Canadian real estate prices continue to rise even during a global pandemic.
According to US Federal Reserve data shared by Better Dwelling, in Canada, the real prices increased 2.93% in Q3 2020 – which takes the annual growth to the highest among the G7 countries.
Canadian prices grew 45% faster than Germany which was the second-best performing country on the list!
At this point, the prices have grown over 25x faster than US home prices and the most interesting thing to note is that half of these increases occurred in just the past 5 years.
So, what has led to these significant price rises?
There are a lot of factors at play here.
Firstly, real estate has always been important for Canadians. It is considered a safe investment and buying a home is on the top of the priority list for many Canadians.
Secondly, while immigration numbers may temporarily be down, over the last few decades, immigration has played a pivotal role in raising demand in the Canadian real estate market, particularly in and around key cities such as Toronto, Vancouver, and Montreal.
In addition to that, some COVID-19 related changes have also led to an increase in housing demand.
The unprecedentedly low-interest rates have increased home affordability as Canadians are now able to obtain mortgages at extremely low rates.
Additionally, there has also been a shift in what matters the most to homebuyers as COVID-19 has led to increased flexibility and remote work. This means that Canadians are increasingly seeking features such as in-home offices and backyards. According to 35% of RE/MAX brokers, move-over buyers from other cities and provinces would be the ones that will continue to spark market activity in 2021.
Is this perceived ‘bubble’ likely to burst soon?
Unlike what was predicted, the COVID-19 pandemic did not bring the real estate market down. In fact, in many cities, there are still bidding wars and intense competition for the properties that are being listed.
What Lauren Haw, CEO of Zoocasa, shared on CTV News really sums up the sentiments of many.
“… this pandemic didn’t do it. I don’t know what it will be that will drive the Toronto market into price decline.”
While the market has remained resilient throughout 2020, there are a few things that may change in 2021-2022. While a ‘crash’ isn’t anticipated, there will likely be changes in demand for certain types of properties as Canadian preferences evolve.
The condo market, for instance, will be impacted by individuals choosing to move out of big cities, individuals opting to buying over renting, and the decline in short-term rentals. Hence, it is likely to underperform.
The Teranet Monthly Market Insights Report, published in December 2020, also shows that condo properties experienced the largest YoY decrease of 14.3% in mortgage registrations.
It will be interesting to see if the Canadian real estate market continues the momentum this year or witness softening when it comes to house prices. To stay updated about market trends, property market activity, and mortgage insights, connect with us on social media –we are on Twitter and LinkedIn.