-term slowdown with a rebound in 2021.
“There’s not going to be a buying opportunity. It’s going to be a patient time as the market returns to normal,” he said.
“In the medium- to the long-term, there’s going to be incredible forces still bringing population to the city, and we just don’t have the housing supply in order to be able to satisfy that need.
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.
