Up until the coronavirus pandemic, the Atlantic Canada economy had endured some challenges that persisted for many years. People were leaving the eastern seaboard, the real estate market was stagnant, and economic growth was minimal. Moreover, it seemed that all of the nation’s wealth was concentrated in a few regions, particularly British Columbia, Alberta and Ontario. All of that changed in the last year. From Halifax to St. John’s to Charlottetown, Atlantic Canada has experienced a recent boom unseen in decades. Over the last 15 months, the most significant development has been the housing sector, with sales activity and price growth hovering at levels not seen in more than 30 years. In fact, depending on where you look on the east coast, residential transactions and valuations have been breaking records month after month. But is the party coming to an end? When industry observers study the Halifax housing market trends, for example, one word has been used repeatedly: unsustainable.
Indeed, the gains that Nova Scotia’s capital has witnessed since the spring of 2020 have been phenomenal. Can the good times be extended in the second half of 2021, and perhaps heading into 2022? Let’s take a look at the data and see what is happening in the beautiful city of Halifax.
Halifax Housing Market Shows Signs of Easing…Finally!
According to the Nova Scotia Association of REALTORS®, Halifax residential sales tumbled at an annualized rate of 12.3 per cent in June to 729 units. This is in line with the broader Nova Scotia year-over-year decline of 6.6 per cent, highlighting that demand is beginning to cool down.
Prices also climbed to complete the second quarter of 2021, but the record pace of the last 15 months ostensibly slowed down. Halifax real estate prices advanced 27.9 per cent to $468,790. Once again, this matches the rest of the province’s 27.6 per cent surge in the average price of homes sold in June.
Year-to-date, residential transactions advanced 38.2 per cent to 4,237. Residential average prices rose 32.4 per cent to $463,409.
If demand is beginning to be exhausted, what about the state of supply? CREA figures highlight that the Halifax real estate market has seen a massive jump in new residential listings, climbing 53.9 per cent year-over-year.
Meanwhile, housing starts slowed in June, particularly compared to the same time a year ago. According to the Canada Mortgage and Housing Corporation (CMHC), housing starts totalled 15 in June, down from 152 in the previous year. However, year-to-date, housing starts reached 1,486, up from 1,051 in the first six months of 2020.
Does this mean the nation’s housing affordability crisis has seeped into the Maritimes, too?
A Housing Affordability Crisis in Atlantic Canada
A new study has further confirmed the alarming trend that many suspected would surface given the sleep uphill spikes in real estate figures over the past year: homes are becoming too expensive for the average Canadian, even on the east coast. The Royal Bank of Canada (RBC) affordability measure, which gauges ownership costs to household income, edged up 0.9 per cent in the first quarter of 2021 to 52 per cent. This represented the third consecutive quarterly increase.
Put simply, average Canadian homebuyers will need to spend 52 per cent of their income to cover the costs of the average home in the Great White North. The last time it was this high was in 1990.
If you think you could easily escape to remote parts of the country, you might be out of luck. The RBC study noted that affordability had declined in Halifax. Despite expectations that the substantial gains in prices have reached their zenith, RBC senior economist Robert Hogue believes prices will continue to go up, further exacerbating the affordability calamity unfolding nationwide.
Right now, the last place that may be many Canadians’ last hope of achieving the dream of homeownership within their budgets is Saint John, New Brunswick, which has been labeled as the country’s most affordable housing market. Owning a property in Saint John requires less than one-quarter (23.4 per cent) of your income. This is good news, but Hogue does not believe this will last, noting that “property values are heating up fast and will drive up ownership costs in the period ahead.”
Will the Halifax Housing Market Become Affordable Again?
Halifax is expected to become one of Canada’s hottest cities for real estate as policymakers invest in the core of the urban centre. Commercial development, public transit, better infrastructure, new storage facilities for handling the changing population and of course a population boom – these are the factors that will continue to drive Halifax’s new-found reputation as a major hub, in not only the Maritimes, but also within the broader Canadian landscape.