Has the Canadian real estate market been immune from the coronavirus pandemic? Despite the COVID-19 public health crisis decimating the national economy and leaving more than two million people out of work, Canada’s housing sector has not only survived, but has thrived under today’s economic conditions. Before the highly infectious respiratory illness disrupted the economy, the real estate industry was booming. Nearly a year into this pandemic, sales activity and prices have been soaring. Hamilton is one of the many red-hot markets in Canada to witness an incredible surge during the coronavirus pandemic. Hamilton real estate was doing rather well before COVID-19 effectively paused the nation, but it has been lift-off for the city in 2020, thanks to a wide range of factors.
What are the trends that agents, sellers and homebuyers are looking at today? Let’s explore some of the most recent data coming out of Hamilton, to see if the numbers can give us a glimpse into the next year.
The Hamilton Real Estate Trends That You Need to See
Although sales activity and prices were slightly slower month-over-month in October, the Hamilton real estate market is doing even better than it was the same time a year ago, reports the REALTORS® Association of Hamilton and Burlington (RAHB).
According to the latest RAHB report, sales of residential properties located within the RAHB market area climbed 23.7 per cent year-over-year in October. The average price of homes increased at an annualized rate of 19.8 per cent to $721,523. On a monthly basis, sales were down 7.6 per cent and prices were up 0.02 per cent.
But while houses are enjoying a boom, condominium prices are beginning to stagnate, says a new housing report by RBC Economics. The study concluded that condo prices have already flattened in Hamilton, Toronto and Vancouver, with RBC economist Robert Hogue writing that the “impact of COVID-19 on the housing market is complex.”
Industry observers are paying attention to inventory levels. The number of active listings fell 39.8 per cent in October from the same time a year ago, while new listings were only up 5.5 per cent from 2019.
“The trends this fall are not reminiscent of what we would normally see – with October activity slowing slightly compared to September – and this is due to 2020 not being a typical year,” said RAHB President Kathy Della-Nebbia in a news release. “As a result of COVID-19, we experienced a delayed spring market and a surge in record activity over the summer months when the province began to reopen. As a result of this unstable year, active listings at the end of each month are some of the lowest we’ve seen, exacerbating low inventory levels and continuing to drive average price.”
The head of the real estate association further noted that Hamilton would unlikely experience a downturn like it temporarily endured during the first wave of COVID-19. That is, if demand remains strong and the economy – nationally or provincially – does not shut down. Della-Nebbia added that the number of new listings could be one of the contributing factors to higher prices.
“These unprecedented times are where the services of a local RAHB REALTOR® are invaluable. We will continue to work with clients to ensure their housing needs are met, and will continue to use virtual technology and sanitary measures to combat COVID-19,” Della-Nebbia stated.
Should there be another coronavirus-induced shutdown, it is more than likely that the real estate industry will be spared from being mandated to close. But, like earlier this year, agents will pivot and innovate, adapting to the environment and utilizing digital tools – such as virtual tours and e-signing – to allow real estate transactions to take place safely.
Will the Second Wave Differ from the First?
Have conditions changed from the first wave to the second?
During the first wave of the highly infectious respiratory illness, the federal government and the Bank of Canada (BoC) were beginning to implement policies to adapt to the changing economic landscape and stop the bleeding. From income support payments to ultra-low interest rates, Ottawa acted quickly and swiftly to prevent a full-blown economic collapse. Should the second wave ignite another public health disaster, the market already possesses the tools it needs to endure a financial crisis.
The central bank’s near-zero-interest-rate-policy (ZIRP), which is unlikely to be raised anytime soon, has facilitated the massive growth in the Canadian housing sector. The BoC has also slashed the benchmark five-year mortgage rate to below five per cent. The Hamilton real estate market has benefited from historically low borrowing costs, allowing homebuyers to have more options at their disposal. So, if bidding wars ignite over Hamilton properties, Canadians can feel confident that they have the means to put up a fight for their dream home.
Ultimately, policymakers have signalled that they are willing to do anything to support both the economic recovery and the real estate sector.
Winter Is Coming (whether we like it or not)
Winter is right around the corner, which is typically bearish for the real estate sector. Could Hamilton – and the broader housing market – cool down like the temperature outside? It has been argued by some that the pent-up demand has been exhausted, but with interest rates at historic lows and the economy on the road to recovery, it is possible that we will slide into 2021 with the same strong market activity that we’ve witnessed over the past few months.
What Is the Canada Mortgage and Housing Corporation (CMHC)
The Canada Mortgage and Housing Corporation (CMHC) is a Canadian Crown Corporation that serves as the national housing agency of Canada and provides mortgage loans to prospective buyers, particularly those in need.
Understanding the Canada Mortgage and Housing Corporation (CMHC)
The Canada Mortgage and Housing Corporation (CMHC) serves as the national housing agency of Canada. CMHC is a state-owned enterprise, or a Crown corporation, that provides a range of services for home buyers, the government, and the housing industry.
CMHC’s stated mission is to “promote housing affordability and choice; to facilitate access to, and competition and efficiency in the provision of, housing finance; to protect the availability of adequate funding for housing, and generally to contribute to the well-being of the housing sector.”1
A primary focus of CMHC is to provide federal funding for Canadian housing programs, particularly to buyers with demonstrated needs. CMHC, headquartered in Ottawa, provides many additional services to renters and home buyers, including mortgage insurance and financial assistance programs. CMHC acts as an information hub for consumers, providing information on renting, financial planning, home buying, and mortgage management.
