Month: June 2020

Canadian purchasing power is likely to worsen amid the sustained impact of the COVID-19 pandemic on the labour market, according to the nation’s largest banks.

The Bank of Nova Scotia is predicting the Canadian unemployment rate to reach as high as 16%, along with a 1-million drop in the upcoming edition of the Labour Force Survey, The Financial Post reported.

“To arrive at this figure, the change in the stock of CERB (Canada Emergency Response Benefit) applications of about 1.6 million between LFS reference periods was scaled back to compensate for expanded eligibility, while assuming no material gross job creation to offset the job destruction evidence through claims,” Scotiabank told clients in a note.

Meanwhile, the Canadian Imperial Bank of Commerce is expecting unemployment levels to move down more slowly than the rate south of the border.

CIBC Senior Economist Andrew Grantham said that in the United States, 87% of newly unemployed persons said last month that they are on “temporary lay-off,” versus 60% in Canada.

“That would equate to a smaller rebound in the employment ratio (around 2.5%) if all of those workers came back,” Grantham said. “How far [jobs market] rebounds go, and how fast they occur, will of course be largely dependent on the spread of the virus and whether stricter social distancing measures need to be reintroduced later in the year.”

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Toronto’s rental property owners are gradually losing hope as the COVID-19 pandemic drags on, according to a new market analysis by RE/MAX.

A significant contributor to the gloom is the almost-overnight collapse of Airbnb, which suffered much-reduced bookings once the coronavirus took hold of the global economy. The online lodging service has lowered its internal valuation from $31 billion to $26 billion, Business Insider reported in early April.

RE/MAX said that these developments have left Toronto’s landlords over-leveraged and susceptible to market volatility – a far cry from the pre-outbreak vacancy level of less than 2% and a monthly rent rate of $2,213.

“Many real estate investors were reaping the benefits of Airbnb-style short-term rentals, where the profit margin was so much greater than a traditional lease,” RE/MAX said. “With the closing of the US/Canada border and the imposed stay at home measures, the demand for short-term rentals disappeared overnight, and now some investors are left scrambling to find tenants for their vacant spaces.”

The market impact could also linger long after the crisis has passed, although pent-up demand might help stimulate activity during this phase.

“Since the closure of non-essential businesses across the city in late March, many tenants are struggling to make rent payments. This will inevitably put downward pressure on demand for a brief period of time, even after protection measures have been lifted,” RE/MAX said. “This extra supply flooding the rental markets, coupled with depressed demand levels, means there is potential for average rental rates to decline within the Greater Toronto Area. This anticipated drop in rent prices and competition may translate to a less stressful home search for new renters, post-crisis.”

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