Canada鈥檚 housing market is headed into a period of 鈥漵evere declines鈥� in sales and construction, but the full effect of COVID-19 on real estate is far from certain at this point, according to a new report by the Canada Mortgage and Housing Corp.

CMHC deputy chief economist Aled ab Iorwerth described an uneven recovery that will 鈥渧ary considerably鈥� across different parts the country, and urged that forecasts be taken in the context of an 鈥漞xtreme uncertainty鈥� that lies ahead.

Average home prices in Toronto, Montreal and Ottawa are expected to rebound sooner, starting in late 2020 and rolling into early 2021. Prices in Vancouver, Edmonton and Calgary may not bounce back until later in the forecast period, the report said.

Calgary and Edmonton will see average home prices decline due to uncertainty around oil prices and economic recovery in the region.

Volatile factors, such as a potential second wave of the virus, higher unemployment and the pace of an economic recovery, could influence the direction of the housing market in the coming months, ab Iorwerth explained.

鈥淲e are still at the early stage of understanding the impact of COVID-19 on the economy in general, and on the housing market in particular,鈥� he said on Tuesday in a conference call.

鈥淟imited data availability means we will remain in the zone of considerable uncertainty.鈥�

He said the CMHC is relying on its own housing market outlook from late May as its central forecast for the coming months. It expects the housing market likely won鈥檛 see a return to pre-pandemic levels before the end of 2022.

Greater cultural shifts may also affect the speed of recovery, he said, and many of those developments are so recent that they鈥檙e hard to fully comprehend or quantify.

Cities which lend themselves to industries that allow for working from home, could prove to make those regions 鈥渕ore resilient,鈥� which could have ripple effects on housing, ab Iorwerth said.

鈥淲e do not yet have a grasp on the answers to questions, such as the impact of greater work from home, differing impacts across industries, the effect of less mobility across provincial boundaries and the decline in immigration following cutbacks and international aviation,鈥� he added.

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There are also substantial questions about how rental markets will be affected.

He noted that a decline in immigration and interprovincial activity will lower demand for rental units, which combined with a 鈥渟ignificant new supply in rental properties close to being completed,鈥� could mean that vacancy rates are likely to jump.

鈥淪uch increases in vacancy rates, however, will be from historically low levels in Toronto and Vancouver, in particular,鈥� he noted.

Earlier this month, CMHC reported the annual pace of housing starts, excluding Quebec, fell 20.4 per cent in May compared with April.

The Canadian Real Estate Association reported in May that home sales had their worst April in 36 years, with home sales falling 57.6 per cent from a year earlier to 20,630 sales for the month.

The Canadian Press

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