Source – theglobeandmail.com
- “…The remote work trend has helped spark a real estate boom on the East Coast. Nova Scotia and New Brunswick hit record numbers in both sale and prices, and though PEI sales were below record levels, the average price set a new high-water mark. Resource-dependent Newfoundland and Labrador reversed years of declines brought on by the commodities crash of 2015”
‘Off The Charts’, Canada’s Real-Estate Market Defies Expectation as People Rush to the Country
By Rachelle Younglai, Published: 20/02/2021
Home prices have come roaring back, but saving for a down payment takes longer. The East Coast is hot, but condos and rental apartments are not. This is what a COVID-19 housing boom looks like
When the pandemic hit last March and lockdowns started, many assumed the economic downturn would hammer real estate. People would be thrown out of work, default on their mortgage payments, maybe even lose their homes.
The federal housing agency, Canada Mortgage and Housing Corp., forecast home prices could drop as much as 18 per cent in the worst case scenario. The exuberant housing market would surely fizzle out.
And it did, for a minute. But then, it came roaring back.
After a lull in March and April, sales activity and prices set new records month after month. With interest rates at historic lows, homeowners sick of their living arrangements upscaled to roomier digs in the cities, the suburbs and rural areas. The cost of detached homes rose fastest of all in most markets, with momentum accelerating into this year, with new records for sales and prices yet again.
But alongside this unlikely, unpredicted boom, there were other shifts under way. Prices have skyrocketed in cottage country while demand for condos has cratered. Meanwhile, the debt used to finance these new homes no longer seems quite so worrisome – at least, for now. The following charts, statistics and dollar figures offer a snapshot of the Canadian real estate market today, in all of its prediction-defying glory.
A brief lull – then back up
People rush to the country
Steve Ferguson, the mayor of Prince Edward County, says the biggest complaint he gets from newcomers is the spotty internet service. “We are trying to address it as quickly as possible, lobbying federal and provincial governments to improve internet access throughout eastern Ontario,” he said
A two-and-a-half hour drive from Toronto, Prince Edward County has long been a popular spot for city dwellers looking for a vacation property or a summer home. Now, with the pandemic forcing people to work from home – and causing them to rethink their living arrangements– it has seen a real estate surge.
“People are fed up with the density of the city and they just want to get out. They can do whatever they did in Toronto remotely. So why stay in the city?” Mr. Ferguson says.
Remote work motivated some to buy second properties in cottage country, or sell their homes in the city and buy cheaper places in smaller cities and towns. Home resales in 2020 reached record highs in more than a dozen regions in Ontario, including Orillia, Welland, Kingston, Haliburton, Cambridge, Timmins and Sault Ste Marie.
The same was true in vacation spots across the country. Prices in the Okanagan Valley and Sunshine Coast outpaced gains in the Vancouver area. There were big price jumps in Alberta’s Wabamun Lake and Lac Ste. Anne, Saskatchewan’s Christopher Lake and Emma Lake, Manitoba’s Lac Du Bonnet and Quebec’s Eastern Townships and Les Laurentides, according to Royal LePage.
Cottage country’s big surge
The steepest price increases came in Ontario, where competition for properties was intense. The home price index, which adjusts so expensive transactions don’t distort the overall picture, jumped around 30 per cent year-over-year in Woodstock-Ingersoll, as well as summer vacation spots including Quinte & District, Lakelands, Simcoe & District and Kawartha Lakes. The trend continued in January.
Quinte & District, which includes Prince Edward County, had record home resales last year. Its home price index rose 31 per cent to $421,700 – and the market shows no signs of slowing down. Active listings dropped 63 per cent in the twelve months to January, indicating less available stock and sending prices flying last month as more Torontonians scrambled for the opportunity to buy a retreat property or move to the region permanently.
“It’s not panic buying, but it’s an acute sense of urgency and almost nothing is listed for sale,” said Treat Hull, a real estate broker who has sold houses in the county for nearly a decade. “There are plenty of buyers. There are people who would have never thought of moving here in a million years.”
….Meanwhile, people are flocking to Atlantic Canada
More sales on the East Coast – 2019 to 2020, percentage change to annual home sales
…The remote work trend has helped spark a real estate boom on the East Coast.
