In the latest RPS - Moody's Analytics Housing Market Outlook, Canadian house prices may suffer a peak-to-trough decline of about 10% as a result of the current coronavirus-related economic shutdown.
The report notes, “The COVID-19 pandemic along with the collapse in oil prices will create a perfect storm this year for both home sales and residential construction”.
Here are some of the key points from the report:
- Shelter-in-place orders and social distancing have brought house hunting to a virtual halt while layoffs, the collapse in oil prices, and the plunge in equity prices have kept prospective buyers at bay.
- The unemployment rate is expected to hover around 8% in the second half of 2020—almost 2% higher than its prerecession level. This will be a dominant factor in determining the decline of house prices.
- The worst effects will be felt in regions that rely disproportionately on the leisure/hospitality, trade and energy industries. British Columbia is most exposed in terms of leisure/hospitality and trade, while the Prairie provinces—which were already dealing with softening demand for energy—are most vulnerable to the collapse in oil prices. Housing affordability is still a big issue in Vancouver and Toronto, and the pandemic will lead to even further widening in economic inequality, including housing.
The Moody’s Analytics forecast model for the RPS house price indices compares current house prices to long-term trend prices.
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