After the shock of COVID-19 wiped out the traditionally busy spring real estate market across Canada, buyers made up for it during the summer months. July saw record sales as buyers made up for lost time, but the question of whether the sales boom is sustainable is a hot topic.

On the one side is the real estate industry, which has produced several studies and surveys to prove that consumers won’t let the pandemic slow down their real estate dreams. On the other side is Canada Mortgage Housing and Corporation (CMHC) and specifically its president and CEO Evan Siddall, who has taken a combative stance rarely seen from government bureaucrats.

Siddall has been critical of rosy forecasts and outlooks from the real estate and mortgage industries. In a letter to lenders, he wrote, “We continue to believe house prices will fall, even in the face of recent activity, which appears to be the result of very low interest rates and a sharp reduction in new listings/supply vs underlying demand. Our projections always anticipated a delayed impact: weakening in late 2020 and 2021 once government income supports unwind, bankruptcies increase and unemployment starts to bite. Weakness in oil-producing regions and sharp reductions in immigration will add further pressure. The economic cost of COVID-19 has been postponed by effective government intervention; it has not been avoided.”

Not surprisingly, the real estate industry doesn’t agree with that assessment. “The outlook for the B.C. housing market is much brighter following a surprisingly strong recovery,” says Brendon Ogmundson, chief economist for the British Columbia Real Estate Association. “We expect home sales will sustain this momentum into 2021, aided by record-low mortgage rates and a recovering economy.”

The association is forecasting that prices in the province will finish this year up by 7.7 per cent and increase a further 3.7 per cent in 2021. 

A recent report by Re/Max is also calling for a strong finish to 2020 across the country, with sale prices increasing by 4.6 per cent. “Looking ahead, government financial aid programs may be coming to an end in September, which could potentially impact future activity,” says Christopher Alexander, EVP of Re/Max of Ontario-Atlantic Canada.

“However, the pent-up demand and low inventory dynamic may keep prices steady and bolster activity for the remainder of 2020. Overall, we are very confident in the long-term durability of the market.”

Robert Hogue, senior economist with RBC Economics, says that pent-up demand will “keep the market humming in August and possibly September.

“We see little that can stop the appreciation in property values near term. If anything, many markets are likely to experience further acceleration,” says Hogue. “That said, we continue to believe the eventual shift to a lower demand baseline later this year will have a cooling effect on prices – most likely by the early stages of 2021. We expect lower immigration and increased condo supply in core urban areas to concentrate any weakness on the high-rise condo segment.”

Shaun Cathcart, senior economist for the Canadian Real Estate Association, says: “Recall that before the lockdown, we were heading into the tightest spring market in almost 20 years. Things may have gone quiet for a few months, but ultimately the market we’re seeing right now is mostly the same one we were heading into back in March. That said, there are some new factors at play as well. There are listings that will come to the market because of COVID-19, but many properties are also not being listed right now due to the virus, as evidenced by inventories that are currently at a 16-year low. Some purchases will no doubt be delayed, but the new-found importance of home, lack of a daily commute for many, a desire for more outdoor and personal space, room for a home office, etc. will certainly also spur activity that otherwise would not have happened in a non-COVID-19 world.”

That desire for more space is reflected in a survey conducted for the Ontario Real Estate Association by Nano Research, which found that close to 60 per cent of those who are active in the real estate market say that living in a rural area is now more appealing to them than it was before the pandemic. More say the same about living in the suburbs.

The survey also says that more renters are interested in buying a home than they were pre-pandemic.

Similar results were reported in a survey by Mortgage Professionals Canada. “We were surprised by responses that show higher expectations about buying homes in the near future,” says Will Dunning, the association’s chief economist. “Among non-homeowners, the expectation of buying in the next year has doubled from seven per cent at the end of last year to the current 14 per cent. There has also been a rise in expectations about buying for people who already own their home.”

The report also found that homeowners have not become more worried about their ability to weather a downturn in the housing market, and that there is still a high degree of confidence that real estate is a good long-term investment.

But Siddall is still concerned. Responding to a story recently that quoted several industry sources, Siddall tweeted: “Do I detect another correlation between those who earn fees on housing transactions and those who a) criticize our cautious outlook, b) clearly haven’t read it since they already declare us wrong before the date of our forecast and c) complain when I observe these correlations?”

Siddall is due to leave his post at CMHC at the end of the year, and by then we may have a better idea which side had a more accurate forecast.