Flu real estate

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Yesterday’s marginal, analysts are now many to expect a price correction. A fair return to the balance, some would say.

The pandemic has been due to the long upturn in the residential real estate in Canada. Yesterday’s marginal, analysts are now many to expect a price correction. A fair return to the balance, some would say.

Last, the canada mortgage and housing corporation (CMHC), rather pessimistic, sees in his crystal ball a fall in average between 9 and 18 % of the price of housing over 12 months, a forecast from the simple to the double, which reflects the degree of uncertainty associated with the health crisis. The National Bank was made to echo with a decrease in the anticipated average of 10 %. “A decline of this magnitude has not been observed in the course of the last three recessions” in Canada, underscore the economists of the institution, in a special study published on Wednesday.

The CMHC is worried. Its president, Evan Siddall, has even gone so far as to evoke in mid-may an increase of the initial capital outlay of 5 to 10% on the purchase of a property in order to constitute a cushion to avoid having to sell a property at a loss, the mortgage insurer does not, however, without wanting to protect his financial situation. Mr. Siddall was inspired by elsewhere, data from the canadian bankers Association at $ 700 000 the number of borrowers who asked for a postponement of payment to support that 12 % of mortgage borrowers have already requested a leave of absence, a proportion to increase to 20 % by September. It is feared that many of these reports do not become seized.

Yet, the canadian market of a mortgage loan is he not already had his panoply of constrictions ? Reduction of the maximum amortization period, recovery of the initial investment, and applying a resistance test, the result is an improvement in the credit quality of borrowers and, by extension, of the insured loans. According to the economists of the National Bank, just 1.8 % of the holders of the mortgage are currently in a situation to have a negative on their property. In the event of a 10% decrease in price, 3 % of owners find themselves in this situation.

Add other constraints to the access to the property in the middle of a recession so-called ” historic “, without regard to regional differences, with many owners experiencing financial difficulties following a loss of employment income that may offer for sale their residence, could push prices in a downward spiral and fuel a movement of seizures.

It may be recalled that at the beginning of the month, the evaluation firm Morningstar DBRS presented two scenarios for Canada, serving not forecasts, but rather the basis for the evaluation of the firm. The agency holds that the failure rate on the mortgage loans only amounted to 0.25 %, or 25 basis points, before the expansion of the epidemic. According to the conservative scenario in which the agency agrees, this rate would almost triple, to reach 65 basis points in 2020, and decline gradually thereafter. Its pessimistic scenario evokes a percentage of loans overdue up to 100 basis points, to levels usually seen during corrections real estate severe.

Regardless of the strength of the correction, DBRS estimates that the pandemic will have had the effect of bringing property prices to a level consistent with the income growth of households and population. In his eyes, the canadian real estate was overvalued by 20% last year. Of 26 and 18% in pockets of overheated Toronto and Vancouver, 11% in Montreal. Reading moderate sketch a contraction of 10 % of the average price in Canada by 2022, 14% and 10 % in Toronto and Vancouver (with a contraction of 19 and 15 %, respectively, on the condominium market, where there is more overheating), 6% in Montreal, wrote one.

The National Bank also illustrates this regional differentiation of the magnitude of the declines estimated in its base scenario. With a correction of 13 % in Toronto, 12 % in Vancouver, 10 % in Calgary and 7 % in Montréal.

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