Massive job losses. Declining immigration. Fewer international students in the country.
There was no shortage of reasons to be pessimistic about the Canadian housing market’s chances of avoiding a major hit through these last few months as the COVID-19 pandemic rampaged across the globe.
But, in a recent research note, RBC Global Asset Management Chief Economist Eric Lascelles sounded thoroughly impressed with the housing market on both sides of the border, noting they had proved “more resilient than expected.”
The economist said the performance of Canada’s housing market was all the more impressive when considering its “greater underlying vulnerabilities.” While Lascelles didn’t elaborate on these vulnerabilities, one would assume he’s alluding to Canadians’ notoriously large household debt loads and relatively high use of mortgage deferrals compared to rates south of the border.
Despite all that working against it, Lascelles says that so far this summer, Canada’s housing market has seen resale home prices increase 12 percent compared to a year ago with home sales activity also on the rise versus 2019. New home construction is still trending “in the realm of normal” even with the widespread shutdowns that affected homebuilding to various degrees across the country through the spring.
While there’s no doubt that there was more than a hint of optimism in Lascelles’ writing, the economist remains guarded about the road ahead as we move into the fall.
“But for all of this happy news, the final page has not yet been written on the housing market. As government support fades, delinquencies and foreclosures may rise, resulting in greater weakness later. Still, we only look for a modest decline rather than a steep drop,” he wrote.
In a recent interview with the Financial Post, Royal LePage President Phil Soper said the brokerage is projecting a relatively modest 2.5 percent increase to national home prices by the end of 2020.
It won’t be a great year, but Soper does not anticipate that any of the “doom and gloom” scenarios that some have prophesied will come to fruition.
