Posthaste: What to expect from Canada’s housing market in a post-COVID-19 world

Posthaste: What to expect from Canada’s housing market in a post-COVID-19 world


Good Morning!

Social distancing has frozen Canada’s housing market. Sales and new listings in Toronto were down 69% and 64% in April, respectively, from the year before. Anyone selling right now probably has to, so any data economists can glean will be misleading.

To find out where we are truly headed, CIBC economists looked beyond today’s distorted numbers to see what the economy and the market will look like when we are on the other side of this pandemic.

The good news is the housing market started in this crisis on a solid footing. There were signs the market was improving after adjusting to the stress test. National average home prices were seeing double digit increases, and sales were climbing.

The not so good news is what happens to the economy once it does start to reopen. “Our working assumption is that a flattening of the virus curve will not be a green light to go back to normal,” wrote CIBC economists Benjamin Tal and Katherine Judge in a report this morning.

“Simply put, reopening stores and restaurants does not mean that people will feel comfortable shopping and dining out again,” they said. There is also the risk that a second wave of infection will bring back social distancing rules, delivering another blow to a fragile economy.

CIBC expects volatile growth to continue until there is a vaccine.

“The economy of the post-vaccine era will be a different economy. The cumulative damage suggests that when we recover, potentially at one point in 2021, we will be recovering into recessionary conditions.”

Unemployment is now rising from a pre-crisis rate of 5.5% to above 13%. Most of that is temporary layoffs and people will go back to work when the economy opens. “But no doubt, a portion of the damage we are witnessing now will be long lasting, as many small businesses will close permanently, and some larger corporations will reduce capacity. So, the move from 5.5% to 8% in 2021 is in line with a recessionary economic environment.”

The housing market will not be spared the volatility, CIBC says. When the market returns to fundamentals in 2021, CIBC expects demand will be reduced by a weaker labour market and less investment activity.

“Overall, as the fog clears, we expect to see average prices 5-10% lower relative to 2019 levels, with high cost units in the high-rise segment of the market seeing the most notable price declines,” they said.

Home construction will also suffer. This was supposed to a record year for completions, but that’s not going to happen now. Homebuilders face shortages of workers and materials, while social distancing is slowing the speed of work. CIBC estimates productivity is down about 40% based on conversations with developers.

“Even during deep and painful previous recessions, housing starts in Canada didn’t fall below an annual rate of 100,000 units. This time around, they will break that barrier,” said the economists.


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SORRY CAPITALISTS, Woodstock is cancelled. The Berkshire Hathaway annual shareholders’ meeting, which legendary investor Warren Buffett calls the highlight of the year, would normally draw tens of thousands to Omaha, Nebraska, this weekend for sweet treats, festive events and most importantly, the wisdom of the great man himself. Shareholders will still get the wisdom, in a live webcast Q&A with Buffet and his deputy Greg Abel beginning at 4 p.m. ET Saturday, but the physical gathering has been called off because of the coronavirus pandemic. So in a tip of the hat to happier times, here’s a pic from the past: Warren Buffett playing the ukulele with the Fruit of the Loom gang before a crowd of shareholders during the annual meeting of 2005. ERIC FRANCIS/BLOOMBERG




  • Imperial Oil and AltaGas hosts virtual annual general meetings
  • Today’s data: ISM U.S. manufacturing index
  • Notable earnings: TC Energy, Imperial Oil, DavidsTea, Restaurant Brands International, Cameco, Exxon Mobil, Chevron



Talk about a glass half full. Provincial deficits are expected to surge an astounding sixfold to $63 billion this year in the fight to survive the coronavirus pandemic. The good news is this won’t be the worst red ink the provinces have ever seen, says an analysis by RBC Economics which compared the bank’s projections with the deepest recorded deficits. As the RBC chart below shows, every province experienced worse conditions during the 1980s and 1990s, though Newfoundland and Labrador and Alberta come close. That’s assuming things don’t get worse than RBC’s most likely scenario. “Grimmer scenarios cannot be excluded. Much about the health, economic and fiscal impact is uncertain at this point,” said economists Robert Hogue and Ramya Muthukumaran.




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Today’s Posthaste was written by  Pamela Heaven (@pamheaven), with files from The Canadian Press, Thomson Reuters and Bloomberg.

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