The booming Ontario housing market has been a beacon of light in a disappointing year for the economy and broader society. The province’s real estate sector has experienced record growth in the middle of one of the worst economic downturns in history. From historically low interest rates to pent-up demand and continued federal fiscal support, Ontario – and the overall Canadian real estate market – has continued to perform at impressive levels.
But as more people exit the sidelines and leap into the real estate market, housing stocks are becoming a concern. While this has been an issue for Toronto for many years, the problem is extending to the rest of the province. The issue is that more people are migrating from Toronto to rural communities, generating a sudden spike in demand in smaller towns, allowing former big-city dwellers to eat up any remaining housing supply.
As some Ontario markets potentially face record low inventory in 2021, real estate prices are expected to climb even further. Toronto homeowners should benefit from this situation, but so will those in plenty of other communities: Durham, Windsor, Thunder Bay, Guelph and a plethora of others. But how concerning is the supply situation in Canada’s biggest housing market for homebuyers?
Record Low Inventory in the Ontario Housing Market
With the spring and summer pent-up demand potentially exhausted, is trying to find a home in Ontario comparable to looking for a needle in a haystack?
Ontario has been one of the hottest housing markets in the nation. From Toronto to Windsor, the province experienced tremendous growth in the real estate market in 2020, despite the spring’s tepid two-month slowdown. And it is unlikely to reverse course in 2021.
The province’s supplies are dwindling amid strengthening demand across Ontario – within both major urban centres and suburban communities. According to the Canadian Real Estate Association (CREA), close to two-dozen Ontario markets had less than one month of inventory by the end of November. Market analysts focus on this figure because it identifies how long it would take to liquidate current inventories at the current sales activity rate.
Renewed sales activity is exceeding the recovery in new listings. As a result, inventory levels are tightening, which could persist due to historically lows borrowing rates. The shortage of residential properties, especially single-family properties, is anticipated to continue.
“Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province. This shortage is expected to limit sales activity in 2021. The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties,” CREA wrote in its updated housing market forecast.
Will 2021 Be A Repeat of 2020?
All signs are pointing to an upward trajectory in the ultra-competitive Ontario housing market. Of course, demand will be a considerable factor in escalating real estate prices, boosting sales and supporting the broader Canadian economic recovery.
But other aspects will facilitate growing demand this year, much like how they did throughout 2020.
The central bank has cut its benchmark rate to 0.25 per cent, and it brought the five-year mortgage rate to historic lows. When rates are this low, borrowing is stimulated since it has never been cheaper to take out a mortgage, tap a line of credit, or apply for a loan. This gives homebuyers more options because they can have more funds at their disposal.
Real estate professionals working within the Ontario housing market – and across the country – have done an exceptional job at pivoting to allow this essential service to continue safely in the midst of a global pandemic. From the onset of lockdown measures in spring of 2020, real estate agents quickly adapted to the situation, adopting digital tools to accommodate public health guidelines, and this commitment has helped the industry remain active and healthy. Although most housing markets experienced a modest slowdown early on in the public health crisis, agents helped the real estate sector bounce back as rapidly as it did by instilling confidence in hopeful buyers.
Ontario and Beyond?
Should Ontario’s housing supply not improve anytime soon, could homebuyers travel out of the province to buy? Remember, many consumers now have more freedom pertaining to where and how they work, and are no longer confined to their jobs’ physical location. Ultimately, Ontario’s low inventory levels could lead to a booming spillover effect, forcing households to migrate west to Manitoba or Saskatchewan or east to Atlantic Canada.