Pent up housing demand may lead to summer market rebound during COVID-19

Friday Aug 07th, 2020

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At a time when Canada is planning to survive the COVID-19 pandemic, hopeful indications are now coming from China as it has been able to contain the virus as no new local COVID-19 infections have been recorded since days.Beijing’s economy is slowly rebounding after weakening earlier this year. In March, the Chinese housing sector witnessed a rapid turnaround in what may be a classic case to predict for Canada's own sector trajectory until the effect of the pandemic subsides throughout the world.

"China's private housing sector is springing back to life as more selling offices reopened across the country after a national closure, protecting home builders from this year's deeper financial downturn," South China Morning Post writer Iris Ouyang wrote in an article released in March.

Ouyang listed amount of home selling in eight major Chinese cities that observed lower rates in the final quarter of 2019. She also noticed that property prices in Chinese cities of 30 tier-1 and tier-2 tripled as of February in March, an indication that the coronavirus epidemic was fading. South China Morning Post uses a four-tiered method to rate China's cities using data on GDP, population and democratic governance.

"There's a release of pent-up demand from the Spring Festival and the coronavirus lockdown period in February," Yang Hongxu of the Shanghai-based real estate consulting company E-House China Research and Development Institute told South China Morning Post. "And we see the real estate sector partly warming up."

There is little that can be assured in these unprecedented days. Many analysts agree that the experience of China and other Asian countries that were first affected by the virus early in the year would essentially reflect Western countries' experience, who are now bearing the maximum cases of this outbreak.

"If the pattern shown in Asia persists (and we have reason to think it will) we're about 3 to 4 weeks away from the global pandemic inflexion point," Tamara Specific Vasiljev, senior economist at Oxford Economics, wrote in a research note published today.

"Actually, the number of cases of coronavirus cases continues to increase dramatically, and Western economies have been unable to replicate the impact of Asian policies on quarantine and containment. But in the West, the trends of COVID-19 deaths are close to patterns seen in Asia, pointing towards a fast turnaround, "she added.

The expectations for a reinvigorated summer and fall demand are definitely correct. Earlier this month, BMO economist Priscilla Thiagamoorthy reported that Canada's housing sector "found a stable foothold in the first few months of 2020" before being disrupted by the COVID-19 pandemic's unparalleled destructive impacts.

The Bank of Canada has cut its primary interest rate to a record low last week in reaction to the wide-ranging economic impacts of the pandemic.

Despite high housing demand anticipated in the months leading up to the pandemic and all-time low mortgage rates as Canada recovers on the other side of the COVID-19 crisis, there's plenty of justification to anticipate a residential recovery in the months ahead.

China is obviously pursuing this trend as its epidemic is fading, thus strengthening the argument that if it takes the same route the Canadian economy might bounce back easily.

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