The shortage of rental housing is a major topic in the public debate, and for good reason. Access to a roof over one’s head, a fundamental right, has never seemed as complex and fragile as in this era of upheaval. Another crisis, just as worrying, is looming on the horizon for landlords.
Our journalists Zacharie Goudreault and Samuel Ouvrard recently reported that property owners were under pressure. According to data compiled by The duty According to the Quebec Land Registry, the number of acts of financial difficulty jumped by 39% between 2022 and 2023. The number of notices of exercise sent by creditors who are running out of patience and who are threatening to repossess or sell the house increased by 49% during this same period.
The good news, if we can call it that, is that the situation is less discouraging than before the pandemic. The bad news is that many experts fear a deterioration in market conditions if certain grey clouds continue to gather over the heads of homeowners, namely a rise in the unemployment rate, which was 5.7% in Quebec last June, persistent inflation and a decline in the key rate not rapid enough to avoid a shock to households renewing their mortgages in the coming months. According to estimates from the Superintendent of Financial Institutions, approximately three-quarters of mortgages in Canada will mature by the end of 2026.
These conditions are particularly ungrateful for young people and first-time buyers, who have had to work hard to accumulate the savings needed to purchase a property. Young people do not have it easy in this disordered century. The pandemic and successive lockdowns have deprived them of opportunities to socialize, at school or at work. The rental market is reduced to a closed door or a work of seduction to win the lottery of a healthy apartment at a decent price. Young people are the first victims of the decline in the job market with an unemployment rate that stood at 10.3% last month in Quebec.
Add the climate crisis and armed conflicts around the world, and ask them again why they are so anxious compared to previous generations. End of parenthesis.
The deterioration of the mortgage market does not only affect young people, but all households that risk finding themselves short of cash to absorb an increase in the cost of money when renewing their mortgage. The president of the Corporation des propriétaire immobiliers du Québec (CORPIQ), Éric Sansoucy, fears an increase in repossessions and judicial controls by the end of the year. Already, for the first five months of 2024, 3,700 acts of financial difficulty, 2,550 notices of exercise for unpaid creditors and 154 property seizures have been listed in the Land Registry, revealed The duty.
Squeezed homeowners will depend on banks for leniency in their loan repayments. Banks are already on edge across the country. They hold nearly three-quarters of all mortgages. The economic situation has forced them to increase provisions for bad loans from $2.5 billion to $4.1 billion. That is basic prudence in a country where household debt is close to 180 percent of disposable income.
Fortunately, inflation slowed to 2.7% on an annual basis last June. The Bank of Canada also lowered the key interest rate to 4.5% on July 24, a decrease of 0.25 percentage points. Homeownership conditions are also better than they have been since 2019 as the economy slows, but the lull may be short-lived. In its most recent study, the Canada Mortgage and Housing Corporation predicts an increase in mortgage debt due to the adverse pressures of rising values and falling employment.
The real estate market is not like any other. Throughout history, its collapse has had disastrous consequences for the quality of life and well-being of citizens, the vitality of communities and the housing stock, the strength of the economy and banking institutions. When real estate collapses and homeowners find themselves without a roof over their heads or savings after years of hard work, there is a social and political bill to pay. Our governments would do well not to forget this, because in the current state of public finances, they will not be able to play the Keynesian saviors if a real estate bubble were to burst.