Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Canadian Real Estate Prices Could Drop Up To 30%, Moody’s Advises Institutions
Deep pocketed investors and institutions were advised Canadian real estate prices will fall. Moody’s, one of the world’s largest risk organizations, published their economic forecast. In the baseline forecast, Canadian real estate prices fall 8% in real terms, and recover a year later. It also gets worse as the pandemic carries on.
If things don’t get back to normal until July – just one month later than baseline, they expect prices to drop 20%. Reconstructing their model using projections given to parliament, prices are expected to decline 24%. The firm further added they don’t believe low interest rates can stop this trend. However, the decline in interest rates will help the recovery phase.
Canada’s GDP Growth Is Flat, But Real Estate Outperforms
The Canadian economy is further leaning on real estate for growth, as the rest of it slows down. Real GDP in February was up 2.1%, a big decline – but a little skewed due to an unusually slow Q1 in 2019. The real estate, rental and leasing portion of GDP saw growth of 5.9% from last year though. The real estate, rental and leasing portion of GDP now represents the biggest portion of GDP since the peak in 2016, and is likely to blow past that in the next report.
Nearly 1 In 5 Canadian Businesses Laid Off More Than 80% Of Staff
Canadian businesses are seeing big drops in revenue, and that’s causing a ripple effect for unemployment. A survey conducted by Stat Can shows 32.3% of companies experienced a decline of 40% or more in revenue. This helped contribute to nearly 1 in 5 businesses laying off more than 80% of their staff. Some layoffs are thought to be temporary. However, that won’t be clear until we see the state of the economy on the other side of the pandemic.
Canadian HELOC Growth Was Drying Up Before The Pandemic
Canadians slowed using their homes as ATMs in February, before the pandemic was declared. The balance of loans secured by residential real estate hit $303.99 billion in February, up just 1.68% from last year. Personal loans represented $268.51 billion of the total, up just 0.67% from last year. That’s a decline in real terms, even with CPI at just 0.9% these days. What does this all mean? Typically households cool on borrowing when they’re starting to feel pinched. This is a trend we’ve been seeing since late last year, despite the return of enthusiastic real estate buyers.
Toronto Real Estate
Altus: Toronto New Home Sales Almost Double, Expected To Cool
The market is packed with warning signs, but that didn’t slow new home buyers in Toronto. There were 3,780 new homes sold in March, up 67% from last year. The past two Marches had levels of sales not seen outside of recession, but this is still a big increase. Altus Group, the firm that provided the data, did note they expect volumes to slow as the year progresses. This is partially due to the comparison period, and partially due to the pandemic lockdown.
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