Is Canada's real estate sector on the brink?


This week, the National Bank published a special study dedicated to real estate. In its last edition of the IMMO conference, CORPIQ shared with you the vision of one of the two authors of this study, Matthieu Arseneau, General Manager and Deputy Chief Economist of the Economics and Strategy Group at the National Bank Financial Markets.

Is Canada's real estate sector on the brink?

Here are the main lines of his analysis in this new and unprecedented pandemic context.

Since the 2008-2009 recession, the Canadian housing market has been perceived by some as a vulnerability for the financial system. The sharp contraction in the economy caused by the Covid-19 pandemic and its effect on the labour market suggests that the unemployment rate could remain high for some time. 

Under these circumstances, forecasts anticipate a 10% decline in house prices in Canada, a decline that has not been observed in the last three recessions. Several factors are put forward to explain this: employment, interest rates, tourism, and immigration. 


National Bank experts estimate that the unemployment rate should remain around 9% in 2021. In fact, more than a fifth of jobs are concentrated in sectors particularly affected by the pandemic: retail trade, accommodation and catering, and arts and entertainment. It should be noted, however, that these workers have some of the lowest property ownership rates, which suggests a lesser impact on the residential investment market.

Interest rates

Interest rate cuts had helped stabilize the real estate market during previous recessions. In the current crisis the impact could be less, as interest rates are already at a very low level and central banks have very little room to manoeuvre.


It is clear that this sector is particularly affected by the pandemic and will negatively affect the real estate sector. Restrictions have impacted the tourist accommodation sector and the rental of properties that were intended for tourists, particularly via Airbnb-type platforms. In this context, National Bank analysts anticipate that many properties are likely to be put on the resale market since they generate little, or no, revenue.


The dynamism of the Canadian market in recent years was due in part to the immigration policy in place and its preference for economic immigrants, which provided constant support to the real estate market and influenced housing prices.

Analysts suggest that the reduction of the immigration thresholds in the coming quarters would be a risk factor for a more pronounced drop in prices, as would the increase in the minimum down payment suggested last May by the CMHC for credit granting criteria.

Finally, the amplitude of the decline anticipated by National Bank experts varies from one city to another, particularly concerning affordability. Thus, the decline in prices forecast for Montréal (7%) is less than the three other major Canadian cities: Toronto (-13%), Vancouver (-12%) and Calgary (-10%). 

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