Canada’s housing market shattered records in July despite the economic uncertainty surrounding the COVID-19 pandemic – and with the usually busy fall real estate season drawing near, experts are divided about whether the boom will continue.
Last month marked the highest monthly sales figure on record, the Canadian Real Estate Association reported, while the national average sales price jumped to a record $571,500.
Part of the fuel behind rising prices has been driven by a change in the real estate cycle, RBC senior economist Robert Hogue said during an RBC podcast earlier this month.
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Traditionally, many homebuyers and sellers wait until spring to make deals as snowfall hampers curb appeal. This year, all of the usual spring homebuying fever was pushed into the usually slow summer months as people emerged from lockdown.
Under normal circumstances, real estate agents expect a busy period in early fall as people try to finish their move before winter.
Rachel Gagnon, an Ottawa-based real estate broker at Ian Charlebois & Associates Real Estate & Mortgages, said the demand for housing has stemmed from “stay at home” orders, which left people wishing for more space and amenities.
“Unless a major, and I mean very major, shift was to happen, which would create an influx of properties on the market, things will continue to move as they have over the last few months,” she said.
“As we move forward through August and September, people work through the new school rules, I think we’ll see a fairly large uptick in activity. Unless a second wave shifts things dramatically, I think we’re going to have a very busy fall market that won’t slow down until the Christmas season.”
But Gagnon also said that she has seen the pressure placed on first-time homebuyers, who are trying to get into the market now while they can afford a mortgage, even if it maxes out their borrowing power.
And COVID-19 related travel restrictions have led to slowing immigration and less demand from property buyers seeking rental properties for tourists or students.
The uncertainty means a fall slowdown is possible, said Bethany King, a team leader at Century 21 Millennium Inc. Brokerage in Brampton, Ont.
While some lenders are offering cash back, lending expectations have also changed, said King. For example, some lenders consider essential workers to have better job security should a second COVID-19 wave come.
Fear about a “second wave” in the fall has parents planning to save money, in case children are sent home and parents need to cut back hours and income to focus on caregiving, she said.
“Those are the things that have investors who are regular people – not millionaires that have tons and tons of properties, and are cashing out – preparing for the worst,” King said.
Kean Birch, an associate professor at York University, said he will be watching for the extension or end of mortgage payment deferrals.
“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, who studies economic geography.
Evan Siddall, chief executive of Canada Mortgage and Housing Corp., wrote a letter earlier this month that said he expects house prices to fall, “even in the face of recent activity, which appears to be the result of very low interest rates and a sharp reduction in new listings.”
“Our projections always anticipated a delayed impact: weakening in late 2020 and 2021 once government income supports unwind,” read the letter.
However, Sherry Cooper, chief economist at Dominion Lending Centres, called CMHC’s forecast is “overly pessimistic.”
“Here we are in the second half of 2020, and the national average sales price has risen 14.3 per cent year-over-year,” she said.
“The good news is that the housing market is contributing to the recovery in economic activity.”