Friday, June 18

Why the Canadian Housing Market Is Soaring in the Pandemic


This week began with an unusual apology. Evan Siddall, the president and chief executive of the Canada Mortgage and Housing Corporation, took to Twitter to acknowledge that the federal agency had erred last year when it forecast that the pandemic-induced economic collapse might cause house prices to fall by as much as 18 percent.

One factor is that the pandemic didn’t hit the wages of high-income people as hard as it hit those of others. In Ottawa, Montreal, Toronto and Vancouver, the report found, housing price increases were most pronounced among higher-priced houses. People with higher incomes have suffered less from unemployment because they tend to have jobs that can be done remotely.

They were also able to save more than usual, because restrictions on travel and shopping meant they spent less. Combined with ultralow mortgage rates, houses became an attractive target for spending that money.

Another reason demand surged, the report found, was that when the market nearly shut down early in the pandemic, it created pent-up demand that was unleashed later last year. Buyers soon outnumbered sellers on the market in many regions, the report concludes — a perfect situation for sellers.

Mr. Siddall, who will soon step down from his already extended tenure at C.M.H.C., is no favorite of the real estate industry. Many of those in the business disliked his agency’s tightening of the qualifying rules for the mortgage insurance it sells to banks for lending to heavily indebted home buyers. And many accuse him of being a spoilsport who has scared away buyers with his warnings.

Last year when he offered the incorrect market prediction, Mr. Siddall said that he had a duty to warn young Canadians about the financial perils that a drop in house prices, an increase in interest rates and increasing personal debt levels could bring.

While admitting his forecasting error, Mr. Siddall was no less cautious about the future this week.

“Times were uncertain and I felt that a warning about house prices was responsible,” he wrote about last year’s caution. “Today, we remain very concerned.”



A native of Windsor, Ontario, Ian Austen was educated in Toronto, lives in Ottawa and has reported about Canada for The New York Times for the past 16 years. Follow him on Twitter at @ianrausten.


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