Canadian real estate continues to make headlines for its strength and resilience in the face of COVID-19, and increasingly for the obstacles preventing homebuyers from entering or moving up in the market. A question on everyone’s lips right now is, how long can this current rate of price growth continue? In the face of record-low housing inventory and rising demand across the country, it seems there’s no end in sight. One question recently posed to RE/MAX Canada is this:
Many working class Canadians are being priced out of the market – even folks with professional jobs and high incomes. I wonder about the impacts this has on our society as a whole. Are these rapidly rising prices a good thing or a bad thing? Should there be steps taken to address affordability? How do we do that in a fair and equitable way?
To offer some insight and help answer this loaded question, Christopher Alexander, Chief Strategy Officer and Executive Vice President at RE/MAX of Ontario-Atlantic Canada, explores the latest market data and trends.
February 2021 Market Overview:
According to the February data released earlier this month by the Canadian Real Estate Association (CREA), national home sales increased 6.6% on a month-over-month basis, and rose almost 40% year-over-year. (Surprising, given the strength of the market in early 2020.) The number of new listings rebounded 15.7% from January to February, so we’re seeing a little bit more inventory coming on the market, but supply continues to fall short of demand. CREA reported just 1.8 months of inventory at the end of February – a record low. For context, the long-term average is just over five months. The MLS home price index jumped 3.3% month-over-month and 17% year-over-year. The national average price rose 25% year-over-year in February. Below we break down the price growth in some local markets:
- More than 35%: Lakelands region of Ontario cottage country, Tillsonburg District and Woodstock-Ingersoll
- +30-35%: Barrie, Niagara, Bancroft and Area, Grey-Bruce Owen Sound, Kawartha Lakes, London & St. Thomas, North Bay, Northumberland Hills, Quinte & District, Simcoe & District and Southern Georgian Bay
- +25-30%: Hamilton, Guelph, Cambridge, Brantford, Huron Perth, Kitchener-Waterloo, Peterborough and the Kawarthas, and Greater Moncton
- +20-25%: Oakville-Milton and Ottawa
- +10-20%: Montreal, Chilliwack, Vancouver Island, the Fraser Valley and Okanagan Valley, Winnipeg, the Greater Toronto Area, Mississauga and Quebec
- +5-10%: Greater Vancouver, Victoria, Regina and Saskatoon
- Less than 5%: Calgary, Edmonton and St. John’s
When Will Canadian Real Estate Prices Ease Up?
CREA reports that the national average home price reached a record-high $678,091 in February 2021. Alexander explains why the current pace of price growth is unsustainable, and likely to ease in 2021.
“Sales and price appreciation like that is probably very exciting if you’re listing your home right now, or have sold in the last couple of months. But these numbers are causing a lot of concern for many people in Canada. We’re going to dive into a lot of the reasons why you don’t need to be overly concerned, considering the how strong the market fundamentals are in our country right now. However it is very important to point out that high double-digit price increases are not sustainable, I don’t care how good the market is. It’s very, very difficult to sustain price gains over 10% year-over-year for an extended period of time. That doesn’t mean we’re going to see at the huge correction or that we’re in a bubble. It just means that we shouldn’t expect prices to continue to rise at the level that they are today. Growth will probably come back down into the single digits at some point this year.
“The rising prices and the affordability crisis that we’re experiencing right now is going to have an impact on our society. Most of the highest prices are in our major metropolitan markets – Toronto, Vancouver, Montreal. These cities have been experiencing extreme pressures on housing for the last 15 to 20 years. They continue to attract the most immigrants in Canada. People from across the world are looking at those cities for their high quality of life and they are very attractive, but there’s such limited housing supply.
“We need to find ways to make the rest of this beautiful, wonderful country as attractive as those big cities. Atlantic Canada has been doing a really good job at making their provinces more and more attractive. Their individual provincial governments have been encouraging immigration to those cities and it is paying off in a big way. Halifax, Moncton, Fredericton, these communities are just booming right now and we’re hopeful that other cities across the country will take similar measures to continue to attract more and more people to those parts, taking some of the pressure off of our major markets.”