Seeking Affordability? Spotlight on Newfoundland Real Estate

The national average home price in the Canadian real estate market hit $796,000

In March, up 11.2 per cent from last year. Price growth slowed slightly month-over-month, but many industry experts project that prices still have room for growth this year. But while the broader housing conversation has been on the affordability crisis impacting many markets across Canada, there are still some relatively affordable parts of the country. Wait a minute. There is still affordability in Canada? Yes. All you have to do is look toward the nation’s east coast, to Newfoundland real estate.

According to the Newfoundland and Labrador Association of REALTORS®, MLS® Home Price Index (HPI), which is considered a more accurate measurement than average or median price pressures, advanced 12.3 per cent year-over-year in March to $324,200.

Here are how the three main property types performed last month on an annualized basis:

• Single-Family Homes: +12.4% to $327,400
• Townhome / Row Units: +4.8% to $278,300
• Apartments: +7.6% to $239,500

The St. John’s real estate market has performed exceptionally well, but prices remain relatively affordable. The benchmark price for single-family homes rose 9.6 per cent year-over-year in March, to $294,200. Townhome units saw a moderate gain of 4.6 per cent to $282,800, while apartment prices increased 7.7 per cent to $239,200.

But compared to its Atlantic Canada neighbours and the rest of the country, why is the Newfoundland housing market still affordable?

Why is Newfoundland Real Estate So Cheap?

The main reason for this head-turning affordability on the east coast is the supply-demand balance that still modestly supports home-buying activity, but this could be shifting.

Data from the realtor association found that the number of new listings declined 13.6 per cent in March, reducing the number of new residential units coming on market to 815. This is 0.6 per cent below the five-year average and 1.9 per cent below the 10-year average.

Active residential listings declined 35 per cent by the end of March, totalling 2,436 units. This is the lowest level in active listings for the month of March in a decade.

Months of inventory, which is the number of months it would take to exhaust current demand at the present rate of sales activity, came in at 5.5. This number is down from 8.2 months at the end of March 2021 and below the long-run average of 13.4 months for this time of the year.

New residential property construction activity has been decent, too. According to Canada Mortgage and Housing Corporation (CMHC), housing starts advanced to 43 units in March 2022, up from 23 unit starts in March 2021.

Moreover, RBC Economics expects a homebuilding boom in Atlantic Canada. This forecast is driven by the current accommodative monetary policy and swelling immigration levels over the next three years.

“We expect historically high housing demand and rock-bottom inventories will keep home builders extremely busy across most of the country in the year ahead,” the bank stated.

“Rising immigration—Canada has increased its immigration target by 10,000 to 411,000 in 2022—will add further pressure to expand housing stocks. This will be amplified by strong interprovincial migration in coastal regions, especially Atlantic Canada, where housing is relatively more affordable. We project housing starts to pick up the most in Nova Scotia and New Brunswick.”

Perfect Housing Market Conditions?

While housing market conditions are better in Newfoundland than in Ontario or British Columbia, the trends unfolding across the Canadian real estate market are transpiring in Atlantic Canada. Put simply, the province on the east coast is hurting for supply, which explains bullish forecasts for price growth.

According to the 2022 Canadian Housing Market Outlook report from RE/MAX, the St. John’s housing market is expected to see a five-per-cent boost in residential prices by year’s end. Sales could also exhaust current stocks, with transactions expected to increase by 12 per cent.

“Less-dense cities and neighbourhoods offer buyers the prospect of greater affordability, along with liveability factors such as more space,” said Christopher Alexander, the President of RE/MAX Canada, in a news release.

Alexander added that more supply must be added to ensure there is a “relative market balance” for the foreseeable future. Although market analysts suggest that there could be signs of easing, insufficient inventories are prevalent.

Sources:

• CREA
• CMHC
• RBC Economics