TORONTO (Reuters) - Realtors across Canada are kicking off the busy spring selling season with the unprecedented step of cancelling open houses, moves that could contribute to slower-than-forecast sales in the country’s biggest housing markets this year.
The coronavirus outbreak, combined with a collapse in oil prices, is fueling recession fears and slowly eroding housing demand in key markets despite the central bank’s 100 basis points of rate cuts this month.
“Open houses are quickly becoming extinct,” said Phil Soper, chief executive of brokerage Royal LePage, although agents are still showing homes to individuals and small groups.
“If it is contained to a few weeks in the spring, it will simply delay transactions,” he said. But extended lockdowns will diminish the capacity for large purchases.
Canadian home prices climbed 2.9% in February from a year ago, their strongest growth since December 2018, while home sales in Toronto and Vancouver surged 45%.
Before the outbreak, the Toronto and British Columbia real estate associations forecast over 10% sales growth in Toronto and 19% for Vancouver in 2020.
While the Bank of Canada’s rate cuts could initially attract home-buyers, “weaker confidence and greater job insecurity will offset the affordability factor,” CIBC economists wrote last week.
They expect flat home price growth in the next two to three quarters, with sales volumes and starts temporarily dipping.
Ira Jelinek of Harvey Kalles Real Estate in Toronto canceled two open houses over the weekend. One buyer who lost money in the stock market has put his plans on ice. But with offers still coming in, Jelinek remains optimistic.
Oakwyn Realty agent Steve Saretsky is less bullish.
“The market was ripping hot” just last week, said Vancouver-based Saretsky, who held open houses but saw a noticeable slowdown in traffic.
“Almost overnight, things really took a turn,” he said. “Phones are slower, people are nervous. I’ve had a couple of people request to pull out of presale contracts.”
Hilliard MacBeth, author of “When the Bubble Bursts: Surviving the Canadian Real Estate Crash,” predicts a more prolonged decline.
“It’s been a very long time since we’ve had a nasty recession and the amount of debt that has been allowed to accumulate is nothing like in 2009 and in 1996,” he said.
Muted housing growth poses another earnings headwind for Canadian banks, whose mortgage books make up 42% of overall lending. More bad loans are already expected for banks due to the oil price crash.
Reporting By Nichola Saminather; Editing by Andrea Ricci
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