Why is the Canadian Real Estate Market on Fire Despite the Current State of Emergency?
Toronto and Vancouver are among the most expensive and fastest rising cities in the world.
When the COVID-19 pandemic started and restrictive measures were put into place, many believed that this would result in a slowdown in the real estate market.
That slowdown never really happened.
Even though there is a second wave of the pandemic, that has resulted in another series of lockdowns, the real estate market is still going strong.
According to Radio Canada International, data from December 2020 shows that Vancouver home sales were up over 50% when compared to the same time last year, while Toronto sales increased by about 60%.
… and it’s not just the big cities, residential property sales in smaller cities and cottage country have drastically increased too.
In this blog, we examine the reasons behind this continuous growth in the real estate market.
Confidence in the Real Estate Market
The resilience of the housing market has definitely increased consumer confidence levels. Even when the broader economic outlook may look gloomy, restrictions are in place, and the COVID-19 cases are rising, Canadians see real estate as a ‘stable’ investment.
According to a survey conducted by RE/MAX, an international real estate company, 53% of Canadians are confident that Canada’s housing markets will remain steady in 2021. Additionally, over half of them believe that real estate will remain one of the best investment options this year.
Similar sentiments can be seen in a survey conducted by Nanos Research for Bloomberg News. The survey highlighted that 44% of respondents expected the value of the real estate in their neighbourhood to rise in the next six months.
Rental to Ownership
Even though the pandemic has resulted in significant job and business income losses, it has also resulted in another key change – a drastic drop in the interest rate.
The Bank of Canada has lowered the target for the overnight rate to an effective lower bound of 0.25% and has indicated that it will continue to hold the interest rate at this level until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.
This has effectively lowered the cost of borrowing for Canadians and increased their affordability. As lower interest rates have fueled the demand and the supply remains relatively low, prices are rising to new heights.
Move outside the ‘big’ cities
Lastly, remote work has made many Canadians, living in cities, realize that they don’t really need to live in urban centres for work.
Additionally, younger Canadians (under the age of 35) have also realized that they need more space. This has been a motivator for the move from their current neighbourhoods to those where they can buy bigger, more spacious properties for similar prices.
These are some of the factors that have continued to fuel the momentum in Canada’s real estate market.
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