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This Week’s Top Stories: Canadian Real Estate Prices Expected To Fall, and Banks Set Aside Billions For Losses – Better Dwelling

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Time for your cheat sheet on this week’s most important stories.

Canadian Real Estate

CMHC’s Canadian Real Estate Price Forecast Shows Big Drops In Ontario And BCCanada’s national housing agency gave a detailed breakdown of its real estate price forecast. Prices are expected to fall later this year, and continue into 2021. The forecast ends 2022 not quite recovered across the country. Different markets are expected to be impacted differently, with Ontario and BC projected to take big hits. Less overvalued markets like Quebec are expected to see much smaller price declines.
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Canada’s Big Six Banks Set Aside Over $10 Billion For Bad Loans, Up Over 300%
Canada’s Big Six banks are expecting billions of loans to go bad soon. Provisions for credit losses (PCLs) hit $10.92 billion at the Big Six, up 346.42% from the year before. PCLs are cash set aside for loans the bank believes have become unrecoverable. The sudden spike of increase implies banks see delinquencies to rise sharply soon.
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TransUnion Warns A “Severe” Scenario Likely In Canada, Mortgage Defaults To Jump
TransUnion, one of North America’s “Big Three” credit rating agencies, expects the mortgage market to deteriorate. Analysts from the firm look at over 40 metrics, including forbearance and credit. At this point of the pandemic, the firm sees a “severe” scenario playing out, with mortgage originations dropping, balances swelling, and delinquencies doubling. That’s the trifecta of bad news when it comes to mortgages.
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CIBC: Challenges To Canadian Real Estate Will Be “Coming In 12-18 Months”
One of Canada’s biggest banks sees the real estate market getting hit, but doesn’t expect issues for 12 to 18 months. The bank notes unemployment from 5.5% pre-crisis, to 13% currently. They expect unemployment to fall back to 8% next year, but that’s still at recessionary levels. This should lead to reduced real estate activity, with anticipated declines of 5 to 10 percent. The bank’s analysts further added, “high cost units in the high-rise segment of the market seeing the most notable price declines.”
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Most Of Canada’s Insured Mortgages On Deferrals Projected To Be Underwater Soon
Using the CMHC’s forecast, most of Canada’s recently insured mortgages are projected to be underwater. The CMHC estimates 12% of insured mortgages are now on payment deferral, and they expect this to rise to 20% by the end of the summer. The CMHC is forecasting price declines between 9 and 18% over the next 12 months. This would leave a considerable portion of insured mortgages with less than 1% equity in the next few months.
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Toronto Real Estate

Only 5% Of Greater Toronto’s New Homes Sold Last Month
The pandemic finally put the breaks on Toronto’s new home sales, which seemed previously untouched. There were just 771 units in April, down 80% from last year. This is a whopping 78% below the 10 year average. While the slowdown is expected, the decline in sales is much faster than the decline in inventory. This will lead to downward pressure on prices if it persists.
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Halifax Real Estate: A Top Canadian Market to Watch – RE/MAX News

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Before the coronavirus public health crisis devastated the Canadian economy, analysts and investors were keeping a keen eye upon trends emerging within key Canadian real estate markets, including the Halifax real estate market. For years, parts of the Maritimes suffered from economic stagnation due to high unemployment, capital outflows and a declining population. But in the months leading up to the COVID-19 pandemic, many homebuyers started homing in on the East Coast.

Halifax has been a fascinating city to watch, particularly after the approval of the Centre Plan. In 2017, the municipal government gave the go-ahead to an initiative that would improve the development of Halifax’s urban core. The campaign would lead to expanded public transit, new commercial and residential buildings, new and buried utility lines, and pedestrian-friendly walkways. The efforts are expected to attract businesses and workers from across the country and around the world.

With it, of course, would come a booming real estate market. In line with the Plan’s projections, Halifax is witnessing an economic resurgence, and this could only be the beginning.

Halifax Real Estate: A Top Canadian Market to Watch

In August, the Halifax-Dartmouth housing market experienced a 20.3-per-cent year-over-year increase in residential sales, with 769 transactions reported by the Canadian Real Estate Association (CREA). The residential average price also surged 18.2 per cent to $372,982 in August.

Year-to-date sales activity in the region was down 1.1 per cent in August, with 4,693 homes trading hands. However, Halifax home prices have still climbed 11.6 per cent to an average of $356,687.

This is a continuation from what has been occurring in the aftermath of the COVID-19 outbreak, with homebuyers scooping up properties at a rapid rate.

Housing experts anticipate these bullish trends will persist heading into the fall. According to the RE/MAX Fall Market Outlook Report, the inventory shortage and increased demand will boost average housing prices in Halifax by 10 per cent during the remainder of 2020.

In Halifax and across Nova Scotia, as demand continues to blossom, industry observers are warning that supply will continue to fall, which has sparked concern among federal officials. Andy Fillmore, the Member of Parliament for Halifax and a former city planner, says that the housing shortage could soon price too many Halifax homebuyers out of the market.