Nova Scotia and New Brunswick hit record numbers in both sale and prices, and though PEI sales were below record levels, the average price set a new high-water mark. Resource-dependent Newfoundland and Labrador reversed years of declines brought on by the commodities crash of 2015.
More Ontarians and Albertans migrated to Nova Scotia during the first three quarters of last year than in all of 2019, drawn in part by house prices that are still well below those in major urban centres, particularly in Toronto. “The freedom to work from anywhere, accelerated their plans to move,” said Wendy Luther, chief executive with Halifax Partnership economic development agency.
Ms. Luther said the health crisis highlighted her province’s advantages over large urban centres: No density, low COVID-19 case rates and cheaper housing.
The average selling price of a home in Nova Scotia was $331,429 last year (a record high), with the price just below $400,000 in Halifax. In New Brunswick, the average selling price was about $200,000 with similar prices in larger cities like Saint-John and Fredericton. In the Toronto region, meanwhile, the average selling price was nearly $930,000 and on track to top $1-million this year.
It’s a similar story in New Brunswick. “The pandemic has motivated people to take advantage of the flexibility,” said Jeff Cyr, director with Greater Saint John’s economic development agency.
Travel restrictions also pushed up demand for vacation properties. The average selling price in Prince Edward Island jumped above $300,000, and in Newfoundland and Labrador, homeowners sought different living arrangements and people bought cabins, cottages in rural areas after travel bans thwarted their vacation plans.
As well, residents from bigger cities like Toronto sold their condos and moved to Newfoundland, where they could buy bigger properties with ocean views. “It’s not just Barrie and London that are getting the exodus from Toronto. They are also going other places,” said Bill Stirling, CEO of Newfoundland and Labrador’s real estate association.
…While Fleeing Condos
After years of condo hype, 2020 was the year the tiny homes in the sky lost their appeal.
Condos with no outdoor space became undesirable in places where the buildings are packed together and the surrounding amenities were closed or restricted.
Over all, the value of condos across the country rose at a slower pace than houses. The price index for condos was up 4 per cent year over year, while it climbed 16 per cent for houses, according to CREA.
In most of the major cities, demand waned as the supply of condos increased. Nowhere was it more pronounced than in downtown Toronto. Condos in the city were the only type of property to lose value in Toronto and its surrounding region. New listings flooded the market, with investors trying to offload condos, owners moving to bigger properties and Airbnb hosts putting their units up for sale after tourism vanished. By December, the average selling price was down 4.7 per cent compared with the same month in 2019.In January, the price was 8 per cent lower. The lower prices have lured investors back into the space; resales jumped over the past two months.
Meanwhile, active listings in Vancouver increased for condos and decreased for houses. The price index rose 3 per cent for condos but 10 per cent for detached houses.
It was a similar story in the city of Montreal, where active condo listings persistently rose in the latter half of the year and steadily fell for houses.
…Renters Vacated Downtown Apartments
It’s no surprise that demand for rental units declined with people leaving their downtown condos for more space, and job losses within the service industries.
Toronto, Montreal and Vancouver – the country’s major job centres – saw apartment vacancy rates more than double during the pandemic. Vacancies rose at quicker pace in the cities versus the surrounding suburbs, with the highest rates downtown, according to data from CMHC.
In Montreal, the downtown apartment vacancy rate was 10.2 per cent versus 2.7 per cent across the wider metropolitan area. In the city of Toronto, it was 7.3 per cent compared with 3.4 per cent in the wider region. In Vancouver, it was 6.3 per cent versus 2.6. For comparison, the national apartment vacancy rate was 3.2 per cent.
In Toronto, the average monthly rental rate for a two-bedroom apartment fell to $2,440 in October of last year from $2,476 in the same month in 2019, according to CMHC. In Montreal, the rental rate rose to $1,277 from $1,274 over the same time period.
It wasn’t just because office workers were leaving. Apartment renters in low-paid industries such as retail, accommodation and food services lost their jobs and could no longer pay the rent after government-mandated lockdowns closed businesses. And border restrictions meant postsecondary students had no need to live in the city when their schools went virtual.