Pandemic’s economic effects could haunt Metro Vancouver housing into 2022
Pandemic could dent Metro house prices for years, CMHC suggests
Derrick Penner
The Province
A downturn in Metro Vancouver housing markets due to the COVID-19 pandemic could range from gloomy to downright dismal through 2022, according to the national housing agency’s latest report.
Prices have shown some immediate signs of stability since the collapse of sales at the start of the shutdown as markets froze, but that isn’t expected to hold through 2021 and ’22, in the analysis of the Canada Mortgage and Housing Corp. (CMHC).
“The price signal that we’re getting from the market, we don’t really consider it representative of how (the market) is going to evolve,” said CMHC analyst Eric Bond.
Instead, Bond expects that the loss of 275,000 jobs in Metro since the start of the pandemic and a virtual shutdown of immigration, both drivers of property demand, to take hold more visibly in the market.
“What we’ve seen, has been a very rapid increase in unemployment in Vancouver, so progressed from about five per cent, before the pandemic, to 14 per cent. In May,” Bond said. “That impacts consumer confidence and impacts people’s ability to pay for major purchases like housing and the uncertainty around it could last for some time.”
And over time, in Metro, that could mean average home prices falling eight per cent to $885,000 or plummeting as deeply as 16 per cent to $805,153 at a trough in about the middle of 2022 before recovering, according to the forecast.
“To be very clear, we are not forecasting, in any way, a financial crisis here,” Bond said.
CMHC, the Bank of Canada and the federal government have all taken emergency measures to make sure there is capital available for banks, and qualified borrowers can still get into the market, but “there will be significant challenges,” Bond said.
CMHC released the updated market outlook Tuesday, following up from its May 27 outlook report, which began to grapple with estimates of how the sudden COVID-sparked shutdown of the economy will impact housing markets at the provincial and national levels.
Tuesday’s news release looked more closely at urban markets and for Vancouver, its expectations are that housing resales will remain low for the rest of 2020, before recovering in 2021.
The forecast estimates that housing sales could fall to between 15 and 24 per cent by the fourth quarter of the year, compared with the first quarter. That would be as low as 27,608-24,342 units by the end of 2020.
Before the pandemic began, CMHC estimated sales would top 32,362 units by the end of 2020. At the moment, however, realtors are experiencing some renewed interest in the market, according to Vancouver agent Adil Dinani.
“There’s a window that we’re seeing now where people are coming out back into the market,” said Dinani, a realtor with Royal Lepage.
Dinani said Metro sales in May were down 45 per cent from a year ago, but that isn’t as bad as the 65-70 per cent decline in sales experienced at the depths of the shutdown in March and April when only people who absolutely had to buy and sell were trading properties.
Prices, however, haven’t moved much, Dinani said, because a flood of people also took their homes off the market leaving little inventory.
In the last 30 days, Dinani’s office has sold 15 homes, which “is a very active month for us,” he said.
“So, if you have job stability, which fortunately, touch wood, a lot of our clients do, the move is there,” Dinani said. “Could we see that towards the end of the year where more folks need to sell because their financial position hasn’t improved, sure that’s a very realistic possibility.
“There’s no benchmark for this, so we’re kind of going with it.”
Bond said there is considerable uncertainty in the forecast and whether it follows the upper or lower range of its trend depends on how quickly or slowly jobs recover and immigration begins again.
“If the restrictions are lifted and migration is able to resume later this year, next year or targets for migration are increased, we will see that play an important role in recovery in the region as well,” Bond said.
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