Chart of the Week
While we have been running this chart for several weeks and will continue to do so, we thought we would highlight it this week because Israel has become the first country to cross more than one dose administered per person in its population:
Israel has now fully vaccinated nearly 45% of its population. Further, if we consider that ~20-25% of the population is not eligible for the vaccine as none have yet to be approved for those under age 16, more than half of the “eligible” population has now been fully vaccinated in Israel and close to 75% has received at least one dose.
COVID-19 Update
Globally, total case counts are nearing 120 million with more than 2.6 million fatalities. As we mentioned last week, the daily case count, which had dropped precipitously from early January through mid-February, has stagnated for the past couple of weeks at just under half a million.
The Good News
While the case count remains higher than hoped, we have seen a precipitous decline in both severe cases of COVID and fatalities. Because the vaccines have been primarily targeted initially toward the most vulnerable groups, we have seen higher risk cases fall sharply; although, the easing of lockdowns and the more contagious variants of the disease have led to an uptick in milder cases amongst less vulnerable groups that are less susceptible to severe cases.
Economic Update
The question has come up several times over the past few weeks – what are the risks of a sharp downward correction in housing prices? While COVID has led to many “interesting” developments over the past 12-months, one of the most interesting has been the boom in housing, which has been triggered by a number of factors, including:
- Record low mortgage rates
- A desire for more space brought on by the feelings of isolation COVID has inspired
- The desire to move from high rise buildings where the risks of transmission are significantly greater
- Government programs, which has made it easier for the Canadian banks to lend in a challenging environment
We have begun to see some of these things ebb, especially mortgage rates, which have begun to rise in recent weeks. This has not had much of an impact as of yet on the housing market as mortgage rates are still near historic lows, but were we to see a meaningful uptick in interest rates (something we think remains a low risk), it could have some impact on the housing market.
The bigger risk is likely that as COVID moves to the rearview mirror, some of the trends from above that it sparked begin to wane. While we expect this to happen, one of the countervailing forces to this will be the likely increase in immigration to Canada. Immigration has been a major source of housing strength in Canada over the past decade as new demand moved to the country and tended to center in Toronto and to a lesser extent Vancouver. COVID has significantly slowed immigration to Canada and we would not be surprised to see a surge in new immigrants when the country begins to reopen.
Thus, while some of the drivers that have been in place over the past year are likely to ebb, there could be some powerful offsets.
What we expect to happen: We think the most likely outcome is that the pace of gains slows considerably (essentially – we pulled forward some of the gains we were likely to get over the next several years), but that the market remains resilient. As we have noted several times over the past year, the condo market, especially in Toronto, likely remains the most vulnerable, as there is a significant supply glut, while COVID has weighed on demand.
Be Safe,
Matt & Ann-Marie