2021 forecasts for Canada’s housing market
According to Canadian housing experts, in case you were saving money hoping for a prices decline, this year will hardly be great for you.
The COVID-19 pandemic didn’t affect the hottest national real estate markets as hard as some expected. Moreover, Toronto and Vancouver showed a strong competition for detached houses leading to consecutive monthly record high prices.
CTV News talked to real estate agents and experts in Vancouver, Calgary, Toronto and Montreal to see their forecasts for 2021. Although each of them has a different view on the market conditions, they all agree that prices for mid-range detached houses will keep rising as people are looking for larger home offices and backyards amid COVID-19.
Extremely low interest rates, seen since the beginning of the pandemic, are making such deals even more attractive for first-time buyers who haven’t been affected by the pandemic as hard as homeowners.
“COVID has made people reconsider their properties”, – says Vancouver-based agent Mark Wiens.
Although bidding wars for houses are expected to get stronger in many areas of Canada, condo sector shows a different story. All the experts say that small one-bedroom condos in downtown cores have already faced a significant hit last year, and their prices will probably not go up at the start of 2021.
While it’s bad news for condo owners planning to sell, it could be good news for those who would like to buy a small condo hoping for the future rebound of the segment.
Toronto: record high home prices and suffering condos
The Toronto housing market hasn’t slowed down, with record 10,563 home sales in October, marking a 25% annual gain. In addition to it, October saw price for detached houses rising by 14.8% annually to $1,204,844.
According to Lauren Haw, CEO of Zoocasa, one of the main reasons for such a change was a strong demand following early months of the pandemic, when many buyers and sellers froze.
“Everybody were stuck in their homes determining what they wanted to change. Some of them preferred small changes like investing into a larger kitchen. Others decided to move out of the city,” – she noted.
That has led to a “small-town revival,” with a strong competition in towns across southern Ontario.
“This trend will continue”, – Haw noted. “People who wanted to purchase a $600,000 one-bedroom condo in downtown Toronto, now understand they can work from home in Barrie, Ancaster, Guelph or London. And people in London are following the same trend, moving to Strathroy and Woodstock.”
In case the economy keeps recovering and interest rates remain low, home prices will continue to grow.
In October, when Toronto real estate prices broke records again, the UBS Global Real Estate Bubble Index ranked Toronto third in the global list of cities most at risk of a possible property bubble. Vancouver took the eight position.
However, Haw doesn’t predict a bubble burst this year.
“I don’t expect a price correction in 2021. Meanwhile, it’s been 30 years since a strong correction in the Toronto housing market,” – she said.
“Nevertheless, the pandemic didn’t do it, so what’s it going to take? I don’t know what could lead the Toronto market to a price decrease.”
At the same time, she expects weaker prices for one-bedroom condos, especially downtown with numerous renters and Airbnbs. Toronto condo sales were down by 8.5% in October, with far less interest in smaller units downtown.
“I don’t believe we’ve already seen the bottom of condo prices, so urban condo prices will keep falling during the first quarter of 2021,” – Haw said, pointing that a vaccine may change the situation.
“It would lead to the recovery of service centres, the economy, and businesses. Everyone would return to their local restaurants, supporting the economy and making renters come back to the city. As a result, investors wouldn’t have to sell off one-bedroom condos.”
Vancouver: “A great year”
Vancouver is still a seller’s market. In November, the average price of a Vancouver home hit $1,044,000, marking a 5.8% annual increase. Home sales exceeded 3,000 for the first time since 2015, and the month became the second-best November in the last 10 years.
Agent Mark Wiens says it was “a great year” for Vancouver.
This year, he expects the prices to keep growing, as people spend more time at home reconsidering their preferences.
Calgary: A strong hit
In case of Calgary, we can see a different story. The pandemic hit when the city was still struggling with the consequences of an oil sector crisis. In October, year-to-date sales were down by about 6%.
According to agent Justin Havre, the average price for detached houses is almost unchanged in Calgary, with an annual increase by only 0.74%. Fewer houses were listed, and the inventory fell by almost 12%.
With Alberta showing the second-highest unemployment rate in Canada, Havre is surprised the market is doing so well.
“It’s very interesting that we’re seeing this activity, and we’re pleasantly surprised,” – he added.
In his opinion, 2021 will be also difficult for Calgary, as more homeowners may face foreclosure over the first half of the year.
“It’s obvious with 21% of mortgages being deferred. Many deferred them because they lost their jobs,” – he said. “In case they haven’t found a new one or couldn’t sell their home, they may face foreclosure.”
In terms of buying options, Havre says that condos in the downtown core will show lower prices.
Montreal: Vaccine may push prices down
Montreal showed a strong activity in case of all property types last year, with a 32% annual gain in home sales in November. The average prices were also up: single-family houses rose by 17%, and condos – by 14%.
A restrained supple helped fuel the prices growth, as more buyers wanted larger spaces, says real estate agent Georges Bardagi.
The pandemic is also encouraging people to leave the city centres.