CMHC expects lower demand for housing as economy takes COVID-19 hit

OTTAWA – Canada Mortgage and Housing Corp. expects a drop in home prices in the country’s biggest cities amid “severe declines” in home sales and construction.

The federal housing agency says a combination of factors related to the pandemic, such as higher unemployment and lower income, will slow housing starts and push sales and home prices below pre-COVID levels.

CMHC says the market likely won’t see a return to pre-pandemic levels before the end of 2022.

Average home prices in Toronto, Montreal and Ottawa are expected to rebound sooner, starting in late 2020 and rolling into early 2021.

Prices in Vancouver, Edmonton and Calgary likely won’t rebound until later in the forecast period, it added.

Calgary and Edmonton will see average home prices decline, it said, due to uncertainty around oil prices and economic recovery in the region.

CMHC deputy chief economist Aled ab Iorwerth says COVID had “unprecedented impacts” on the country’s urban centres, and could lead to “severe declines in sales activity and in new construction.”

Greater cultural shifts may also affect the housing market, he said, and many of those developments are so recent that they’re hard to fully comprehend or quantify.

“We do not yet have a grasp on the answers to questions, such as the impact of greater work from home, differing impacts across industries, the effect of less mobility across provincial boundaries and the decline and immigration following cutbacks and international aviation,” he said.

There are also substantial questions about how rental markets will be impacted.

He noted that a decline in immigration and interprovincial activity will lower demand for rental units, which combined with a “significant new supply in rental properties close to being completed,” could mean that vacancy rates are likely to jump.

“Such increases in vacancy rates, however, will be from historically low levels in Toronto and Vancouver, in particular,” he noted.

This report by The Canadian Press was first published June 23, 2020.

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