Coronavirus is causing uncertainty in the global economy and has the possibility of triggering a great recession across the globe. Vancouver housing market is expected to pull back significantly because of the Covid-19 pandemic. Home resales could shrink by 30 percent because social distancing regulations limit sales.
The economic fallout gnaws at confidence and leads to speculations. The measures put in place by the Canadian government to combat Covid-19 are expected to lead to a slowdown of the housing market. As the pandemic continues to affect lives adversely, market activity is already showing a sharp decrease. In March, sales were high by nearly 50 percent, but as the pandemic continues, the sales have dropped by approximately 35 percent.
The bank affordability measure in Canada was steady at 50 percent in 2019. Vancouver had the highest affordability measure at 80.4 percent, followed by Toronto and Edmonton at 68.2 and 31.6 percent, respectively. However, the Canada Mortgage and Housing Corporation forecast that after the pandemic, there will be lower housing starts and a slower rebound in sales and prices of most markets in Vancouver than in other Canadian cities.
Vancouver Housing Market
The Vancouver real estate forecast explains that the pandemic has allowed for construction, but the new builds are challenged by reduced migration from the country. The housing starts are expected to reduce significantly in the immediate future due to uncertainties of the long term effect of Covid-19. Before the pandemic, the construction industry was operating at capacity or close to its capacity. Still, there was a reduction in construction activities even before the pandemic started. Despite the adverse effects of the pandemic, things are expected to pick up towards the end of 2020.
Housing Sales and Price Recovery
The house prices in Vancouver have been reducing over time. However, home prices are expected to stay stable in the short term because of a wait and see attitude by both buyers and sellers. After Covid-19, unemployment is expected to rise as well as market illiquidity. This is expected to force sellers who will be tight squeezed by the economy to lower home prices. The trend is likely to be in the short term because of low-interest rates, a strong job market, and a bounce in immigration in Canada. Moreover, this is expected to favor sales and help sales to rise rapidly.
Soon after the pandemic started, resale of houses was suspended, and listings also reduced. Covid-19 is expected to delay the recovery of sales that had slowed down between 2018 and 2019. House sellers may be getting less for their homes in the short term. The CMHC forecasts that house prices will decline after Covid-19, but it will occur gradually until 2022 before showing signs of recovery towards the end of the year.
The average house prices are expected to decline due to reduced incomes of the Vancouver residents. The impact of the pandemic on buyers has not been even, and there is extra uncertainty after the pandemic for the average price decline. Same as most markets in the city, the housing prices are expected to return to normal in Toronto and Montreal before it does in Vancouver.
The price wars on oil that developed recently have adversely affected the housing market in Vancouver. The adverse effects are expected to be temporary after the Covid-19 pandemic. The year 2021 is expected to have better economic outcomes, and even the impact on the supply chain will be less.