In a recent assessment of the economic and financial impacts of COVID-19, the Bank of Canada released its estimation that the national economy would decline by just under 8% in 2020, and then rebound in 2021, re-attaining the pre-COVID level of economic output by 2022.
This is in line with most experts, banks, and economic forecasters, not just in Canada, but around the world. The thinking is that once suppressed demand is allowed to organically re-flate when the worst of COVID is behind us, the economy will rapidly recover; turbocharged by the lowest interest rates and greatest financial liquidity in human history.
A few days ago, CREA, the Canadian Real Estate Association, released information on the latest price fluctuations across Canada. The numbers are very positive considering the immensity of the economic, social, and political impact of COVID-19. Almost every major urban and suburban real estate market saw prices increase in June compared to June 2019. Hamilton, Quebec City, Winnipeg, and the Niagara region were the top performers in the country. These areas saw prices increase at the rate of inflation, Hamilton saw prices go up on average by 2.5%. Only three cities saw prices decline on average. Those were Toronto, Vancouver, and Calgary. Calgary saw the biggest price decline, at -1%.
Calgary and Alberta are going through a very difficult recession given the collapse in commodity prices and the resulting impact to the broader Albertan economy. It’s not just oil, prices for agricultural goods and other minerals are not as high as was the case in the past. The good news out of Alberta is that real estate prices in Edmonton did not decline. As for the GTA., keep in mind that the Toronto economy is completely dominated by a service sector that has not fully re-opened. Many businesses have not only recently resumed operations in full, such as certain private medical offices and dentists. Cities in Ontario that are doing well outside of Hamilton at the top are Guelph, Barrie, Oakville, and Kitchener-Waterloo. Hope for the rapid recovery is one of the psychological columns holding up the stability in real estate prices. But there are multiple factors to the resilience which is being noted. Low interest rates, the apparent fiscal capacity of government’s to stimulate, and a growing tech. and services sector are all bright spots.