The resilience of Canada’s housing market in the midst of the coronavirus pandemic and the prevailing economic headwinds it ushered in continues to astonish many industry watchers.
John Lusink, president of Right at Home Realty Inc., says the firm, which has 12 branches around Ontario, posted record sales in September after a very strong summer.
It’s a phenomenon that played out across much of the country, according to the Canadian Real Estate Association, which reported last week that sales nationwide jumped 45.6 per cent in September compared with the same month last year.
“Crazy is a word I hear used more often. It just continues to baffle people,” Mr. Lusink says of the conversations among agents at his firm.
Sales across Canada edged up 0.9 per cent in September from August on a seasonally adjusted basis. But the Toronto area cooled slightly, with a 5.1-per-cent dip in September compared with August, seasonally adjusted.
Mr. Lusink says the numbers coincide with what he’s seeing: The hottest areas at his firm are cities such as Barrie, Ottawa and Burlington.
Last spring, real estate agents began reporting that people were fleeing cramped big city properties for more space in the suburbs and beyond. Mr. Lusink believes the migration is continuing, even as cooler weather blows in.
In September, the largest year-over-year price gains in the country were tallied in the Ontario markets of Ottawa, Bancroft, Quinte and Woodstock-Ingersoll. Each of those markets posted an advance of approximately 22 per cent in the benchmark price on CREA’s Composite MLS Home Price Index.
“All sorts of people are moving out,” he says. “I see it continuing.”
In Port Hope and the surrounding areas, the Northumberland Hills Association of Realtors says sales jumped 46.8 per cent in September from the same month last year. The average price rose 23.1 per cent in the same period to $620,662.
Fionna Barrington, a real estate agent with Chestnut Park Real Estate Ltd., says properties are selling briskly – and many of the buyers are from central Toronto.
Young people with children are moving to the towns of Port Hope and Cobourg, she says, in search of large homes and access to good schools.
Many are drawn to Trinity College School, which is a private institution offering boarding and day school. Ms. Barrington says there are also several well-ranked public schools in Port Hope.
Families with a large budget are buying the historic Victorian and Edwardian homes with sizable amounts of land.
“It blows my mind the money that is out there – especially the young people.”
One young Toronto couple with a budget between $800,000 and $1.2-million is looking for a property in the Northumberland countryside, but there are few listings and those that do come on disappear quickly.
“By the time they’re able to get out here to see it, it’s sold,” Ms. Barrington says.
Country properties of between 10 to 25 acres are attracting older couples who want to invite their younger family members to stay. Places that would have taken one year or more to sell in the past are now selling within a couple of months, she says.
“I think grandparents are seeing the opportunity to have their families all together in a safe place rather than Toronto,” she says.
For families with a smaller budget, newer homes in town are selling with multiple offers in the $500,000 to $900,000 range.
The surge in the suburbs and smaller cities comes at the expense of tidy downtown Toronto condo units. Mr. Lusink says residents of microunits in many high-rise condos can no longer use the gyms and party rooms and other amenities that made the lifestyle appealing.
“Our downtown branch is reporting a drop in activity – especially in condos.”
Mr. Lusink notes that, just as rental rates are sliding and condo listings are swelling in Toronto, a massive amount of new supply is coming on as projects are completed.
“I would not be too keen to put up a brand new tower today,” he says.
At CIBC World Markets Inc., deputy chief economist Benjamin Tal has zoomed into the data to figure out what’s driving the market’s recent trajectory.
“By any measure, the V-shaped recovery in the Canadian housing market is mind-boggling,” Mr. Tal says.
He notes that pent-up demand after the lockdown is one factor, and historically low interest rates have added juice, too. But the country is still enduring the worst recession on record, he notes in his report.
As for low rates, he points out that buyers who are taking out a variable or five-year fixed-term mortgage must qualify at the Bank of Canada’s posted rate, which stood at 4.79 per cent in mid-October. That qualifying rate is actually higher than the rates borrowers were paying in the 2008 financial crisis and recession.
One big difference during this recession compared with previous downturns is that no less than 80 per cent of the jobs lost since February were in low-paying occupations.
“With a relatively large segment of the labour market not experiencing income disruption, more households are in a better position to take advantage of low interest rates – and that combination is the key factor behind the strong housing market performance that we are currently witnessing,” Mr. Tal says.
The economist also points out that larger, more expensive properties are selling, and that trend is pushing up the average price.
With a very limited supply of low-rise properties available, buyers are bidding up prices. In the high-rise market, supply is climbing and demand has fallen. That means low-rise prices are rising much faster than those in the high-rise segment.
Looking toward the rest of 2020 and into next year, Mr. Tal doesn’t see the market continuing at its current pace: Softer economic growth, a second wave of the virus and eroding job security in sectors that have so far been safe are some of the risks he sees.
He predicts sales will stabilize at a level below their long-term potential while price growth will moderate – and may even fall into negative territory as we approach the winter months.
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