The housing market in Canada has never – and will never – seen any sign of prohibition – and with many economists stating the housing market “likely had its strongest year ever in 2020 – what will 2021 and beyond hold for us?
First, let’s start with what we already know: the real estate market has been very strong over the last year. Demand is high, offers are being made on homes within hours of them being listed, and fanning the flames of speculation is the increase in price. In March 2021, the average sale price of a home in Canada was 31.6% higher than it was one year earlier, shattering previous records. One trend we know is clear: homes aren’t just more valuable than ever, they’re gaining in value in a way they never have before.
While we don’t have a crystal ball to predict the future and tell you if this is the time to buy or sell, we do have market statistics, historical trends and industry insights. Here’s what we’re expecting to continue and what’s might change in the roaring ‘20s real estate market.
The urban exodus and the search for space
Triggered by the pandemic – this trend of homeowners searching outside downtown cores and wanting more space will continue. With lockdowns and frustrations with city life, combined with the popularity and adoption of remote / hybrid work options, the urban exodus and desire for less crowded areas will continue.
Average prices of homes in Canada expected to increase
From the start of this pandemic to now, home prices have increased. And according to multiple sources, this has no signs of slowing. In fact:
- The Canadian Real Estate Association predicts that the national average home price will rise 9.1% in 2021
- Royal LePage is predicting a 5.5% increase in home prices
- RE/MAX Canada expects average residential prices to rise 4% to 6% in 2021
- The Canada Mortgage and Housing Corporation forecasts that this pandemic-induced turbocharge of the housing market won’t wear off for another two years.
While there isn’t consensus in how much the market will increase, there is a general agreement that it will. While this is good news for existing homeowners who want to build equity in their home, it can be a concern for those who are looking to enter the market.
If Canada’s housing supply remains the same, prices will likely continue to rise faster than the rate of inflation, leaving those who don’t already own a home even further behind.
Mortgage rates to remain low(ish)
With our historically low mortgage rates and steadily increasing home prices, it’s an ideal time to borrow to buy. But any home buyer who is looking to borrow a significant sum to purchase their home should be keeping an eye on the interest rates.
The Bank of Canada has stood by its comments last year where they claimed that rates would remain low until 2023, which is how long they expect it to take for the economy to make a full recovery. However, rates are rising. Home owners should take time to research mortgage rates and terms and also run the numbers on what their payments would look like if their interest rate increased 1, 2 or even 5% over the mortgage term.
Discretionary spending will increase
Many young professionals and knowledge workers were able to keep working and collecting their salaries throughout 2020, but without the opportunity to travel, dine out, go shopping or engage in other discretionary spending, they had a chance to save. The average Canadian saved more than $5000 during the pandemic and for many Canadians, those savings translated into a downpayment and added pressure to the market with more people able to buy a home.
Now that restrictions are lifting and discretionary spending will again increase, we can expect that spending will trickle back to pubs, salons and travel and there will be fewer buyers vying over the available homes on the market.
Will the real estate bubble bust?
If the pandemic has taught us anything, it’s that we should expect change. As more people go back to commuting downtown, as interest rates rise, and as buyer competition decreases we expect the market conditions to shift and to soften, but only slightly. We agree with the Canada Mortgage and Housing Corporation forecasts that this market will continue to be very strong for another two years.
When you’re making a large investment you need to ensure that you’re able to carry the costs of it through the good years, and the bad.
Are you taking advantage of the strong market to purchase, sell or refinance your home? You’ll need a real estate lawyer. Contact us today!