The Kawartha Lakes real estate market has joined the broader Ontario housing boom. It is not only the Greater Toronto and Hamilton Area (GTHA) that is enjoying impressive growth. Industry observers are calling it the “small-town boom” as suburbs and rural communities witness incredible gains, buoyed by strong fundamentals and near-zero interest rates. Of course, everyone is wondering just how long this red-hot activity can last.
For now, Kawartha Lakes homeowners are likely enthusiastic over this seller’s market, while homebuyers are hoping for, at the very least, a modest correction. Until the Bank of Canada (BoC) tightens monetary policy and new supply comes to market, home prices could continue their upward trajectory.
So, just how much growth has the Kawartha Lakes real estate market witnessed in 2021?
Prices Continue to Soar in Kawartha Lakes 2021 Real Estate Market
According to the Kawartha Lakes Real Estate Association (KLREA), residential sales soared 105.2 per cent year-over-year in March, with unit transactions totalling 197. In the first three months of 2021, home sales have surged 68.8 per cent from the same time a year ago.
The MLS® Home Price Index (HPI), which is considered more accurate than average or median price measurements, showed double-digit growth to close out the first quarter. The single-family benchmark price increased at an annualized rate of 36.9 per cent to $553,400.
The dollar value of all home transactions in March skyrocketed 238.2 per cent year-over-year to $137.9 million. The doubling from last year is a new record for the month of March.
Inventory levels continue to be a concern in the Kawartha Lakes housing market. The number of new listings advanced 69.6 per cent to 273, while active residential listings slumped 52.8 per cent to 133. The last time active listings were this low for the month was more than three decades ago.
The months of inventory – a figure that highlights how long it would take to sell present stocks at the current rate of sales activity – was 0.7 at the end of March. This is below the 2.9 months from March 2020. It is also under the long-run average of 3.9 months for this time of the year.
Even rentals are soaring, with many cottages already fully booked for all of this year.
For the Kawartha Lakes real estate market, this represents unprecedented growth. Nobody could have predicted these soaring trends in the cottage segment of the housing sector, especially in the midst of the COVID-19 public health crisis. But as more families yearn for more living space amid an increase in time spent at home, small towns and rural communities have become the go-to locations for many homebuyers who are ditching city-living.
“We’ve been seeing growth for the last several years, but not to this extent,” said Kawartha Lakes Real Estate Association president Eugene McDonald. “In the past you would get one or two offers on a property; now we’re seeing 15 to 20, maybe more.”
But is there any relief on the way? According to Canada Mortgage and Housing Corporation (CMHC), housing starts in the region climbed to 26 in February, up from four the same time a year ago. Meanwhile, completions totalled just one in February, down from eight last year.
Ontario’s Small-Town Housing Boom
The Canadian real estate frenzy is not only lifting big cities such as Vancouver, Toronto and Montreal. In Ontario, so many suburbs and rural communities are experiencing exponential growth, from record-high sales activity to all-time high housing prices. Indeed, there are many reasons for this trend, most notably remote work arrangements that allow professionals the flexibility to work from anywhere with a reliable Internet connection. No longer restricted to living within close proximity to their place of work, city and suburban dwellers are seizing the opportunity to get in on the red-hot market, cashing in their urban dwellings for more space and quieter living.
Historically, housing booms have occurred in only certain parts of the country. In the aftermath of the Great Recession, Toronto and Vancouver led the nation’s real estate industry, forcing first-time homebuyers to search for more affordable housing options in small towns. Today, the boom is nationwide, spanning both large cities and what are once sleepy, remote towns across the country. It has been a remarkable development in the housing sector, but this heated activity is making it increasingly difficult for first-time homebuyers to tap into the market, no matter how far they travel from the urban core.
Will it last? Industry observers have been speculating if this is a truly a bubble or simply a case of fundamentals. In the Kawartha Lakes housing market, there is a huge demand for properties, from detached homes to cottages. But supply is struggling to keep up with homebuyer demand, which is driving up prices. There are two other factors at play, too.
First, out-of-town buyers from Toronto and other larger suburban markets can leverage the profit from their purchase and outbid locals in small towns by an exorbitant amount. Second, with interest rates at an all-time low, homebuyers can borrow more at a low cost, further fuelling rising prices and bidding wars.
Small-town Ontario is experiencing enormous and potentially permanent change. Whether it is sustainable or not remains to be seen.