Canadian Home Prices Jumped by Record 26.6% in 2021
The Canadian Real Estate Association says annual home sales reached a new high in 2021, eclipsing the previous record set in 2020 by about 20%. The association said that about 667,000 residential properties changed hands in 2021, about 30% more than the 10-year average.
Highlights from the release:
- National home sales inched up 0.2% on a month-over-month basis in December.
- Actual (not seasonally adjusted) monthly activity came in 9.9% below the record posted in December 2020.
- The number of newly listed properties fell 3.2% from November to December.
- The MLS® Home Price Index rose 2.5% month-over-month and was up a record 26.6% year-over-year.
- The actual (not seasonally adjusted) national average sale price posted a 17.7% year-over-year gain in December.
Home sales in December were little changed from November and were coupled with a dearth of properties on the market that was so extreme that CREA senior economist Shaun Cathcart called it a record low. New listings for December fell 15% to 28,550 from 33,606 at the same time during the prior year.
TD Economics economist Rishi Sondhi said listings have not kept pace with sales. “In fact, the number of homes newly listed last year was below levels that generally prevailed before the pandemic struck,” Sondhi wrote in a note to investors. “It could be that a lack of supply is perpetuating itself, in that potential sellers who would be more active in ‘normal’ times are holding back their listings due to a dearth of inventory to relocate to, and intense competition for available properties.”
The lack of properties available weighed on sales, which rose by only 0.2% on a seasonally-adjusted basis between November and December. On a non-seasonally-adjusted basis totalled 35,971, down nearly 10% from 39,940 in December 2020.
Sales were down in part because buyer fatigue was setting in towards the end of the year, said Cailey Heaps, a Toronto broker. “Several buyers found the competitive bidding situation discouraging and chose to pause their search, but have now come back with renewed interest,” she said, in a statement.
Sondhi believes some of the “froth” will come out of sales this year as interest rates, which were dropped significantly throughout the COVID-19 pandemic, likely rise. However, he believes the urge many buyers have to act now rather than later will sustain sales above pre-pandemic levels.
That could translate to little reprieve for homebuyers hoping to shell out less on a property. The national average home price hit $713,500 in December, up almost 18% from December 2020.
Excluding the Greater Vancouver and Greater Toronto Areas — two of Canada’s most active and expensive housing markets — from the calculation cuts more than $150,000 from the national average price. In the GTA alone, the average price was above $1.1 million, up about 24% from $932,004 2020. In the Greater Vancouver Area, the average price was more than $1.2 million, up 15% from about $1.1 million the year before.
CREA found year-over-year price gains were still in the mid-to-high single digits in Alberta and Saskatchewan, but reached about 12% in Manitoba and 30% in Ontario. Greater Montreal’s year-over-year price growth remained at a little over 20% with the average price in December hitting $527,600, while Quebec City had half that growth and an average price of $303,700. Price growth was at 11% in Newfoundland and Labrador and more than 30% in New Brunswick.
“With interest-rate pull-forward behaviour keeping demand so strong, and supply struggling to keep up, its little wonder why prices are continuing their relentless upward march,” Sondhi said. “However, while prices will likely increase this year, higher interest rates should slow the rate of increase.”
Canadian Housing Starts Slowed in September but Hit Record in 2021, Rising 21%
The trend in housing starts was 260,567 units in December, down from 267,606 units in November, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
“The six-month trend in housing starts was lower from November to December, but remains at very high levels,” said Bob Dugan, CMHC’s chief economist. “For SAAR housing starts in Canada’s urban areas, both single-detached and multi-family starts decreased in December. On a positive note, actual urban housing starts were 21% higher in 2021, adding much needed supply. The increase was driven by higher single-detached (28%) and multi-family (19%) starts and was mainly due to recovery following COVID-19 shutdown measures in 2020.”
On a trend and monthly SAAR basis, the level of housing starts activity in Canada remains high in historical terms. Among Vancouver, Toronto and Montreal, Vancouver was the only market to post growth in total SAAR starts in December, due to higher single-detached and multi-family starts.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of Canada’s housing market. In some situations, analyzing only SAAR data can be misleading, as the multi-unit segment largely drives the market and can vary significantly from one month to the next.
The standalone monthly SAAR of housing starts for all areas in Canada was 236,106 units in December, a decrease of 22% from 303,813 units in November. The SAAR of urban starts decreased by 24% in December to 212,918 units. Multiple urban starts decreased by 29% to 157,687 units in December, while single-detached urban starts decreased by 4% to 55,231 units. Rural starts were estimated at a seasonally adjusted annual rate of 23,188 units.
“Some easing in December’s starts data was expected, given the outsized November surge. On a trend basis, the pace of starts remains robust, stimulated by strong demand, low levels of unsold new inventories, and elevated prices,” Toronto-Dominion Bank economist Rishi Sondhi wrote in a client note.
The real estate industry and economists say new housing is needed to help meet demand. But even though housing starts reached a record high in 2021, it is not expected to temper the pace of home price increases. As well, Sondhi said that it is taking longer for developers to complete housing units. “Even as starts ramped up, it will take time for this new supply to hit the markets, as the length required to finish a project is also on the rise.”
