Canada's housing sector will take a long time to recover from the coronavirus lockdown, according to Canada Mortgage and Housing Corp. (CMHC).
In a new outlook report, CMHC says that housing prices, sales and building will all be near historic lows in the months ahead and likely won't see a return to pre-pandemic levels until the end of 2022 at the earliest.
The federal housing agency sees pressure on the sector and does not foresee a quick “V” shaped recovery. In a best-case scenario, CMHC said housing could come back in a somewhat slower "U" shape while its more pessimistic scenario is a more flat and prolonged "L" shaped return.
"We don't expect this to be a very quick recovery," said Bob Dugan, Chief Economist for CMHC. "If there's enough foreclosures and banks are taking losses because of this, it could affect their willingness to lend and it could lead to a bit of a freezing up of liquidity in lending markets."
CMHC said average housing prices could fall anywhere from 9% to 18% in its forecast, and as much as 25% in oil-producing regions of Canada. In the faster recovery scenario, prices could start to recover by mid-2021, while in a slower recovery prices might not be back to pre-COVID-19 levels until the end of 2022.
Pressure on prices will come as sales drop, with an expected 19% to 29% decline in sales from pre-COVID levels this year as job losses affect buying decisions. Uncertainty in the housing market will also affect new home building, which could see declines of between 50% and 75% this year compared with pre-COVID-19 levels before starting to rebound next year.
The CMHC forecast is more pessimistic than what Canadian banks have forecast, including National Bank that said Wednesday it expects a drop of about 10% in house prices. Other banks have provided a range of forecasts since the pandemic hit Canada in mid-March. CIBC said in early May that it expects home prices to have fallen between 5% and 10% compared with 2019 levels before starting to recover later this year.
