CMHC Forecasts Housing Market Will Not Recover Until at Least 2022

Real estate for sale signs are shown in Oakville Ont. on Saturday Dec.1 2018. THE CANADIAN PRESS  Richard Buchan

Canada's resilient housing market appears to have finally met its match in the Covid-19 pandemic.

"Following large declines in 2020, housing starts, sales and prices are expected to start to recover by mid-2021 as pandemic containment measures are lifted and economic conditions gradually improve, " said Bob Dugan, CMHC's Chief Economist. "Sales and prices are likely to remain below their pre-COVID-19 levels by the end of our forecast horizon in 2022".

It does, however, see pressure on the market because interest rates were already so low before the crisis started that central banks have little policy room to manoeuvre, while drops in tourism could also put pressure on the economy and push what had been short-term rentals onto the housing market.

The main driver behind the projections is a drop in demand from millions of cash-strapped Canadians who have lost their jobs or have seen their incomes drop amid the virus crisis. "We think this is a pretty good assessment of the evolution of housing markets and the economy in the next couple of years". Real estate, along with residential building construction, accounted for almost 15% of output previous year, ahead of energy at about 9%.

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CMHC said average housing prices could fall anywhere from nine to 18 per cent in its forecast, and as much as 25 per cent in oil-producing regions.

Furthermore, the CMHC is anticipating the construction of new homes to slow down drastically, with housing starts decreasing by 75% due to construction activity restrictions.

The unprecedented economic shock of the COVID-19 pandemic and the uncertainty around the timing of a vaccine has prompted Canada's national housing agency to paint a pessimistic scenario of a recovery that extends beyond the end of 2022.

Realtors have criticized the CMHC's forecast as too pessimistic given the resilience of the housing sector during the pandemic so far. This would be created to avoid exposing young people and taxpayers to significant losses from falling home values.

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