Housing starts typically represent earlier demand. Developers break ground after the majority of their units have been sold before construction to ensure that there is demand and financing for the building. Since the pandemic started, buyers have sought houses and bigger properties. But demand is growing for condos given that many buyers have been priced out of the single-family homes and condos are generally cheaper than a house.
‘Too Many Buyers, Not Enough Homes’: Climbing Year-End Prices Suggest a Hot Spring Housing Market, Says Royal Lepage
The last quarter of the year is traditionally the slowest in real estate. But 2021’s record-breaking sales and prices bucked tradition through to the end, according to the Royal LePage House Price Survey.
It shows that more than half of Canadian property markets — 61% — saw a quarterly increase of 3% or more in the final quarter, including a 4.1% rise in the Toronto area. Among 62 regions surveyed, 87% experience double-digit annual home price growth in the fourth quarter of 2021.
That portends a busier-than-usual spring, said CEO Phil Soper. Thanks to the reinstatement of pandemic restrictions, he expects the upcoming season to look a lot like a less frenetic version of last year — “Too many buyers, no enough homes, multiple offers, upward pressure on prices.”
Some of that would have happened regardless given the lack of supply and burning demand for property, he said. But if people were suddenly free to go back to restaurants, the office and their usual activities, “savings would start to return to normal and they wouldn’t have cash burning a hole in their bank account, which seems to be finding its way into renovations or new properties, if you can find a home.”
Soper said this winter’s market feels calmer than last year’s. “There was a weird desperation in the air as 2021 started. People were traipsing out in snow storms to look at non-winterized cottages because they felt if they didn’t do it then the door would shut on the opportunity of a lifetime,” he said. Royal LePage is forecasting a 10.5% increase in home prices nationally for 2022 — 11% for the Toronto area.
Soper says an anticipated rise in interest rates this year won’t be enough to deflate the market. “We’re moving from almost free money to very low interest rates. Even a material increase in the cost of borrowing will still leave us in very low interest rate territory,” he said.
With the introduction of the mortgage stress test since the last expansionary period of 2016-2017, consumers have a buffer zone, as the mortgage stress test requires borrows qualify at a higher rate than the loan they actually need to pay. “Somewhere in the range of 90% of the new mortgages written last year, people had to qualify at the full 5.25% that the Bank of Canada specifies, which is more than double the best rates you can get. So we’re looking at … a large group of buyers who have shown themselves to be able to handle these increases,” he said.
When the market corrects — Soper expects that in the second half of 2022 or 2023 — he says the change will be muted by the formation of new households by newcomers and adults moving out of their parents’ homes the housing shortage and the reality that people will still need a place to live, whether they rent or buy.
The home price survey, is based on proprietary data. It shows the GTA median home price rose 17.1% year over year in the fourth quarter to about $1.12 million. The percentage increase matches the national average but the median Canadian price is a much lower $799,000.
The aggregate home price, including all houses and condos, was less dramatic in the city of Toronto than the surrounding communities. While Toronto homes rose 8.1% annually to $1.4 million in the fourth quarter, Markham, Oakville, Oshawa and Richmond Hill all saw year-over-year median price increases closer to 30%. The median price of a condo in the GTA increased 14.8% year over year to $665,400 in the final quarter.
Brampton registered the biggest GTA gain soaring 29.5% in the fourth quarter compared to last year with a median price of $1.08 million. It also showed the greatest annual increase in detached houses, the most sought-after pandemic real estate. The median price of a house in Brampton in 2021 was $1.28 million — a 34.3% climb over 2020. It was followed by Milton with a 29.9% gain to $1.34 million; Vaughan, up 28.9% to $1.6 million; and Oshawa, where detached houses cost 28.7% more last year at $906,600.
Inside the city of Toronto borders, where prices still exceed most of surrounding 905 at a median $1.59 million last year, the annual increase was 12.5%.
Kingston posted the highest year-over-year aggregate home price gain of 38.1%. A home there that cost $523,000 in 2020 rose to $722,100 in 2021. A detached house in Kingston soared 44.3% to a median, $780,600.
Source: Toronto Star
Calgary Housing Activity to Decrease This Year, Prices to Remain Strong
The Calgary Real Estate Board says it expects the city’s housing market activity to moderate in 2022 after record sales were experienced in 2021, but tight conditions will linger. The Alberta board is forecasting the city will see 25,598 sales this year, down from 27,686 in 2021 and 16,149 in 2020.
CREB says rising lending rates will cool some demand for housing, but sales will still be strong because many were able to save more money during the COVID-19 pandemic. CREB is also predicting annual price growth will slow to 4% this year, down from more than 8% last year, when the average price of a home totalled $585,275. The board expects supply levels will eventually improve relative to demand this year, especially after last year’s surge in housing starts.
However, CREB chief economist Ann-Marie Lurie says the current tight conditions will stick around until at least spring and could result in one of two scenarios. “If supply levels remain low relative to demand, we could see stronger-than-expected price growth,” she says, in a release. “On the other hand, if rates rise much faster and higher than expected, it could cause a more significant pullback in sales.”