Buying a home is a major financial milestone for many Canadians; owning a property doesn’t just provide them with shelter, but is usually the largest asset in their portfolios, too. With gains outpacing most money markets, a homeowner’s equity can provide capital for anything from home renovations to retirement planning.
And amid the onslaught of the global pandemic, home has become so much more than a place to live. For many, where we live has also become our office, school, gym and restaurant. It’s where we have sheltered in place to prevent the spread of the COVID-19 virus, in hopes of keeping ourselves, our loved ones, and our communities, safe.
“As the pandemic has made homeownership more important than ever, it has driven new trends in home buying psychology,” says Lauren Haw, CEO and Broker of Record at Toronto-headquartered Zoocasa Realty. “More buyers are looking to upsize their homes and are looking to markets where it’s most affordable to do so. As well, the ability to work from home has untethered many from living near business centres, and has offered buyers the flexibility to relocate [farther afield] to markets they may not have previously considered.”
How COVID “supercharged” the Canadian housing market
This new urgency has “supercharged” what was already a frothy housing market, according to the Canadian Real Estate Association. Initially, the shock of lockdowns and economic uncertainty did cause a nationwide lull between February and March 2020, with sales and listings plunging 14.3% and 12.5%, respectively. However, the market recovered to normal seasonal levels by June 2020, with sales soaring 15.2% year over year, and 63% from May 2020—much faster than the industry had anticipated.
Buyers venturing outside their current regions to find a dream home have brought big city market dynamics with them. Formerly sleepy small towns are now grappling with a rapid depletion of inventory, bidding wars and homes selling for considerably higher than they were listed for, both due to overwhelming demand and the practice of pricing properties artificially low to attract more potential buyers and sparking a bidding war. The latter is a tactic frequently used in larger urban markets, and had not been typically seen in small towns prior to the pandemic.
Conditions across the country came to a head in March of this year, when CREA reported the highest level of home sales ever, up 76.2% from the pit of the lockdown, with the average price across all home types (including one- and two-storey single-family homes, semi-detached homes, townhouses, and condos) up 31.6% year over year to an average of $716,828. Single-family homes experienced the largest price increase annually, with the benchmark up 25% to $795,700, with similar increases for ground related housing with greater square footage; townhouse prices rose 18% to $586,700 nationally. However, the condo sector bore the brunt of buyers’ fears early on in the pandemic, as people living within close proximity was considered a health risk; the price benchmark grew just 5.3% to $498,000 year over year.
The national sales-to-new-listings ratio (SNLR), which measures the level of buying competition in the market, sits at a scorching 80.5%, indicating steep sellers’ conditions, with more than 80% of Canada’s markets considered “unbalanced” in terms of supply and demand.
This is sounding alarm bells for policymakers, prompting the Canadian government to take action to cool sizzling price growth: A new national foreign buyer tax was introduced in the most recent federal budget, while the banking regulator has proposed a tougher mortgage stress test, to take effect in June of 2021.