“If we want to have a city that reflects the full diversity of everyone who lives in our city … we have to put in place mechanisms so that we can have the diversity of income earners … especially when it comes to folks who traditionally lived in those areas and find themselves being priced out,” said Fillmore in an interview with CBC News, adding that all three levels of government and the private sector need to devise a plan to address this problem.

With interest rates being as low as they are, developers might take advantage of the ultra-low borrowing costs and invest in new housing developments. Fillmore did also say that municipal governments can modify zoning regulations, something that could stimulate new supply. Until then, the Halifax housing market could be tighter for the next 12 months, which would translate to higher valuations. 

During this time, experts say it is also important to keep an eye on mortgage deferrals, says Kean Birch, an associate professor at York University.

“I find it worrying that housing prices are continuing to rise. The reason being that we don’t know what’s going to happen once the mortgage payment deferral ends, and the consequences actually could be dramatic across the board. And it could be highly inequitable as well,” said Birch in an interview with Halifax Today.

Is Atlantic Canada the Next Real Estate Hotspot?

Is Atlantic Canada finally catching a break? For a long time, the Maritimes had endured economic stagnation, capital flight, and a sliding population. This could be changing now, based on the latest real estate data. Housing prices are soaring, the jobs are coming back, and economic development is accelerating. In these respects, the good times are returning to Halifax, St. John’s, Charlottetown and Fredericton.

But the momentum of this upswing will hinge on what happens over the next few months. Although the consensus is that Halifax and the rest of Atlantic Canada will still record strong housing numbers, fears over the second wave of the coronavirus and general uncertainty could weigh on the real estate market as we head into the last quarter of 2020.

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Real estate site that backstops home buyers raises $100 million to expand across Canada – Financial Post

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Article content continued

Properly is playing the technology disruption card to smooth real estate deals somewhat akin to apartment hunter Compass in the U.S. as it bets on the desire of modern consumers to sidestep life’s hassles, whether it be cooking with Skipthedishes food delivery or grocery shopping with HelloFresh meal kits. The Canadian real estate industry continues to accelerate in most markets outside of the Prairies, which has been marred by pandemic-induced oil price woes.

Properly uses computer models and market analysis to determine equity values, which can be combined with mortgage offers from Canada’s large five banks including special rates with the Canadian Imperial Bank of Commerce for purchasing your next home while you’re still in your current one. Then it offers staging and handyman tweaks for selling it, all for a 5 per cent commission, the industry standard, Ruparell said.

Many brokerages offer similar services, noted Waterloo, Ont.-based Remax agent Dawn Peace, but few clients take them on because the current market prices move so fast.

“Until you sell you don’t know how much exactly you have in your hands, and you might get $100,000 above asking and you might not,” Peace said. “Until it’s technically exposed to the real market with real buyers, you don’t know.”

Ruparell said: “The process of buying and selling a home has remained complicated and stressful and uncertain and we don’t believe that should be the case. There’s an opportunity for us at the same price you’d work with a traditional agent to provide this additional value service and do so profitably.”

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Toronto is the only North American real estate market considered in bubble territory – The Globe and Mail

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Toronto home prices are overvalued, making it the only North American city at high risk of being in a bubble, according to a new report on global real estate conditions by UBS.

The bank ranked Toronto as No. 3 in its annual bubble index, following Munich and Frankfurt. Seven of the 25 global cities assessed were in the high-risk category. Hong Kong, Amsterdam and Paris were below Toronto.

The report defines a bubble as being a period of a substantial and sustained mispric­ing of homes.

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On the flip side, Chicago had the lowest ranking and was labelled undervalued, while Madrid, Warsaw and Milan were considered fair valued.

UBS real estate analyst, Jonathan Woloshin, said “there is a greater chance of price stagnation or price decline” in cities like Toronto than in places like Chicago. “Does that mean it will happen? No. But the risk is certainly greater,” he said.

The UBS report stressed that it was not predicting when a bubble would burst. “Overvaluation and undervaluation can go on for quite a long period of time,” Mr. Woloshin said.

But the report said a change in the economy, investor sentiment or a major increase in housing supply could trigger a decline in home prices.

The report looks at imbalances in real estate markets, including the relationship between home prices and household income. This is the fourth straight year that Toronto has been in the bank’s bubble zone, taking the top spot in 2017. Vancouver also made it to the No. 1 spot in 2016, but this year the UBS index did not classify the city as being in the highest risk zone.

Toronto’s home prices have increased, “yet affordability is already stretched,” the report said. It also said the “expected appreciation of the Canadian dollar will curb the appeal of Toronto’s property to foreign buyers when travel restrictions are lifted.”

Toronto is Canada’s second-priciest real estate market after Vancouver. After an eight-week slowdown during March, April and May, home resales and prices in Toronto have reached record highs. In August, the average prices for detached houses and semidetached houses in the city jumped more than 20 per cent to $1,505,100 and $1,166,226, respectively, compared with August of last year.

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Although home resales and prices across most of the country have rebounded to prepandemic levels, the Canada Mortgage and Housing Corp. has forecast that a correction in the market could see home prices fall between 9 per cent and 18 per cent.

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