Atlantic Canada is still one of the most remarkable housing markets in Canada today. Despite much of the Canadian real estate market cooling down, provinces in the eastern seaboard are enjoying incredible growth in the housing industry. From economic opportunities to record-low interest rates to evolving consumer patterns, provincial markets like Nova Scotia and New Brunswick are defying trends in some other provinces, by posting robust sales activity and strengthening prices. Let’s see how this trend is playing out in the Newfoundland and Labrador real estate market.
Let’s start with soaring housing prices province-wide. Many young families were anticipating some relief, especially as both major urban centres and rural communities were finally coming down heading into the fall buying season. Has Newfoundland and Labrador real estate reached its peak? As the old adage goes, nothing is what it seems.
How did the Newfoundland and Labrador housing market fare during the dog days of summer? Suffice it to say, homebuyers were not staying inside their air-conditioned homes – they were out house hunting.
Newfoundland and Labrador Real Estate Market Defies National Trends
According to the Newfoundland and Labrador Association of REALTORS®, residential sales climbed at an annualized rate of 21.4 per cent in August, totalling 703 units. This marked a new sales record for the month of August. Year-to-date, housing transactions have spiked 66.7 per cent year-over-year, with 4,273 units exchanging hands.
On a long-term basis for the month of August, Newfoundland and Labrador real estate sales were 31 per cent above the five-year average, and 41.8 per cent above the decade average. Most sales activity occurred in St. John’s: up 54.4 per cent year-over-year compared to the rest of the province (10.2 per cent).
Home prices followed the strong demand. The MLS® Home Price Index (HPI), which is considered to be a more accurate measurement than using average and median, surged 11.3 per cent to $319,800. Moreover, the HPI composite benchmark price for St. John’s real estate advanced at an annualized rate of 7.6 per cent to $286,200.
Here is a look at how the leading property categories performed in August:
- Single-Family Homes: +11.6% to $323,000
- Townhouse / Row Units: +8.1% to $270,800
- Apartments: -0.2% to $236,300
Supply was another major factor in the Newfoundland and Labrador real estate market. The number of new listings rose 1.9 per cent year-over-year to 1,047 in August. The number of active residential listings tumbled 12.6 per cent to 4,399 units at the end of August. Historically, new listings were 2.7 per cent above the five-year average, while active listings were 18.8 per cent below the five-year average.
Months of inventory, which is the time it would take to exhaust current inventories at the present rate of sales activity, measured 6.3 months at the end of August. This is down from 8.7 months at the same time a year ago.
According to Canada Mortgage and Housing Corporation (CMHC), housing starts remained relatively steady, with 68 starts in July 2020 and 67 in July 2021. However, in the first seven months of 2021, housing starts reached 324, compared to 188 at the same time last year.
Is There More Room for Growth in the Newfoundland and Labrador Housing Market?
Can the Newfoundland and Labrador housing market continue its record-setting growth in the final months of 2021? There are various factors at play that could either help or hurt the province.
According to an RBC Economics report titled “Recovery bumpy but still advancing in all provinces,” Newfoundland and Labrador has seen slower capital investment growth and crude oil production compared to other provinces in Canada. The financial institution also forecasted that it will be the last provincial economy to fully recover from the coronavirus-induced economic downturn. RBC Economics projects growth rates of three per cent and 2.5 per cent in 2021 and 2022, respectively.
“In fact, production is falling at every major oil field off the province’s coast this year,” the report stated. “Capital spending is also on the way down in the province as major projects either have wound down in recent years or are nearing completion – such as the Muskrat Falls hydroelectric project. Planned major capital spending is nearly 32 per cent below 2019 levels, a decline of 0.4 per cent year-over-year. On the plus side, the Terra Nova offshore oil project will be refurbished and restarted next year after being shut down two years ago. This will partly mitigate declines in oil production and capital spending.”
Overall, with only a few months to go in 2021, both the St. John’s and provincial real estate markets will continue to be driven by single buyers and young couples searching for single-detached homes. Retirees are also expected to play an important role this year and next.
In short, buckle up – it could be an incredible ride ahead for Newfoundland and Labrador real estate!