Of Fitch Covid and Real Estate in Canada
“How about we all stop paying mortgages! It’s a moral hazard.”
Rick Santelli
One of the Big Three U S rating agencies Fitch Ratings Inc. has finally made some credible predictions about the real estate market in Canada in 2021.
Here are some of the findings and raison d’etre for such assessment.
Fitch forecasts that the unemployment rate in 2021 will fall to 7.8% from 9.5% in 2020. When measured against the average rate of 6.3% during the previous five years, the unemployment rate would continue to a matter of concern and would impact the housing market. The segment that has been hardest hit by the pandemic is the 15% self-employed workforce. Their misery will continue for longer than previously thought. The doles may have sustained them for some months in 2020, but that succour would no longer be available to them.
Secondly, the home prices will feel the pressure due to an unprecedented fall of almost 40% in immigration due to the pandemic- a factor that will show its impact in 2021. The rentals are already down and likely to remain low or fall. Despite the incredibly low mortgage rates at the moment, the stress test requirement for new mortgages will continue to undermine demand for housing.
