Thought of the Day - September 22 - The Canadian Housing Boom

Moncton, Halifax, Ottawa and Montreal have joined Toronto and Vancouver in a boom in house prices brought on by the pandemic.

While traditionally, a one percent increase in unemployment brings about a four percent decrease in house prices, this has not been the case with COVID-19.

First, houses are not yet being dumped on the market:

• Due to government incentives and subsidies, unemployment has not yet fully translated to lower consumer spending, especially in real estate;

• Federal banks have been pushed (well lured as part of the "free money/unlimited spread" policy) not to foreclose on delinquent accounts (as well as agreeing not laying off any of their employees). Thus mortgage-payment holidays are encouraged along with low mortgage rates (just don't try to get a small business loan, or an unsecured line of credit).

Secondly, the demand for housing has increased:

• People that have made out like gangbusters in certain businesses and are looking for purchase opportunities; many of these were located in the cities mentioned;

• The stock markets have been heavily subsidized and so are super-heated; people are now taking profits. In addition, we are going into the fall, traditionally a lack-lustre time for the markets, and this year there are more uncertain times partially due to the pandemic, so investment diversification or taxation shelter options, such as real-estate, are being sought;

• People who normally spend money on family vacations are instead reinvesting in their homes through renovation or up-sizing;

• There was a pent-up demand for real estate, as the spring, a traditional time for house purchase, did not happen;

• A quarter of people in BC have or will change "jobs" (Thought of the Day -July 7 - Coronavirus and Employment Turnover). This life change may also include a change of residence;

• Couples are finding working from home is not just a short-term necessity. They now require two home offices to function, so are forced to move up-market.

Is this a "bubble"? Of course it is. Just like government debt and the stock market, it is supported only by continued growth expectation and associated consumer confidence; but unlike the other two there are actually some tangible assets involved. And we are doing our part. Our daughter has bought a condo in New Westminster and so will be moving out at the end of October.

Happy house hunting.

Cheers

Cliff