At the start of 2020, few would have anticipated that St. John’s real estate would be one of the hottest Canadian housing markets by the end of the year. Twelve months later and the nation’s east coast is witnessing exponential growth in its housing sector. Commercial development, population growth, and a rebounding economy are contributing to the area’s booming real estate market. And this could be a main headline in Canadian real estate news for many years to come.
St. John’s is one of Atlantic Canada’s hottest cities, despite having one of the country’s coldest winters! From impressive sales activity to record-breaking valuations, St. John’s is becoming the envy of the nation for its eye-popping real estate data. But is this only temporary, or is it a long-term trend that will carry into 2021, and beyond?
For years, Atlantic Canada had been considered a buyer’s market. Housing was cheap, the economy was struggling, and the region was experiencing a population exodus. Fast forward to the present, and St. John’s and its neighbours are sitting comfortably in a seller’s market. Here is what you can expect if your home-buying sights are set upon this historic Atlantic city:
St. John’s Real Estate: The Housing Market That is Topping the Charts
According to the Newfoundland and Labrador Association of REALTORS®, residential activity in St. John’s ballooned by 62.9 per cent year-over-year in December. This outpaced the 50-per-cent growth in the rest of Newfoundland and Labrador. Single-detached home transactions soared at a record 47.2 per cent from the same time a year ago.
What about prices?
St. John’s overall benchmark price climbed by an annualized rate of 5.7 per cent in December to $268,200. But certain properties outperformed others: the benchmark price for single-family homes increased by 6.7 per cent year-over-year to $271,400, while the benchmark apartment price tumbled four per cent to $225,000.
With supply not increasing in line with demand, these prices could continue to climb heading into 2021. Active residential listings province-wide in December were down 21.1 per cent compared to December 2019, marking a five-year low inventory level for the month of December.
Months of inventory fell to 7.1 months in December, down from the 14 months of inventory recorded at the same time a year ago. The long-run average of months of inventory is 10.5 for this time of the year. This is an important metric the industry uses because it is the number of months it would take to sell current stocks at the present rate of activity.
Despite long-term bullishness, the RE/MAX outlook for St. John’s residential real estate in 2021 is a drop of as much as three per cent to approximately $285,027 across all property types.
Is the St. John’s Housing Market ‘Vulnerable’?
The Canada Mortgage and Housing Corporation (CMHC) published its latest Housing Market Assessment (HMA) for the third quarter of 2020. The HMA examines the nation’s biggest real estate markets’ level of vulnerability, using four primary factors: overbuilding, overvaluation, overheating, and price acceleration.
Regina, Hamilton, Montreal, and Moncton topped the list of cities more vulnerable in the Canadian housing market. St. John’s, meanwhile, joined the list of six markets that received overall low vulnerability scores (Edmonton, Calgary, Saskatoon, Winnipeg, and Quebec City were the others).
“Although the unprecedented income supports from governments provided temporary relief, the COVID-19 crisis negatively affected the level of permanent disposable income available to households,” said Bob Dugan, CMHC’s chief economist, in a news release. “Along with the weakening of other drivers of the housing market, overvaluation imbalances increased further or started to emerge in several markets in the third quarter of 2020.”
Beyond Pent-Up Demand in St. John’s
The term “pent-up demand” has become a fixture in conversations about the Canadian real estate market last year, to explain the monumental surge in housing activity. Due to the coronavirus pandemic, much of the spring and summer buying and selling had been delayed by a few months. But while it is believed that the pent-up demand has been exhausted, St. John’s situation is beyond this market phenomenon.
Indeed, the east coast city’s rejuvenation is potentially part of a long-term trend of economic revitalization, population growth, and a strong housing sector. The COVID-19 public health crisis could be the contributing factor to its long-term rejuvenation.
From historically low interest rates, to a change in how we work and the adoption of digital tools by real estate agents, Canadians have more options at their disposal to navigate the housing market during these unprecedented times. This is great news for Canada’s former underdog housing markets like St. John’s.