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COVID-19 to push Canadian housing prices down: economist

Last Updated May 1, 2020 at 2:05 pm PDT

FILE - The CIBC bank logo is seen Tuesday, June 21, 2016 in Montreal. CIBC says it is offering reduced interest rates on personal credit cards for Canadians in financial hardship due to the COVID-19 pandemic. THE CANADIAN PRESS/Paul Chiasson
Summary

Housing starts could fall to historic lows: CIBC

Home prices could drop five to 10 percent, with luxury condos particularly vulnerable, economist says

Even in a post-vaccine era, economist says economy will look different than before the crisis

VANCOUVER (NEWS 1130) — The Canadian housing market will face challenges in the next 12 to 18 months, including a drop in prices, according to an economist with one of the country’s largest banks.

Meanwhile, housing starts could fall to historic lows, all due to COVID-19.

Katherine Judge, with CIBC Capital Markets, said home prices could drop five to 10 percent, with luxury condos particularly vulnerable.

“Investment in condos is highly correlated with the stock market, so, of course, that is one area why we would see a fall in that segment of the market,” she said.

“Coming out of this, even as we do see restrictions lifted, we will still have elevated unemployment. Confidence will also be hit.”

Job losses have affected income levels, as well, Judge added.

“Generally, when you see this scale of job losses and the hit to income, people won’t be able to afford more expensive units, essentially.”

CIBC sees new home construction dropping to 50,000 units annualized by the second quarter, which Judge describes as historic lows.

So even in a post-vaccine era, she said the economy will look different than before the crisis.