Edmonton's housing market started out strong in March, but ended with an overall decline of two per cent compared to last year because of the COVID-19 pandemic.File

Predictions of doom in the post-COVID Canadian real estate market have to be questioned … as do visions of sunshine and roses.

On the gloom side, analysts argue COVID will be the straw that breaks the back of Vancouver and Toronto’s real estate prices, prices that have defied normal cycles by going up, up, up over the last 20 years with no major corrections.

A real-estate crash in those two cities would send the Canadian economy reeling – a knock-out punch on top of the financial burden caused by the COVID crisis.

A more convincing counter-argument says the financial storm will be minor. Thanks to COVID spending by governments, especially shoring up banks, things will return to “normal” (with way more debt, but nobody seems to care) in a year’s time.

A sobering statistic: Until a few years ago, real estate (including residential construction) was second to oil & gas in Canada’s economic activity.


But since 2019, real estate has been king — 15% of Canada’s total economic output, compared to 9% for fading oil & gas.

The boom is all about Toronto/Vancouver. Calgary’s real estate woes? Nationally, nobody cares. With zero elected federal Liberals, Alberta has no political clout in Ottawa. Calgary has only 12% of the population of Toronto and Vancouver.

So, if property prices precipitously drop in Toronto and Vancouver, the strain on the country’s financial system would be something to behold. The government revenue loss would be a killer.

The fear scenario:

Greater Toronto and Vancouver households are carrying such debt — $2.40 owing for every dollar of income (compared to a national average of $1.76), that any interruption of earnings — i.e. COVID-caused layoffs, starts the financial snowball.

Mortgage payments can’t be made, lenders foreclose, more homes/condos come up for sale, nobody buys because nobody has cash. Immigration slows, overseas capital disappears (especially from Asia). Banks are scared to lend. Prices fall even more.

But a crash in the country’s two hottest real estate markets – that have kept the country’s economy afloat for decades – will not happen.

Here is why:

Government bailouts are working. Employee subsidies, payments to the recently laid-off workers, to tenants/landlords/lenders … enough money is circulating as to avoid fear of massive payment defaults.

Most of Canada’s big downtown office towers are owned by institutions (like pension funds) that have no debt, that have quality tenants. “Toronto and Vancouver’s real estate markets aren’t even on their radar,” says NAI commercial realtor Chad Griffiths. “They’re more concerned with revamping office designs to accommodate the post-COVID era.”

Office vacancy rates in Toronto and Vancouver remain under 10 per cent. That is nothing compared to the 30 per cent vacancy rate in Calgary’s downtown.

Edmonton’s office vacancy rate is between 8 per cent and 15 per cent, depending on how it is calculated. Our city’s post-COVID real estate outlook is a subject for another day, but the reality is that nationally, our office tower inventory and residential housing move no dials. One does wonder, however, how the Katz Group’s ICE District/Oilers Entertainment Group is managing.

The naysayers are not considering pent-up demand. If prices drop by 10 per cent and interest rates stay low (as they will) in Vancouver/Toronto, untold numbers of renters will look at buying. Savings are growing. We all stopped spending eight weeks ago!

Globally, real estate investors will still love Toronto and Vancouver. Vancouver is a beautiful city in an oasis of political calm. Asian capital will pour back in, especially if prices dip and restrictions ease.

Colliers commercial realtor Perry Gereluk suggests, once COVID passes, that the national real estate market will be good for Canada and mediocre – but not terrible — for Alberta.

Using Edmonton as an example, Gereluk sees doom and gloom as unrealistic. “Nobody points out that 20 new shopping centres have been built in the last three years around Edmonton. A new shopping centre in Chappelle (south of Windermere), fills up 150,000 square feet of retail space and it is not news. But if a J. Crew retail store closes 10,000 square feet, it’s a big deal.”

No big real estate crash is coming. The debate will not be about a crash in Canada’s biggest real estate markets, but in the time needed — a quarter year, one year, four years — for those markets to return to robustness.