OUTLOOK 2021: CONTINUED STRENGTH
Posted by John Vernon & Associates on
The real estate market was one of the few bright spots in the Canadian economy for 2020. The real estate market was soft in 2018 with year-over-year sales down nearly -5% and the average sale price of a residential property down -4.1%. The decline in housing prices, lower mortgage rates, continued population and economic growth, led many prospective buyers to return to the real estate market in the latter part of 2019 and early 2020. Some areas of the country experienced positive gains in prices and sales. After the initial shock
of the Covid-19 pandemic and associated restrictions and lock-downs in March and April, the real estate market found its footing and went on a record-setting pace for the remainder of 2020.
On the supply side, residential listings on the Canadian MLS® totalled 785,213 in 2020, down -4.3% from 820,420 in 2019. On the demand side, there were 551,392 sales in 2020, up +12.6% from 489,880 sales in 2019. The value of MLS® residential sales in Canada was $313.024 billion, up +27.1% from $246.317 billion in 2019. The sales-to-new listings ratio (a measure of market strength)was .70, up from .60 in 2019. The average sale price of residential properties in Canada was $567,699 (a new high) in 2020, up
+12.9% from $502,812 in 2019. The three largest markets, (i.e., Montreal, Toronto and Vancouver) experienced solid price gains.
Generally speaking, most Canadian cities experienced strong market conditions and many experienced a strong seller’s market. Toronto, Hamilton, Ottawa, Montreal, Halifax/Dartmouth, Fraser Valley and Victoria enjoyed double digit price increases. Most other areas experienced balanced market conditions with relatively modest price increases. No city/area experienced a year-over-year price decline in 2020. Given the prospects of low interest rates, improving economic conditions and a return to normal immigration levels, there is considerable optimism for the real estate market in 2021. According to a recent assessment by Canada Mortgage and Housing Association (CMHC), which takes into account such factors as: overheating, overbuilding, price acceleration and overvaluation, the Canadian housing market as a whole remains at a moderate degree of vulnerability to a price correction.
The Canadian Real Estate Association (CREA) is forecasting that the current market strength will continue into 2021. Residential MLS® sales are forecast to increase +7.2% to about 584,000 units in 2021, and the average sale price will increase a further +9.1% to about $620,404. (The real estate market in Canada has been an important part of the economy for decades. Even in the face of severe headwinds, it has shown remarkable resilience over the years. As one columnist observed, if a pandemic and major recession doesn’t derail it, what will?)