Just when you thought the price of Canadian real estate couldn’t get any higher, the latest data show the market continues to defy expectations – and gravity. Industry experts see no end to rising prices, in the face of growing demand and the ongoing housing supply shortage. Many young Canadians have been priced out, while older ones are increasingly dipping into their own savings to help their children get a foot in the door. Industry experts maintain that adding more housing supply into the mix is the only way to ease runaway prices.
Canadian Real Estate Prices Break Records in February 2022
February was a record-breaking month, according to the Canadian Real Estate Association (CREA), when the average home price in Canada rose 20.6 per cent year-over-year to $816,720 – the highest national average price on record. It’s no surprise that Toronto and Vancouver came in much higher, averaging $1,334,544 and $1,313,400 respectively across all property types, per Toronto Regional Real Estate Board and Real Estate Board of Greater Vancouver data. These pricey cities are skewing the national average up by almost $178,000, but even so, there’s no denying that Canadian housing prices are on a significant and sustained rise.
Meanwhile, February home sales were also up 4.6 per cent month-over-month, a trend that CREA attributes to a surge in homes hitting the market. February saw new listings increase 23.7 per cent month-over-month, following a 10.8-per-cent decline in January. It’s expected that March home sales will also trend higher, as this influx of February listings gets scooped up.
Could the tides be starting to turn? Shaun Cathcart, CREA’s Senior Economist, hopes so. “Ideally, listings will continue to come out in big numbers in the months ahead,” Cathcart commented in CREA’s February market report. “Combined with higher interest rates and higher prices, we could be at a turning point where price growth begins to slow down and inventories finally begin to recover after seven years of declines. Still, in order to turn this market back towards balance long-term, building more new homes across the spectrum remains the key.”
It seems Canadian real estate companies and associations have reached a consensus on that one.
Addressing the Supply Shortage in Canadian Housing Market
Canada’s growing population continues to put pressure on existing housing supply. In fact, one reason Canadian real estate crash hasn’t happened is because of continuous demand. Canadian real estate industry insiders have been calling on the federal, provincial and municipal governments to collaborate on ways to increase the supply of homes, thereby easing pressure and prices. However, governments seem stuck on policies and taxes as a market cooling measure. Policies and proposals have run the gamut, from the mortgage stress test and higher interest rates, to a foreign buyer’s tax, a speculation tax, a home equity tax, calls to end blind bidding, and a “cooling off” period that’s currently on the table in BC.
But RE/MAX executives have voiced concerns that these measures miss the mark, attempting to ease demand or penalizing sellers, as opposed to addressing the root of the affordability crisis.
“Market conditions throughout the course of the pandemic have highlighted the increasing difficulties faced by prospective homeowners in BC. A greater imbalance between supply and demand has resulted in heated market conditions,” wrote Elton Ash, Executive Vice President of RE/MAX Canada, to BC Minister of Finance Selina Robinson in response to the proposed cooling-off legislation. “While the government should be looking at all options to ensure the public is best served, steps to increase housing supply should be at the top of this list.”
This has been the conversation in Ontario as well. The province recently formed a Housing Affordability Task Force, to address the critical housing supply shortage and resulting un-affordability. Christopher Alexander, President at RE/MAX Canada, agrees that the supply shortage needs to be addressed, or affordability will continue to decline—not just in Ontario but nation-wide. RE/MAX’s 2022 Canadian real estate market forecast anticipates the national average residential price across all property types could rise 9.2 per cent by the end of the year.
“We have a critical housing supply issue that’s crept its way into almost every community across the country,” he said. “With the amount of developable land in Ontario dwindling, it’s high time the province explores options, such as increasing building height and density in certain neighbourhoods, making it easier for property owners to add secondary suites, converting vacant commercial units for residential use, and waiving infill development charges.”
Densification Can Be a Beautiful Thing
Alongside calls for more affordable housing in urban centres, are concerns from existing residents, community groups and politicians who fear the character and liveability of their neighbourhoods hang in the balance. But densification doesn’t have to be a four-letter word.
“It can have positive impacts on our mental and physical health, not to mention the environmental benefits of having more walkable neighbourhoods. We just need to be open to new ideas for densification and expansion of residential development, both within our urban centres and in our suburban and rural communities,” says Alexander.
“Densification can’t happen hastily. It must be a thoughtful, coordinated effort across all levels of government, that is considerate of the character of our communities, their existing residents, and those who hope to call them “home.” If done right, densification can be a beautiful thing, refreshing and revitalizing aging neighbourhoods, both in their aesthetic and in the fabric of their make-up.”