Why the Canadian Housing Market Is Soaring in the Pandemic |
This week began with an unusual apology. Evan Siddall, the president and chief executive of the Canada Mortgage and Housing Corporation, took to Twitter to acknowledge that the federal agency had erred last year when it forecast that the pandemic-induced economic collapse might cause house prices to fall by as much as 18 percent. |
 | | Despite the pandemic, real estate sales are strong in Vancouver.Chris Helgren/Reuters |
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Instead, of course, Canada is talking again about whether most of the country is in a soon-to-burst real estate bubble. In Vancouver last month, the benchmark price for detached homes rose by 13.7 percent compared with a year earlier, reaching 1.6 million Canadian dollars. In the Toronto area, the average selling price for detached homes rose by 23.1 percent over the same time period, and a composite price that includes all kinds of housing topped 1 million dollars. |
A sellers' market prevails in many parts of the country, even at a time of economic distress for many. After my mother died earlier this year, I was surprised to learn that bidding wars, something I associated with Toronto and Vancouver, were now common in my hometown, Windsor, Ontario, for sales of even relatively modest houses like hers. In my neighborhood in Ottawa, a city that posted a record number of house sales last month, little time elapses before "for sale" signs are plastered with "sold" stickers. |
 | | Even Ottawa's traditionally slower-paced real estate market is soaring.Ian Austen/The New York Times |
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But the pandemic didn't start that way. In his Twitter posts, Mr. Siddall noted that during the first months of the crisis, the real estate market had severely contracted. |
About a quarter of Canadians were on emergency income support after their jobs were suspended because of shutdowns, large numbers of Canadians were deferring their mortgage payments, and Mr. Siddall's agency had stepped in to buy 150 billion dollars in mortgage securities to keep the market alive. And on top of that, prices in many places were, in Mr. Siddall's view, already unsustainable. |
One factor is that the pandemic didn't hit the earnings of high-income people as hard as it hit those of others. In Ottawa, Montreal, Toronto and Vancouver, the report found, housing price increases were most pronounced among higher-priced houses. People with higher incomes have suffered less from unemployment because they tend to have jobs that can be done remotely. |
They were also able to save more than usual, because restrictions on travel and shopping meant they spent less. Combined with ultralow mortgage rates, houses became an attractive target for spending that money. |
Another reason demand surged, the report found, was that when the market nearly shut down early in the pandemic, it created pent-up demand that was unleashed later last year. Buyers soon outnumbered sellers on the market in many regions, the report concludes — a perfect situation for sellers. |
Mr. Siddall, who will soon step down from his already extended tenure at C.M.H.C., is no favorite of the real estate industry. Many of those in the business disliked his agency's tightening of the qualifying rules for the mortgage insurance it sells to banks for lending to heavily indebted home buyers. And many accuse him of being a spoilsport who has scared away buyers with his warnings. |
Last year when he offered the incorrect market prediction, Mr. Siddall said that he had a duty to warn young Canadians about the financial perils that a drop in house prices, an increase in interest rates and increasing personal debt levels could bring. |
While admitting his forecasting error, Mr. Siddall was no less cautious about the future this week. |
"Times were uncertain and I felt that a warning about house prices was responsible," he wrote about last year's caution. "Today, we remain very concerned." |
 | | A Canadian Coast Guard photo of the Atlantic Destiny shortly before the fishing vessel sank.Jaylon Brownbridge/Canadian Coast Guard |
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- Rescue crews combined to battle heavy seas and high winds and save all 32 crew members aboard a scallop trawler from Nova Scotia that ultimately sank after a fire.
- Defense lawyers failed in their bid to have a man declared not criminally responsible, because of his autism spectrum disorder, for using a rented van to kill 10 people in Toronto and injure 16 others. The legal move angered many in the autism community and was largely dismissed by a judge as she convicted the man of murder and attempted murder.
- A noted hockey author and journalist, Roy MacGregor, looks back on the life of Walter Gretzky, Canada's most famous hockey dad, who died this week.
- The icy winter shoreline of Lake Huron in Ontario's Bruce County doesn't seem like an obvious place to take up surfing. But for some, its shortcomings are more than offset by the strong wind and the large waves it offers.
- Last weekend, 35 top players in women's hockey from Canada, the United States and Europe finally hit the ice for their first competitive games against women since February 2020.
- Times critic Natalia Winkelman reviews "The Walrus and the Whistleblower," a documentary about a former trainer's efforts to free a walrus named Smooshi from an aquatic park in Niagara Falls, Ontario.
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A native of Windsor, Ontario, Ian Austen was educated in Toronto, lives in Ottawa and has reported about Canada for The New York Times for the past 18 years. Follow him on Twitter at @ianrausten. |
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