Canada's Property Market on the Brink

Posted by Ed 12 mths ago 

COVID-19 has left the Canadian economy in tatters, with skyrocketing unemployment.

“The overstretched and vulnerable Canadian housing market is starting to collapse. I believe the big 5 Canadian banks are in for a very tough year.”

The implication is simple: Canadians with extremely tight finances are suddenly facing a loss of income and can no longer pay their mortgages.

Currently, over 20% of borrowers in Ontario, Alberta and Quebec are unable to make their mortgage payments. The chart below illustrates this using mortgage deferrals as the determining factor.

The problem with these deferrals is they’re only a temporary pain-killer. The payments, interest and interest-on-deferred-interest must be paid later.

The success or failure of this deferral strategy is completely dependent on Canadian employment recovering very quickly over the next few months. If people continue to defer, there will be a point of reckoning in the future. 

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Ed 11 mths ago
Head of Canada’s Mortgage & Housing Agency Warns Home Buyers to Question Motives of Those Saying Prices Will Rise
“Please question the motivation of anyone who wants you to believe prices will go up (yes, up) with our economy in slow motion, oil being given away, millions of Canadians on income support and a greater % of mortgages not being paid than we’ve seen since the Great Depression.”
“Here’s more on our house price outlook. Some vocal real estate advisors have labelled us “panic-inducing and irresponsible,’ saying essentially that house prices don’t go down. They’re whistling past the graveyard and offering no analysis. Here’s ours. You decide.” 
“Millions Of Canadians On Income Support”
Canadians use various forms of income support, but nothing highlights issues like CERB (Canada Emergency Response Benefit). The temporary emergency income support rolled out due to the pandemic had 6.7 million applicants by mid-April. At the end of May, the Canadian government estimates 8.29 million unique applicants.
Considering Canada’s labour force is just 18.6 million, that’s 44.5% of them requesting emergency aid. Even if unemployment is still in the low teens, this implies a lot more people aren’t working – and quite possibly won’t have work to go back to.

“A Greater % Of Mortgages Not Being Paid Than We’ve Seen Since The Great Depression.”
Canadians are requesting relief from their mortgage payments at a breakneck speed. The CMHC itself estimates 12% of insured mortgages are currently on payment deferral, and they expect this rate to rise to 20% by September.
More generally, the CBA estimates the big Canadian banks had 500,000 requests looking for mortgage payment deferral in the beginning of April. By the end of May, the handful of large banks had approved 721,000 mortgage payment deferrals. This represents about 15% of all mortgages on their books, and that number is still climbing.

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Ed 10 mths ago
Australia House Prices Fall for Second Month as Lockdowns Bite
While the decline in property prices from the coronavirus outbreak has been milder than initially anticipated, “the downside risks remain significant,” said Tim Lawless, head of research at CoreLogic.

The real test for the housing market will come later this year when current extraordinary levels of government and bank assistance wind down. More than 485,000 mortgage borrowers are on payment holidays, amounting to about 11% of property loans at the major banks, according to Morgan Stanley analysts. About 3.5 million workers are on government wage subsidies.
“Eventually the economy and borrowers will need to abide by market forces,” Lawless said. “This is when we could see a rise in mortgage arrears and the potential for a lift in urgent or forced sales.” 

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