Canada’s national housing market continued to climb in February, according to all measures as reported by the Canadian Real Estate Association (CREA) reported on Monday.
Sales jumped almost 27% compared to February 2019, and rose about 6% from January 2020. Sales were at a 10-year low last February, however, so while the transactions are higher, they are still below their peak in 2016 and 2017.
“With transactions up in about 60% of all local markets in February, the big national increase was largely the result of a 15% jump in activity in the Greater Toronto Area (GTA),” CREA says. “Many other Central and Southern Ontario markets also posted sizable sales gains between January and February.”
Home prices also shot up, with benchmark prices across the 19 markets CREA tracks up 4.55% year-over-year to $648,600. Benchmark prices more closely reflect the “typical” high price as they exclude homes on either end of the curve. Average prices are considered a less accurate measure and they show that the national average sale price skyrocketed, up 15.2% to $540,000.
The hot market is likely just a continuation of the recovery that has been happening over the last two years or so, after the Ontario Fair Housing Plan was announced in April 2017 and after banks tightened mortgage lending criteria in January 2018. Buyers appear to have fully regained their confidence in the markets and demand is high. At the same time, inventory is extremely low in most major cities outside of the Prairies.
“Home prices are accelerating in markets where listings are in increasingly short supply, specifically in Ontario, Quebec and the Maritimes, which together account for about two-thirds of national sales activity,” said Jason Stephen, president of CREA. “Meanwhile, ample supply across the Prairies and in Newfoundland and Labrador means increased competition among sellers.”
Even though there was a small push of new listings, 7.3% more in February compared to January, there are only 4.1 months of inventory left across the country, which is the lowest level since the summer of 2007. In other words, if sales continued at their current pace, all listings would be gone in four months.
The COVID-19 Factor
Whether or not property prices will continue to rise throughout 2020 is the big question now that the COVID-19 pandemic is wreaking havoc on economies around the world, as well as consumer confidence. Interest rates have been repeatedly slashed to stimulate the economy, but sellers may wait to list until the pandemic has passed.
Will the housing market surge and people flock to real estate as a safe haven in times of market turmoil? Or will sellers and buyers just hold tight and stay at home until the worst of this has passed? These are questions that are up in the air right now.
“The world has changed in March. And so has the outlook for Canada’s housing market. Unprecedented measures to slow down the spread of the coronavirus—including social distancing—have the potential to bring house hunting activity to a virtual halt this spring,” wrote Robert Hogue, senior economist with RBC Economics. “Even if not directed to sit things out by health authorities, buyers will have plenty of excuses to take a wait–and–see approach.”