Canada’s housing market has held up during the pandemic, but could still be tested, says Home Capital.

• The chief executive of Home Capital Group Inc. says the Canadian housing market has so far managed to hold up during the coronavirus pandemic, but the alternative mortgage lender still sees considerable uncertainty being caused by COVID-19 that could test that resiliency.

Toronto-based Home Capital reported on Thursday net income for the three months ended June 30 of $ 34.1 million, up from $ 27.7 million for the first quarter and $31.9 million a year earlier.

“You can see from the results we are reporting today that people still want to own homes, and not even a global health crisis has changed that,” said Yousry Bissada, Home Capital’s CEO, during a conference call with analysts and investors.

The increase in profit came as key housing markets for Home Capital have shown some signs of life following a drop- off in activity during the earlier days of the pandemic. For example, whereas home sales in the Greater Toronto Area dropped by 67 per cent yearover- year in April and 53.7 per cent in May, they were down by just 1.4 per cent in June and skyrocketed by 29.5 per cent in July, the Toronto Regional Real Estate Board said.

Home Capital reported mortgage originations of about $ 1.5 billion for the second quarter, a decrease from the $ 1.6 billion it racked up for the first three months of 2020, but an increase over the $ 1.28 billion it accrued a year earlier.

“This says as much about the importance of what we do as it does about our success in doing it, and it is evidence of a market that has stayed healthy and resilient, despite all the predictions to the contrary,” Bissada said.

Yet Home Capital acknowledged the outlook for the housing market isn’t set in stone. Moreover, in reporting its July sales numbers, the Toronto Regional Real Estate Board noted that the month would normally be quieter, but pent-up demand from the spring, signs of an economic recovery and less travel all helped push transactions to a record level.

“The global pandemic related to the outbreak of COVID-19 has cast uncertainty on assumptions pertaining to the Canadian economy, employment conditions, interest rates, levels of housing activity and household debt- service levels,” Home Capital said in its second-quarter report.

Bissada said Home Capital’s mortgage growth also came as it adjusted its “risk appetite,” or the level of risk it is willing to take on, to more cautious levels, reflecting the ongoing financial uncertainty.

To help clients cope with financial pains caused by the pandemic, Home Capital also offered initial mortgage- payment deferrals of up to two months, rather than the six months offered by Canada’s big banks. As a result, residential mortgage and other loan deferrals stood at 2,698 loans with a balance of nearly $1.3 billion as of the end of July, down from 9,903 loans totalling approximately $ 3.93 billion as of the end of April.

Home Capital’s total provisions for credit losses were $ 18.7 million for the second quarter, or 0.43 per cent of its gross loans. The provisions were down 38.1 per cent compared to the first three months of the year, but they rose 207.2 per cent from the $ 6.1 million the lender set aside in the second quarter of 2019.

The still-elevated loan-loss provisions were chalked up in part to the COVID-19- affected economic outlook, which the lender said makes it tough to predict whether increases in expected credit losses will turn into a “significant level” of writeoffs and if additional increases will be needed in the future.

Asked by an analyst about which direction he sees housing prices going, Bissada said he doesn’t have a “crystal ball” for predictions. “But what I do know is that we are prepared for a decline,” he added. “That’s what all these allowances are doing.”