Housing markets across Canada experienced impressive sales gains in June compared to May, combining for a national average increase of 63 percent, month over month.
“All major markets posted double-digit increases in resales from May,” write Nathan Janzen, senior economist and Claire Fan, economist with RBC Economics, in their Focus on Canadian Housing newsletter.
The question now is: What’s ahead?
“The resilience of housing markets near-term is in sharp contrast to a labour market backdrop that, even with partial rebound over May and June, is still exceptionally weak by historical comparison,” say the authors. “But interest rates are also exceptionally low, household income supports (like CERB) have been unprecedentedly large, and the sharp pull-back in March and April almost certainly delayed transactions that would have occurred if not for containment measures.
“So part of the near-term bounce in June likely reflected the release of pent-up demand. Nonetheless, the early housing market recovery has been stronger than most expected, and it would not be surprising to see the momentum continue in July.”
The longer term is clouded by uncertainty.
“The pace and magnitude of the recovery going forward remains largely uncertain. That was one of the reasons the Bank of Canada signalled that interest rates will stay low for the foreseeable future. But it also raises the risk that labour market weakness will remain once past the expiry of mortgage deferrals and the phasing out of government support programs (including CERB) later this year,” say Janzen and Fan. ”And disruptions to immigration flows could significantly weigh on housing demand relative to pre-shock expectations. We continue to expect the housing market to eventually soften once again and for prices to decline modestly. But the near-term bounce-back in activity has been impressive nonetheless.”
Copyright Postmedia Network Inc., 2020
