COVID-19 has turned many Canadians lucky enough to have kept their jobs through the pandemic into savers, which one of the country’s biggest realtors says will help push home prices higher.
Unemployment benefits like CERB — which evolved into CRB, CRSB, and CRC — meant money continued to flow into the accounts of those who did lose income. Shutdowns helped curtail spending and Statistics Canada found household savings spiked to 28.2 per cent of household income in the second quarter, the highest since the 1960s.
“Typical consumption patterns have been disrupted in 2020 as the pandemic has driven the household savings rate to levels not seen in decades,” said Phil Soper, president and CEO of Royal LePage, in a report.
“Most Canadians have sharply reduced spending on discretionary goods and services involving a great deal of human interaction, and with mortgage rates at record lows, many have refocused on housing investments, be it renovations to accommodate work-from-home needs, a recreational property or a new property better suited for the times.”
Coupled with pent-up demand, Royal LePage predicts the median national home price will end the year up 7 per cent versus 2019, despite second wave worries.
Housing depends on location and age
Forecasted price appreciation varies by region. Toronto, recently labelled the world’s third riskiest housing bubble, and Ottawa are expected to rise 8.5 per cent year over year in the fourth quarter. Montreal’s call is for a 9.5 per cent price increase and 4.5 per cent for Greater Vancouver. Calgary and Edmonton prices are each expected to fall 0.5 per cent.
Despite the higher savings rates and record low interest rates, Royal LePage says young buyers still face barriers.
“Young adults are less likely to have been the homeowners who watched real estate equity build over the past few months. Many have lost their jobs during the pandemic,” said Soper.
“If policy makers do not make increasing the supply of homes for rent or purchase a priority, there will be negative social consequences for years to come. COVID-19 has stimulated the demand for additional housing in ways that few could have foreseen.”
Higher savings rates and working from home has led to a renewed interest in renovations. Many homeowners say high demand has meant contractors are unavailable for projects. It’s even led to higher lumber prices and shortages at stores.
A recent survey from RATESDOTCA, shows that trend is likely to continue. It found almost 30 per cent of respondents plan to work from home for the foreseeable future. More than a quarter of respondents completed a home renovation project during COVID-19 or are planning one in the near term.
“Gen Xers (people born between 1965 and 1980) were among the most active doing renovations so far this year (38.1%), and are the most likely to launch new home reno projects in the next few months (42.9%),” read RATESDOTCA’s report.
“Many Baby Boomers (people born between 1946 and 1964) are also renovating their homes (28.9%), but only 15.5% intend to take on a home reno project in the future”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.