Tal expects real estate segment to remain stable, while rental market will get weaker

According to CIBC World Markets deputy chief economist Benjamin Tal, Canada’s economy will face new challenges during the next six months. Meanwhile, the national real estate market will probably continue the V-shaped recovery.

In his opinion, we’ll see another wave of the coronavirus, which may already be starting, actually. It may coincide with the start of the usual fall flu season and make people more scared of going out.

Such a change will hurt the service sector, which has already been the largest victim of the COVID-19 crisis in terms of economy.

Tal says businesses received a push from the reopening of most of the economy this summer, but it will not last over the fall and winter, thus slowing down the recovery process.

“We are recovering into a recessionary territory,” – he noted.

At the same time, Tal is more optimistic concerning the real estate market, which has exceeded most expectations due to low interest rates and a strong demand.

“The service segment accounts for 80% of all lost jobs. Many of them had a low income and were renters. So the strongest influence was on rent, not on home ownership.

“Home ownership was actually up, as 25% of Canadians are planning a home purchase during this recession”.

“Why? Because they still have jobs and income, and mortgage rates are extremely low. It’s a chance they’ve been waiting for. That’s why we see stronger demand from domestic homeowners, not foreign.”

Tal expects the low-rise real estate market to be fine and lower-priced condos to attract investors and Canadians planning to live in the units.

Meanwhile, more expensive condos will be more vulnerable during the next six months.

“The entire housing market will stabilize at the current levels, it will not continue its 20% annual prices growth,” – noted Tal.

Rental housing market will probably remain quite weak, as some young adults who were living with their parents may stay with them longer. Those who moved out, may come back or pair with others in order to reduce the costs.

Although Canada will lose a large number of immigrants this year, Tal still says it’s not that bad as many believe.

According to him, Canada usually welcomes an average of 350,000 immigrants annually, and 45% of them are already here.