The Role Of Fiscal Stimulus During COVID-19 And Toronto Real Estate

COVID-19 & Toronto Real Estate, Finance, Real Estate

For those engaged in the Canadian real estate market – buyers, sellers and homeowners – emerging media headlines about the effects that this global health crisis will have on our economy have been concerning.

Certainly, the Toronto real estate market is feeling the impact of COVID-19 rather harshly, in terms of the decline in the volume of properties being traded. And it’s likely we will continue to feel this impact for the next few months, if not longer. Although March started out super-hot in the market, the implementation of social distancing and self-isolation requirements prompted a decline in sales as we collectively acknowledged circumstances were becoming very different. For a little context, click here for my post: March 2020 Toronto Regional Real Estate Statistics: Before & After COVID-19 Arrived.

Although the real estate industry remains open for business – after being deemed an essential service – only those who need to move out of necessity are currently active in the market. During this time of transition, one’s expectations on the processes for the trade of real estate, and what one’s return on investment should be, need to be adjusted compared to pre-COVID-19 expectations. I discussed this at length – and with caution and concern – in Assess Your Risk: Buying & Selling Toronto Real Estate During The COVID-19 Pandemic.

Homeowners, in particular, should be concerned on the direction the Toronto real estate market may be going, especially if their employment is insecure or there is uncertainty on whether they can maintain their expenses for a prolonged period of time. Of particular issue are those who carry high mortgage debt, which I wrote about just before COVID-19 barged into our lives. Click here to read “The Implications Of Moving Toward An Asset-Based Economy.”

Fortunately, to get us through this time, government aid has been substantial – both to individuals – and to businesses. Seemingly every day, a new program of fiscal stimulus is introduced, or a new layer is added to existing support, to accommodate those who may have been left out!



These include the opportunity to defer mortgage payments by several lenders, utility bill deferrals from the city, and various other incentives by different levels of government. Investigate the Canada Emergency Response Benefit (CERB), Canada Emergency Wage Subsidy, Indigenous Community Support Fund, Employment Insurance (EI), Provincial Employment Relief, in addition to extensions on Income Tax filing/payments or Student Loan and payments, increased federal benefits and a reduction in the withdrawal sum requirement for those with Registered Retirement Income Funds (RRIFs). This article in Moneysense called ‘Where To Find And Apply For COVID-19 Financial Relief” offers a good summary of what is currently available, but check often as the situation is fluid and ever-changing.

But are these programs enough? Or could the Canadian government’s massive investment in fiscal stimulus potentially be too much? Can it effectively help sustain the economy at large?




The Great Depression & Consumer Confidence 

Without diving too deeply into a lesson on macroeconomics, fiscal stimulus has been proven to play a huge role in not only economic recovery, but in short-term sustainability as well. Have you seen the flurry of articles recently which parallels our current economic downturn to the Great Depression? The IMF blogged this week about The Great Lockdown: Worst Economic Downturn Since The Great Depression. Yes, we are experiencing a stall in the economy with widespread industry closures and brutal job losses, but the context is totally different.

Back in 1929, In the U.S., President Herbert Hoover was at the helm of the country as it shifted from record-breaking prosperity to economic freefall after the stock market crash. While the crash alone isn’t to blame for the Great Depression, it was the tipping point of a number of complex economic issues converging. In the aftermath of this economic implosion, Hoover was widely criticized for not making greater use of federal funds and programming to sustain the economy as it faltered.

Hoover was philosophically opposed to government intervention in a capitalist society, feeling that the pain of the stock market crash and ensuing economic fallout would be short-lived. There was an attitude of “only the strong survive” and that these companies would be the basis for growing the economy after the downturn. In fact, Hoover had been quoted as desiring a nation of “homeowners and farm owners”.

Hoover can’t be completely blamed for his expectations that the economy would rebound. After all, it is common for economies to experience periods of substantial growth after falling, as the cycle goes on. However, what was one of the major differences in this downturn was the inability of the consumer to participate in the upswing. While the proportion of the population that held stocks and had their wealth wiped out in the stock market crash was relatively low, many of the banks that everyday people counted on to invest their money and borrow from for spending did.

Many banks were forced to close their doors. This incited great panic and caused a run on the banks soon after, which was total economic chaos. Private investors no longer had the means to invest in industry and commerce, which meant little to no growth, which translated into limited employment opportunities. Those that still did have jobs largely had to take wage cuts. Purchasing power greatly eroded alongside consumer confidence and so on and so forth. Without customers to buy goods, economic growth was hampered even still.

