Canada's national housing agency says lower economic activity, together with recent provincial measures to contain the COVID-19 pandemic have slowed residential construction activity in many provinces, particularly in Quebec and Ontario. (Ryan Remiorz.THE CANADIAN PRESS)

Pandemic will drive Canada into ‘historic recession’ in 2020, CMHC says

Buffeted by the economic shock of the COVID-19 pandemic, Canada will see “a historic recession in 2020,” leading to a significant decline in housing construction and lower housing prices for at least two years, says a report by Canada’s national housing agency.

In a special report released Wednesday, the Canada Mortgage and Housing Corporation (CMHC) said Canada could see declines in output, employment and immigration exceeding those observed during the recession of 2008-2009.

These declines will in turn drive large falls in housing starts and sales in 2020, the agency said.

The CMHC is now forecasting that prices will fall by between nine and 18 per cent from where they were before the pandemic, before recovering a little in the early part of 2021. But they aren’t expected to be fully back to where they were before at least 2022.

The CMHC expects the average price figure to hover between $493,000 and $518,000 this year. In February, before COVID-19 hit, the average selling price of a Canadian home was $540,000. By April, that figure had fallen by more than $50,000 to $488,000.

“Following large declines in 2020, housing starts, sales and prices are expected to start to recover by mid-2021 as pandemic containment measures are lifted and economic conditions gradually improve,” CMHC’s chief economist Bob Dugan said in a statement.

“The precise timing and speed of the recovery is highly uncertain because the virus’s future path is not yet known.”

The downturn in economic and housing activity will be aggravated in the oil-producing provinces of Alberta, Saskatchewan and (to a lesser extent) Newfoundland & Labrador, as the negative impacts of falling oil-sector investment and employment, following the recent decline in oil prices, are expected to continue throughout 2020, the report said.

With files from CBC News

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