An RBC economist expects a possible summer resurgence of the real estate market in Canada.
In a housing update, Robert Hogue of RBC Economics described the ravages being done by the COVID-19 pandemic on the residential property market as a “temporary shock”.
“We expect stronger activity to resume once social distancing orders are relaxed though there’s great uncertainty as to when this will happen,” Hogue wrote.
“Our baseline assumption is sometime in June,” Hogue continued in his April 15, 2020 market update.
According to Hogue, “exceptionally low interest rates will help spur the recovery”.
The Bank of Canada’s trendsetting interest rate currently sits at 0.25 per cent, described as the lowest in a decade.
The figure was the product of three interest rate cuts made by the central bank in March 2020 in a bid to bolster the economy.
On April 15, the Canadian Real Estate Association released a report indicating that home sales last month dropped by 14.3 percent compared to February of this year.
The CREA also reported that listings of homes for sale plunged 12.5 percent in March 2020 compared to February.
According to the national association of realtors, “economic turmoil and physical distancing rules surrounding the COVID-19 pandemic caused both buyers and sellers to increasingly retreat to the sidelines over the second half of the month”.
On the same day, the B.C. Real Estate Association released a report about how the pandemic has impacted the market in British Columbia.
“Provincial housing markets started the month very strong before the COVID-19 pandemic put a halt to activity,” BCREA chief economist Brendon Ogmundson stated in a media release on April 15.
Realtors have been advised not to hold open houses in order to contain the spread of the novel coronavirus.
According to CREA figures, home transactions fell 2.9 percent in the Greater Vancouver area in the month of March compared to February.
The drop was bigger at negative 13.6 percent in the Fraser Valley.
In his housing update, RBC economist Hogue said that the recovery of the Canadian real estate market will “crucially depend on the damage suffered by the labour market”.
According to Hogue, the unemployment rate is expected to “surge into double-digits in all provinces this month before easing gradually thereafter”.
“The longer unemployment stays high, the slower the housing market recovery will be. Our current view is the recovery will stretch into 2021 in most markets,” Hogue noted.
Hogue also said that the chances of a significant drop in prices are “still low”.
“Despite the rough patch ahead, we expect property values to generally hold up,” Hogue stated.
According to Hogue, the tight supply of housing in major markets will “provide some cushion against a correction”.