Darryl Dyck/Canadian Press
I recently read this article by Mark Ting, CBC’s finance columnist, on the connection between unemployment, government aid, and real estate.
Ting notes that usually for every one per cent rise in unemployment there is a four per cent decrease in housing prices.
Yet this is not the case between February and August this year as the unemployment rate doubled and the Canadian housing market soared to record highs.
A few key points from the article shed some light on what exactly happened:
1-“homeowners who lost their jobs were able to keep their homes due to government incentives ie bought them time and allowed them to keep their homes off the market this decreased supply.”
2-“interest rates dropped which lowered the cost of borrowing for buyers and increased the amount of house they could qualify for This increased demand.”
3-“fundamental shift in real Estate desirability. work from home is now a necessity. Living close to work is not. Condo owners are purchasing homes in the burbs so the have a home office and a backyard This has made a tight (contract) detached market and a surge (expand) in condo listings.”
Ting speculates that as s long as government aid keeps flowing the housing prices will continue to go up.
“ Household spending has dropped by 13 per cent, which has increased our savings rate by 28 per cent. The government income replacement programs were effective, but it appears they overshot a bit as for every dollar in salary lost due to the pandemic, the government replaced it with approximately $2.50.” Mark Ting, CBC’s finance columnist.
“There has been a fundamental shift in what is deemed desirable in real estate. Now that the work-from-home movement is no longer a trend but a necessity, living close to your workplace isn’t as important as it used to be. The items that are on top of today’s buyers’ wish lists include a backyard and an extra room for a home office.”
Many Vancouverites are selling their downtown condos to purchase homes in the burbs of North Vancouver and Langley etc… Recently, we have seen a huge flurry of activity in North Vancouver multiple offer competition. The other realtors writing are from Vancouver.
We expect to see the detached market supply contract while new condo listings expand. This could become the norm. If you are thinking about selling a condo, now is the time. As supply surges upward surpasses demand, prices will go down.
Check out the link here to read the full article. Any questions? Call us, we know the market and we can help.