Bad Debts Trends Q2-2021 - JLR STUDY
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JLR STUDY
Bad Debts Trends
Q2-2021
www.jlr.ca
HIGHLIGHTS According to data from the Quebec Land Register
compiled by JLR, an Equifax company, in the second
• In the second quarter of 2021, the number of prior quarter of 2021, 820 prior notices were issued across
notices issued across the province was 820, an the province for all types of properties combined, an
increase of 33% over the same period last year, increase of 33% over the same period a year earlier.
but are down 48% compared to 2019. This increase may be explained by the fact that during
the second quarter of last year, several recovery
• Between April and June 2021, a total of 209 processes were on hiatus due to the onset of the
repossessions were published in the Quebec pandemic. However, it is a noticeable decrease from
Land Register, a 21% increase over the second 2019, reflecting the strength of the real estate market.
quarter of 2020. From July 2020 to June 2021, 3,616 such notices
were published, down 34% from the same period last
• Over the past 12 months, the number of prior
year. Despite the decline in GDP, the various financial
notices has decreased in all regions, as has the
assistance initiatives have helped households
number of repossessions.
weather the ongoing economic and public health
crises, which partially explains why the number of
QUARTELY VOLUME OF PRIOR NOTICES, prior notices has remained historically low.
REPOSSESSIONS AND NOTICES OF SALE UNDER
JUDICIAL AUTHORITY IN QUEBEC
D
espite a high unemployment rate in Quebec
compared to that of recent years, the number
of prior notices remains low. The high level of
demand for real estate may allow financially struggling
households to sell their homes quickly at a price above
the amount of their mortgage debt, thus avoiding
repossession by creditors. Moreover, the government
assistance programs implemented in response to the
arrival of COVID-19 allows individuals who have lost
their jobs to meet their financial commitments.
Evolution of the Number of Prior Notices
JLR Study — Bad Debts Trends - Q2-2021 2Evolution of the Number of Repossessions
ECONOMIC ANALYSIS
In the second quarter of 2021, 209 repossessions
were published throughout the province, up 21% Despite the cessation of mortgage deferrals, bad
from the second quarter of 2020. However, despite debts have not risen significantly. In fact, over the
this increase over 2020, the number remains well past several months, normal recovery processes
below that of 2019. The situation in the spring of have resumed, but the number of households in
2020 was exceptional and is not a good basis for financial difficulty has been limited thanks to the
comparison, as several recovery processes were support measures still in place. Furthermore, as the
on hiatus at the time. Over the last twelve months, low inventory persists, the market is still in favour
a decrease of 31% was recorded, for a total of of sellers, making it easier for those with financial
912 repossessions. difficulties to sell their property at a profit.
Consequently, in the short term, the number of bad
Between April and June of 2021, 253 notices of sale
debts is expected to remain low.
by judicial authority were published, up 86% over the
same period last year. As with the other types of bad Moreover, according to the Canadian Bankers
debts, despite this significant surge over the second Association, as of April 30, 2021, 0.18% of mortgages
quarter of last year, the number of notices remains in Quebec were in default. This proportion has
historically low. Over the past twelve months, 857 declined as it was at 0.26% at the same date in 2020
publications of this type have been recorded, down and 0.27% in 2019. These statistics indicate that
24% from the previous year. there is very little financial distress in the province.
The data, compiled from ten banks, does not include
Desjardins, the largest lender in Quebec, but it is
reasonable to assume that the trend is the same for
this financial institution as well. These results suggest
that the number of published prior notices will remain
low in the coming months.
JLR Study — Bad Debts Trends - Q2-2021 3With the gradual reduction of quarantine measures DEFINITIONS
and the implementation of the vaccination program,
Prior notice: Notification through which a person
economic activity is slowly recovering. In fact, the
informs another individual of his intent to exercise his
Bank of Canada is forecasting economic growth of
hypothecary right (taking in payment, sales by judicial
6.5% this year. A recovery of this strength would limit
authority, sales by the creditor and taking posses-
household financial difficulties over the coming year.
sion for purposes of administration). Prior notices for
In terms of the key interest rate, three consecutive nonpayment of immovable taxes are not included.
decreases took place during the pandemic and,
Repossession: It is either a hypothecated property
simultaneously, Canadian mortgage rates dropped.
abandoned voluntarily for the benefit of its mortgagee
These low rates have led to strong demand over
(lender), a giving in payment or a judgment ordering
the past year. However, with inflationary pressures
the (forced) repossession of a property due to the
looming, the central banks may be forced to
default of payment of the debt.
implement more restrictive monetary policies in
the coming quarters. A reduction in liquidity in the Notice of sale by judicial authority: This category
economy would cause mortgage rates to rise, which includes sales under judicial control and sales under
could create difficulties for certain households with the authority of the courts. It is a notification through
variable rate mortgages, in addition to dampening the which a person informs another individual that he/she
enthusiasm of first-time buyers, whose budgets may has made an act, i.e. taken the decision to exercise his/
be diminished by higher financing costs. As a result, her hypothecary right by way of sale of the immovable
there is some evidence that over the longer term, bad by judicial authority, following the owner’s failure to
debts may rise to levels closer to historical averages. meet his/her obligations.
That being said, this potential increase is not expected
to occur in the next quarter, but rather in 2022.
FOR MORE DETAILS
You wish to get specific data for your area? Contact us
DETAILS BY ADMINISTRATIVE REGION to get a personalized study !
The details on bad debts for each of the province’s Check the Real Estate Radar for more information on
administrative regions are presented on pages 5 and sales, bad debts and the socio-demographic profile
6 of this report. For the administrative regions, the of your sector.
four-quarter comparison is preferable, since the more
Consult JLR publications at this address:
deeds that are published, the lesser the impact of
https://solutions.jlr.ca/publications/prime-studies
random effects.
Over the past 12 months, the number of prior notices
has decreased in all regions, as has the number of
repossessions. Over the past four quarters, Laval
(-55%) and Outaouais (-53%) saw the greatest drops
in prior notices. However, regional data should be
interpreted with caution, since a sharper decrease in
a region does not necessarily imply, as it usually does,
that the financial situation of owners has improved,
given the circumstances that explain the decrease
in bad debts. As the economy recovers, it will be
possible to see whether certain regions emerge from
the health crisis in better shape than others.
Publication by Katherine Torres,M.Sc Economist
JLR, Studies on the Real Estate Market : 1-877-861-5134 publications@jlr.ca https://solutions.jlr.ca/publications/prime-studiesDetails by Region for the Last Four Quarters (July 2020 to June 2021) *For some regions, the number of prior notices or repossessions issued is too small to calculate a representative variation. JLR Study — Bad Debts Trends - Q2-2021 5
Details by Region for the Quarterly Period *For some regions, the number of prior notices or repossessions issued is too small to calculate a representative variation. JLR Study — Bad Debts Trends - Q2-2021 6
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