In a special report, the National Bank presents its most recent real estate forecasts for Canada in the context of the COVID-19 pandemic. Recognizing the current high level of uncertainty, economists anticipate a 10 per cent drop in property prices, but point out that a U.S.-style crisis scenario is rather unlikely given the prudence of Canada’s financial institutions.
According to the study, interest rates, which were already very low before the health crisis, cannot be lowered further and will unfortunately not contribute to the recovery of the real estate market. In addition, the slowdown in the tourism sector will inevitably continue, and the National Bank estimates that if one quarter of the properties rented on short-term web platforms find their way onto the resale market, we would see a 27 per cent increase in listings in Montreal, which would increase the supply of properties in the city in the coming months.
Moreover, the National Bank forecasts that the unemployment rate will hover around 9 per cent for 2020. However, this deterioration in employment should only partially affect the Canadian housing market since employees in the affected job sectors have traditionally had lower-than-average home ownership rates.
The National Bank remains cautious, however, saying that certain risk factors, such as a drop in immigration and a tightening of lending criteria, could exacerbate the expected real estate deflation in Canada. Quebec nevertheless remains in a better position than the other provinces.