When Will Canadian Real Estate Prices Cool Down?

Canadian real estate continues to make headlines for its strength and resilience in the face of COVID-19, and increasingly for the obstacles preventing homebuyers from entering or moving up in the market. One question recently posed to RE/MAX Canada is as follows: Many working class Canadians are being priced out of the market – even folks with professional jobs and high incomes. I wonder about the impacts this has on our society as a whole. Are these rapidly rising prices a good thing or a bad thing? Should there be steps taken to address affordability? How do we do that in a fair and equitable way? This is a loaded question. To offer some insight and offer an answer, says Christopher Alexander, Chief Strategy Officer and Executive Vice President, RE/MAX of Ontario-Atlantic Canada, explores the latest market data and trends.

Canadian Real Estate Data (February 2021):

According to the February data released earlier this month by the Canadian Real Estate Association (CREA), national home sales increased 6.6 per cent on a month-over-month basis, and spiked almost 40 per cent year-over-year. (Surprising, given the strength of the market in early 2020.) The number of newly listed properties rebounded 15.7 per cent from January to February, so we’re seeing a little bit more inventory coming on the market but it continues to fall short of demand. CREA reported just 1.8 months of inventory at the end of February – a record low. For context, the long-term average is just over five months. The MLS home price index jumped 3.3 per cent month-over-month and 17 per cent year-over-year. The national average price posted a 25-per-cent year-over-year gain in February. Alexander explains.

When Will the Market Cool Down?

“Sales and price appreciation like that is probably very exciting if you’re listing your home right now, or have sold in the last couple of months. But these numbers are causing a lot of concern for many people in Canada. We’re going to dive into a lot of the reasons why you don’t need to be overly concerned, considering the how strong the market fundamentals are in our country right now. However it is very important to point out that high double-digit price increases are not sustainable, I don’t care how good the market is. It’s very, very difficult to sustain price gains over 10% year-over-year for an extended period of time. That doesn’t mean we’re going to see at the huge correction or that we’re in a bubble. It’s just means that we shouldn’t expect prices to continue to rise at the level that they are today. Growth will probably come back down into the single digits at some point this year.

“The rising prices and the affordability crisis that we’re experiencing right now is going to have an impact on our society. Most of the highest prices are in our major metropolitan markets – Toronto, Vancouver, Montreal. These cities have been experiencing extreme pressures on housing for the last 15 to 20 years. They continue to attract the most immigrants in Canada. People from across the world are looking at those cities for their high quality of life and they are very attractive, but there’s such limited housing supply.

“We need to find ways to make the rest of this beautiful, wonderful country as attractive as those big cities. Atlantic Canada has been doing a really good job at making their provinces more and more attractive. Their individual provincial governments have been encouraging immigration to those cities and it is paying off in a big way. Halifax, Moncton, Fredericton, these communities are just booming right now and we’re hopeful that other cities across the country will take similar measures to continue to attract more and more people to those parts, taking some of the pressure off of our major markets.”

Click below to watch the whole video featuring Canadian housing market commentary, more consumer questions and the answers:

The post When Will Canadian Real Estate Prices Cool Down? appeared first on RE/MAX Canada.



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Lydia McNutt

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