The impact of the Great Depression was felt in countries around the world, especially here in Canada, with many leaders adopting the same stance as Hoover. Click here to read Great Depression History and The Great Depression And President Hoover’s Response

What all of this underscored is that forgoing a federal stimulus plan to support industry growth and encourage consumer spending can be far-reaching and possibly disastrous.




Concern With Consumer Confidence Today

Today, understandably, consumer confidence is waning here in Canada. We are fearful about the massive shutdown of everyday life; the global economy; and our collective health and safety. We are also fearful about how long this invisible virus may last. Working consumers across all demographics are afraid for their job security, about their personal financial situation, and whether Canadian property values will decline.

Click here to read “Mass Layoffs Push Canada’s Consumer Confidence To An All-Time Low” and “COVID-19 Canadian Consumer Confidence, Economic Forecast Plummet

Although we are certainly mired in challenging economic times… this isn’t the Great Depression!



It is! And this is because our policymakers are literally doing the opposite of what policymakers did in the aftermath of the infamous Black Tuesday stock market crash.

Countries around the world are strategically formulating – and implementing – mechanisms to stimulate their economies!




The Housing Market And Economic Recovery

From mortgage deferrals to various employment benefits intended to keep the household cash flow going, there are policy-driven initiatives intended to help alleviate the strain on consumers individually while keeping money moving through the economy.

Of particular significance to the housing industry, the Bank of Canada and the federal government recently announced CMHC – a crown corporation – will purchase $150 billion worth of existing mortgages. This will provide Canadian lenders with much-needed cash in their coffers, while offsetting the risk of a ‘credit freeze’. Click here to read “Canada Has Put Housing Markets On Life Support: Here’s What’s Happening“.

Why this significant investment? Because if a ‘credit freeze’ ever came about, and banks lacked the liquidity required to lend consumers the funds necessary to purchase and finance homes, then the real estate market would unravel…



More specifically, the decline in property prices would be swift and severe, resulting in widespread economic fallout. It would trigger a domino effect – similar to what occured to in the Great Depression.

The CHMC announcement is an important, proactive move in order to sustain the Canadian housing market – bravo! It’s also a policy which supports and sustains the overall health of the economy, given that housing’s combined contribution to GDP generally averages 15-18%, in addition to how much employment it generates for the economy. Furthermore, much of the personal wealth of Canadians is tied up in real estate; 67% of citizens own their own home (one of the highest percentages in the world), of which many are highly leveraged, particularly in pricey cities like Toronto and Vancouver.



We consulted with our friend and colleague Jake Abramowicz (now The Mortgage Jake Team) about CMHC’s announcement.

He said:

“This “investment’ or “infusion” into the market could not have come at a better time. As much as I think Evan Siddall (CEO of CMHC) has run a very very tight ship, it turns out, he laid out the ammo when he absolutely had to.”

He continued, “It was incredibly impressive how fast it happened and the long-term commitment to continuing the infusion. A lot of people will argue that propping up Canadian housing is the last thing we need. That correction will bring on affordable housing for all! But, to me, that’s a pipe dream. Letting the market collapse on itself would bring such a mass amount of pain throughout so many of the “FIRE” industries (Finance Insurance Real Estate) and not to mention construction, that it would create much more of a long-standing mess to climb out of than having housing that’s a little out of reach currently.

“I also think we’re going to see wholesale changes in the mortgage market (already seeing), especially for investors. So, gradually, I do expect that the market will rebound however lending will be a lot tighter than it is today. Which – in turn – may indeed slow things enough for people to catch up and get on the bus,” Jake explained.

As we struggle to gain our foothold during this economic turbulence, rest assured, there is a method to this influx of capital to the marketplace. The fiscal stimulus serves as a bridge to help us cross these choppy waters and emerge to the other side with a plan for the future. And now more than ever when our present is full of uncertainty, it is important to look ahead.



If you are looking to learn more about financial health, check out these recent posts:

How Canada’s Big Banks Are Responding To The COVID-19 Pandemic Panic

Canadian Real Estate Sees Interest Rate Cut & Mortgage Stress Test Change

Dear Urbaneer: Should I Max Out My House Hunting Budget With CMHC Mortgage Loan Insurance?

What You Need To Know About Canada’s New Mortgage Rule Changes

How Do I Set Up My Home For Financial Success?

Dear Urbaneer – Does It Still Make Financial Sense To Invest In Downtown Toronto Real Estate?




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Thanks for reading!


-The Urbaneer Team

Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-8000

– we’re here to earn your trust, then your business –


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