The Quebec Professional Association of Real Estate Brokers (QPAREB) unveiled its residential market forecasts for 2020 into next year. What was supposed to be a record-breaking year for transactions—Q1 recorded a 18 per cent jump in transactions compared to Q1 2019—repercussions of social distancing measures started to take a toll on the market beginning in mid-March.
Charles Brant, director of the QPAREB’s market analysis department, says market forecasts are difficult right now and much depends on medical discoveries, government decisions and the public’s attitude; however, QPAREB is still able to provide a relatively reliable forecasting framework for the resale market based on two scenarios, one more pessimistic than the other.
A slowdown in the activities of most real estate professionals will lead to a record drop in sales of about 60 per cent in the second quarter of the year, compared to the second quarter of last year. A sharp drop in listings will also happen. This freeze on the market is expected to lead to price stability in Q2.
On one hand, the longer the return to normal economic activity is delayed, the less intense the return of sales will be in the medium term.
The less pessimistic scenario is the restarting of sales will take place in a context where unemployment in Quebec is expected to peak above 10 per cent in the second quarter, according to several Canadian financial institutions. The definitive job losses will naturally have reached the economic sectors that are most vulnerable from the crisis and the households that are most exposed to it.
“In our opinion, despite exceptional government assistance, a significant segment of first-time buyers affected by the crisis will have to give up on their plan to buy a property, or will have to sell their first home during the second half of the year, particularly in those areas where prices are highest and where the economic sectors most affected by the crisis are concentrated,” said Brant. “This could intensify the housing crisis in some rental markets. A temporary spike in new listings could coincide with the end of the deferral of mortgage payments granted to households that are economically affected by the COVID-19 crisis.”
However, the forced postponement of purchases since early spring due to social distancing measures could result in an increase in sales. These sales would only partially offset the increase in supply on the market, as purchases would be from more experienced buyers who have suffered less financially and benefit from extremely favourable financing rates, and who are not necessarily looking for the characteristics of the properties that are being returned to the market.
“Market conditions in Quebec could quickly return to their equilibrium level by the fall; in the second half of 2020, a limited drop in median prices is expected to be seen in several geographic areas, which will present buying opportunities,” said Brant. “For 2020 as a whole, we could ultimately see a 22 per cent drop in transactions in Quebec as compared to the sales record reached in 2019, as well as a two to four per cent decrease in median price depending on the property category.”
The market could start to benefit sellers again at the end of the year with the reopening of the economy and a relatively gradual decline in active listings. The rebound in economic activity will be most intense in 2021, with an expected rebound in transactions of about 25 per cent compared to 2020, as well as a six to 10 per cent increase in prices, depending on the property category. However, the level of activity will not reach the record that was set in 2019.
“Keep in mind that the economy is still dependent on several completely unpredictable factors linked to the possibility of new waves of the epidemic in late 2020, assuming a late discovery of effective treatments and vaccines, which is envisaged in our pessimistic scenario,” added Brant.
