Oilpatch woes compound housing downturn: CMHC
Canada’s mortgage insurer says the COVID-19 pandemic has led to an “unprecedented downturn” in the housing market, with the oil-producing provinces of Saskatchewan and Alberta facing more significant and prolonged effects.
The Canada Mortgage and Housing Corp. (CMHC) released its national Housing Market Outlook on Wednesday. It says COVID -19 has caused a historic recession, leading to decreases across all indicators of the housing market.
The decline from pre-pandemic levels is the greatest in Saskatchewan and Alberta. The pandemic’s global effects have contributed to a decreased demand for oil and greater excess supply globally, with declining oil sector investment, employment and oil prices placing additional pressures on those province’s housing markets.
Average Canadian home prices will decline by nine to 18 per cent and housing starts by 51 to 75 per cent from PRE-COVID-19 levels, before beginning to recover in the first half of 2021, it predicts.
The market could start to rebound by the end of the first half of 2021 with relaxed containment measures allowing the economy to open back up.
The timing and speed of that recovery are unknown, as is whether future waves of infection could lead to further shutdowns of economic activity.
Sales and prices are likely to remain below PRE-COVID-19 levels by the end of 2022, the report predicts.
At the moment, it’s too early to tell which end of the range the market is headed toward, said CMHC senior economist Bob Dugan. The difference between the two scenarios would be the duration of the COVID-19 downturn, he added.
Even with economic restrictions lifted and businesses allowed to reopen, social distancing protocols to prevent further waves of infection would prevent a business-as-usual economy until the development of a vaccine, which experts say will take 12 to 18 months.
“Once this happens, it paves the way for increased consumer and business confidence, which then leads to recovery in spending and investment by households and
Once this happens, it paves the way for increased consumer and business confidence, which then leads to recovery in spending.
firms,” Dugan said.
A more severe and sustained recession could potentially emerge if the pandemic is not contained.
Within the range of forecasts is the possibility that Canada would see declines in output and employment exceeding those that took place during 2008-2009 the recession.
Uncertainty caused by the pandemic has led the CMHC to present a wider range of housing market forecasts, measuring between a “peak” in house prices that occurred in the first quarter of 2020 and the “trough” where they will bottom out.