While the smaller markets within Canada have historically been characterized as localized, stable and affordable, there are many factors at play shifting the balance within East Coast real estate. Home prices in the East Coast, comparative to the rest of Canada, remain far lower than the national average. However, as price tags continue on an upward trajectory, it is uncertain for how long they’ll stay within this affordable range. Below, we dive into the main trends emerging within the local markets of Canada’s East Coast, and how these trends are impacting average home price within this region.
The Impact of COVID-19 on the Canadian Real Estate Market
For a market characterized by handshakes, face-to-face meetings and strolling through the homes of strangers, social distancing measures have inevitably shaken the world of real estate. On the strong advice of many local real estate councils across the country, open houses have been cancelled, replaced with 360-degree interactive tours and video-walk throughs. Many agents are limiting showings to vacant properties, and are ensuring that hand sanitizer and disinfectant wipes are used.
To cushion the economic fall-out of the pandemic, the Bank of Canada made three separate cuts to the overnight lending rate over the course of March. The big banks across the country followed suit, lowering their prime rates, and making it easier for Canadians to access a variable rate mortgage. These rate cuts were not long lasting; by the end of the March, many banks returned their prime rates to pre-crisis levels in response to increasing financial risk amidst pandemic-related business closures and job losses.
There remains hope that once the job market stabilizes post-crisis, the big banks will bring their rates down again, closer to the Bank of Canada’s levels, to help invigorate the Canadian real estate market after this slow-down.
Canada’s East Coast Housing Market
Housing markets in Canada’s East Coast flaunt house prices that are starkly different to the price tags within the country’s hottest markets, Vancouver ($1,020,600) and Toronto ($910,290), compared to Nova Scotia ($260,396), Prince Edward Island ($295,565) and St. John, NB ($184,011). (Source: CREA Housing Market Stats for February 2020)
Despite the variance in price, the real estate trends within the East Coast market tell as story that it not too different from its sizzling counterparts.
Halifax, Nova Scotia – Market Trends & Prices
Halifax real estate prices have been on the up, and yet, the city remains high on the affordability scale according to the 2020 RE/MAX Housing Affordability Report. Prior to the outbreak, Halifax, like seven of the country’s top real estate markets, saw an increase in house prices in early 2020. The city had a 0.8% price increase for the month of February (compared to February 2019), and 7.0% climb in average price year-over-year. With prices on an upward trend, it comes as no surprise that Halifax boasts a sellers market– a trend that was forecasted to continue well into 2020.
Demand in this market is propelled by Halifax’s affordability and thriving cultural amenities; factors which have accounted for the city’s steady population growth. A healthy increase of 4% for 2020 was anticipated for the average home price within Halifax; at present, it is uncertain whether this increase will be curtailed by the impact of the public health crisis.
While it is likely that demand will be temporarily suppressed, it is hopeful that the low interest rates will pull buyers back into the market as soon as the worst of the outbreak passes. If demand rebounds and inventory remains low, it is probable that Halifax home prices will continue to climb towards the projected 4% increase.
Charlottetown, PEI – Market Trends & Prices
Across the Province of Prince Edward Island, home prices have been surging upwards, as have sales volumes. According to CREA data for February of this year, the average home price was a record-breaking $295,565 (up 33.3% from February 2019) and the residential property sales totalled 110 for the month (up 13.4% from February 2019). In contrast, levels of supply have hit a 15-year low for PEI, totalling 669 active residential listings at the end of February (down 6.4% from this time last year).
With supply down and sales on the rise, it comes as no surprise that the PEI market is of late, being referred to as “cutthroat,” and likened to the sizzling, inaccessible Toronto housing market. The growth within PEI’s urban centre of Charlottetown is outpacing growth in most Canadian cities – closely behind areas of Vancouver Island and Niagara – according to CREA data. Rapid population growth, and a number of Canadian investors drawn to the city’s affordable price tags, have tightened supply levels. As a result, fierce bidding wars have become an expectation during real estate transactions within this local market.
With a large number of buyers and investors flipping purchased properties into Airbnb’s, it is possible that in the wake of the COVID-19 crisis, there will be a flood of these vacant properties entering the market. PEI relies heavily upon the tourism industry to fuel the local economy, and if travel restrictions and tightened borders persist into the late spring and summer season, the local economy will suffer tremendously.
This increased supply, coupled with downward pressure upon demand, may have a temporary cooling effect upon this cutthroat market. If isolation and social distancing measures ease up within the next month or two, it is possible that the re-bound will be faster, especially with the availability of lower interest rates which may make Charlottetown’s rising prices more accessible than before the crisis.
St. John, Newfoundland – Market Trends & Prices
The St. John real estate market has been touted as somewhat of an outlier, in comparison to the neighbouring markets detailed above. The city has been a buyer’s market for some time now, and this trend was projected to continue into 2020, with a forecasted price drop of 2% for the year.
According to CREA reports, however, the city had an unexpected, record-breaking start to the new year. Sales activity was up a whopping 39.3% in February from the same time last year, marking a new sales record for the month. While sales have been climbing, supply has been decreasing. Tightening supply means that instead of a price drop, the city may instead start to see prices rise. At the close of February, the average price of a St. Johns home was $184,011, a modest (yet notable) 0.9% increase from February 2019. In tandem with this price increase, inventory levels were at a 10-year low for February of this year, totalling 940 active residential listings. Record low-inventory coupled with increased activity and upward creeping prices…sounds like the fundamentals for a seller’s market at play.
With the impact of COVID-19, it is possible that this may temporarily cool some of the increased sales activity from February. The area has a large aging population, who will likely be impacted heavily by the plummeting stock market. This shift in consumer confidence will inevitably pull demand from the market, despite the lure of low interest rates. This pressure may be enough to in fact push St. Johns’ market back in favour of the buyer, which for this city, would be business as usual.