CMHC also provides mortgage loan insurance for public and private housing organizations and facilitates affordable, accessible, and adaptable housing in Canada.2 Additionally, CMHC provides financial assistance and housing programs to First Nations and Indigenous communities in Canada.3
Professionals and Consumers
CMHC provides services to both professionals and consumers. For professionals, CMHC aims to work in collaboration with different groups to provide affordable housing. Services include project funding and mortgage financing, providing information to understand Canada’s housing market, innovation and leadership networks to access funding and talent to spur housing innovation and increase supply, and providing speakers and hosting events for the industry.4
For consumers, CMHC seeks to provide all the tools an individual would need to either buy a home or rent a home and a variety of information and assistance for current homeowners, such as managing a mortgage, services for seniors to age in place, and financial hardship assistance.56
For financial hardship and mortgage assistance, CMHC provides tools that include payment deferrals, extending the repayment period, adding missed payments to the mortgage balance, moving from a variable-rate to a fixed-rate mortgage, and other special payment arrangements.7
Canada Mortgage and Housing Corporation (CMHC) and the National Housing Strategy
In November 2017, the Canadian government announced the National Housing Strategy.8 Rooted in the idea that housing is a human right, this 10-year, $70 billion project will largely be administered by CMHC, although some services and deliverables will be provided by third-party contractors and other Canadian federal agencies.9
Strategic initiatives of the National Housing Strategy include:
- Building new affordable housing and renewing existing affordable housing stock
- Providing technical assistance, tools, and resources to build capacity in the community housing sector and funds to support local organizations
- Supporting research, capacity-building, excellence, and innovation in housing research10
History of the Canada Mortgage and Housing Corporation (CMHC)
CMHC was established in 1946 as the Central Mortgage and Housing Corporation by the federal government in Canada with the primary mission of administering the National Housing Act and the Home Improvement Loans Guarantee Act and facilitating discounts to mortgage companies. Initially, CMHC began by providing housing to returning Canadian war veterans, and toward the end of the 1940s, CMHC began to administer a program providing low-income housing across Canada.11
In 1947, CMHC was responsible for opening Regent Park, a large low-income housing project, and Toronto’s first urban renewal project. By the 1960s, CMHC introduced co-op housing and multi-unit apartment buildings throughout Canada.11
In 1979, the Central Mortgage and Housing Corporation changed its name to the Canada Mortgage and Housing Corporation
Canadian home price gains accelerate again in May
Canadian home prices accelerated again in May from the previous month, posting the largest monthly rise in the history of the Teranet-National Bank Composite House Price Index, data showed on Thursday.
The index, which tracks repeat sales of single-family homes in 11 major Canadian markets, rose 2.8% on the month in May, led by strong month-over-month gains in the Ottawa-Gatineau capital region, in Halifax, Nova Scotia, and in Hamilton, Ontario.
“It was a third consecutive month in which all 11 markets of the composite index were up from the month before,” said Daren King, an economist at National Bank of Canada, in a note.
On an annual basis, the Teranet index was up 13.7% from a year earlier, the 10th consecutive acceleration and the strongest 12-month gain since July 2017.
Halifax led the year-over-year gains, up 29.9%, followed by Hamilton at 25.5% and Ottawa-Gatineau at 22.8%.
Housing price gains in smaller cities outside Toronto and its immediate suburbs again outpaced the major urban centers, with Barrie, Ontario leading the pack, up 31.4%.
On a month-over-month basis, prices rose 4.9% in Ottawa-Gatineau, 4.3% in Halifax and 3.7% in Hamilton.
The Teranet index measures price gains based on the change between the two most recent sales of properties that have been sold at least twice.
Canada‘s average home selling price, meanwhile, fell 1.1% in May from April, Canadian Real Estate Association data showed on Tuesday, but jumped 38.4% from May 2020.
(Reporting by Julie Gordon in Ottawa; Editing by Christopher Cushing)
Bank of Canada seeing signs of cooling in hot housing market
The sector surged in late 2020 and early 2021, with home prices escalating sharply amid investor activity and fear of missing out. The national average selling price fell 1.1% in May from April but was still up 38.4% from May 2020.
“You are starting to see some early signs of some slowing in the housing market. We are expecting supply to improve and demand to slow down, so we are expecting the housing market to come into better balance,” Macklem said.
“But we do think it is going to take some time and it is something that we are watching closely,” he told the Canadian Senate’s banking committee.
Macklem reiterated that the central bank saw evidence people were buying houses with a view to selling them for a profit and said recent price jumps were not sustainable.
“Interest rates are unusually low, which means eventually there’s more scope for them to go up,” he said.
Last year, the central bank slashed its key interest rate to a record-low 0.25% and Macklem reiterated it would stay there at least until economic slack had been fully absorbed, which should be some time in the second half of 2022.
“The economic recovery is making good progress … (but) a complete recovery will still take some time. The third wave of the virus has been a setback,” he said.
The bank has seen some choppiness in growth in the second quarter of 2021 following a sharp economic recovery from the COVID-19 pandemic at the start of the year, he added.
(Reporting by David Ljunggren and Julie Gordon; Editing by Peter Cooney and Richard Pullin)
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