Eventually, what goes up must come down, which many believe is the case when it comes to ever-swelling housing prices across Canada. For all of 2021, and most of 2020 for that matter, Canadian real estate big and small, from coast-to-coast, have set month-over-month records in terms of residential home sales, sales volume and average sale prices.
Mostly driven by excruciatingly high demand and limited supply, the average price of a home in Canada has grown from $585,609 in August 2020 to $663,503 in August 2021 – an increase of 13.3%. Considering this average price takes into account both big and small markets, this growth is unprecedented, and steadily rising every month for the better part of the last year and a half. However, it seems as though the tides may be changing. With summer in the rear-view mirror and autumn upon us, it appears that markets across Canada may be gently cooling, too. This is welcome news for side-lined homebuyers who have been crowded out and priced out of their target real estate markets.
Activity & Prices in Canadian Real Estate Markets are Easing Up
According to figures from the Canadian Real Estate Association Across (CREA), home sales slightly decreased 0.5% from July to August 2021, while on a year-over-year basis activity declined 14%. Despite this slight drop in sales, market activity is still well above the historical average for this time of year. However, this was not evenly spread across all markets. In Canada, it was roughly a 50-50 split in terms of markets that saw an increase in activity and markets that experienced a decrease.
Cliff Stevenson, Chair of CREA, credits the Federal Election for drawing attention to the real estate market, stating that the unresolved issues in the market have been a focal point over the last month. “Ideas on how to fix the housing market have taken centre stage in this election, with many long-simmering issues having had a big spotlight shone on them over the last year-and-a-half by COVID. The numbers for August provided more evidence of what many of us already knew or suspected to be the case – this housing crisis will not go away on its own . . . It also highlights how there are no quick fixes here, so this market will remain challenging for those who choose or have to engage in it.”
While it may take longer than a couple of months to correct the rampant unaffordability in so many real estate markets in Canada, a promising sign is slowing growth in price changes. In fact, the annual growth of composite benchmark price has dropped in the majority of Canadian real estate markets and over 80% of markets have reported that the annual rate of price growth has finally declined.
In all of Canada, only eight markets have seen flat or accelerated price growth, and the majority have seen a deceleration in price growth. This means that most markets in Canada have seen the rate of property price growth slow down month-over-month, inspiring hope that markets may soon return into more neutral territory.
While the national market still strongly favours sellers, it could be starting to return to pre-pandemic levels, but supply shortages remain a hot-button issue from coast to coast. Shaun Cathcart, CREA’s Senior Economist, adds that if building materials for homes were more readily available, the housing crisis would start to be under control: “As far as campaign promises around building more homes, at least we are finally having the right conversation. But as anyone who has tried to get even a small project done in the last year knows, availability of materials and skilled labour are not dials that can simply be turned up to 11 whenever we decide we need them. And that’s not to mention all the other barriers to building, of which there are many. It’s definitely easier said than done.”
With price growth easing in most areas across the country, it is important that the government continue to seek solutions for developing more affordable housing in desired areas, whether through incentives or a reduction in red tape.
Will Growth in the Canadian Housing Market Continue to Slow in 2022?
It is predicted that the market will continue to level out as the second half of 2021 closes out. However, it would be presumptuous to say that the market will swing back towards historical levels in terms of prices and sales. While many markets are heading in the right direction, the national market is not expected to return to a more neutral (or a less frenzied) territory until at least mid-2022.