Could 2021 be a Busier Year for Canadian Real Estate than 2020?
Friday Apr 30th, 2021
Now that we’ve made it through the first couple months of 2021, we can already see how the new year’s housing market is shaping up compared to 2020.
Despite plunging sales in the spring of 2020 and unprecedented challenges brought on by the COVID-19 pandemic, Canada’s housing market showed remarkable strength in 2020, making it the best-performing year on record.
With the first quarter of 2021 wrapped up, signs are pointing to a continuation of the strong housing market conditions experienced in 2020’s second half. The latest forecast from the Canadian Real Estate Association (CREA) predicts that 701,000 properties will trade hands across MLS systems in 2021, while the national average home price will rise 16.5% annually to just over $665,000.
Davelle Morrison, a Toronto-based real estate broker and REALTOR® with Bosley Real Estate, anticipates 2021 will be another active year for the market. Buyers who didn’t move last year and now find themselves working, schooling, and exercising from home will likely crave a change of scenery after experiencing another round of winter lockdowns.
“The people who didn’t make changes at that point, once they had to go into lockdown again, [they] were like, ‘Ok, you know what, we didn’t make a change the first time around, but now we really have to make a change,’” said Morrison.
Morrison and Adil Dinani, founder and principal of the Vancouver-based Dinani Group Real Estate Advisors at Royal LePage West Real Estate Services, share their insights on what 2021 trends home buyers and sellers could see that will keep the market moving forward.
What happened in 2020?
The 2020 housing market was a year unlike any other in history. As the pandemic triggered lockdowns across the country in the second half of March, the normally busy spring season began to crumble. National home sales dropped by 56.8% in April for the lowest sales total recorded since 1984, according to CREA.
The market started to regain its footing in May and June, quickly ramping up throughout the summer months. Pent-up buyer demand from the spring and low mortgage rates were two major driving forces behind the market’s recovery. In June 2020, REALTOR.ca reported its best month of user traffic with a 42% increase in unique visitors.
Morrison noticed high demand for condominiums in her local market during June, which was quickly followed by a slowdown in July as more inventory flooded the Toronto market. While the overall market experienced an exceptionally strong performance in the second half of 2020, a divergence between condominium and single-family home sales emerged in major urban areas. Buyers began looking for more space outside of cities as many investors offloaded condo units in response to the sluggish rental market.
“I would say 2020 was very different if you had a condo on the market versus if you had a house on the market,” said Morrison.
In the Vancouver region, Dinani says that single-family homes continue to lead the way, while the condo segment gradually builds momentum again. Record-low interest rates and domestic buyers, particularly Millennials who are looking for low-rise properties, have contributed to creating significant growth in both home sales and prices.
“We’re now seeing multiple offers [become] commonplace across all product types,” said Dinani. “We’re well above the active listings ratio in most segments, well into seller’s market territory. [It’s] one of the strongest seller’s markets I’ve experienced in my 15 year career.”
In total, 551,392 properties changed hands over MLS® Systems in 2020, with the national market posting a 12.6% year-over-year increase in sales and setting a new record, according to CREA.
Buyers should brace for a busy and competitive market in 2021
For home buyers looking to purchase this year, there are few indicators that the demand for Canadian real estate will slow down anytime soon.
In its latest report, CREA noted an uptick in demand had been observed in all parts of the country throughout 2020, even though the upward pressure on pricing wasn’t equal between all regions. In 2021, all provinces are expected to see a rise in sales activity, with the exception of Ontario, where a supply shortage is anticipated to cap the number of sales. Morrison explains that while supply has been increasing, it’s not keeping pace with buyer demand. In January, she saw the return of bidding wars and properties selling above asking price.
“I think it’s the demand that has gone crazy, partly because people now know they’ve got low interest rates for a couple of years,” she explained. “Money is cheap right now, hence the reason to buy a second property or get your first property.”
As global vaccination efforts continue to ramp up, experts anticipate that higher federal immigration targets and returning Canadian expats will also contribute to the demand for housing.
“Right now, we don’t have a lot of that, but that is part of the commitment from the federal level that there will be [more immigration] when the borders open up, [and] there will be a commitment to bringing more folks into provinces,” said Dinani. “If you look at the energy centres like Vancouver, Toronto, [and] Montreal, they’ll be the beneficiaries of this immigration.”
For those purchasers who may be anxious about timing the market correctly in response to rising demand and prices, Morrison says the best time to buy is whenever you are ready — nobody can time the market perfectly, whether it’s real estate or the stock market. While the market is expected to remain strong for the next three months, Dinani predicts that as life normalizes towards fall 2021 and into the winter of 2022, the market will begin to provide more sustainable growth.
“The market has risen quite considerably in the last six months, and there will be a period where it levels out,” he said. “Nothing can rise infinitely. It has to level out at some point, and I do anticipate that happening.”
Sellers can expect serious buyers
With the pandemic keeping us all inside, Morrison explains that buyers are more serious about making an offer than in previous years. For sellers, this means a ban on open houses in many parts of the country and the implementation of physical distancing restrictions could draw in fewer casual purchasers.
“Especially because of COVID-19, the only reason you’re out looking for a property right now is because you actually want to move,” said Morrison. “There are no more open houses [in Toronto], there aren’t any looky-loos. People who want to move are serious.”
Dinani explains that the Vancouver market has recently been driven by local buyers, some of whom are in the younger purchaser demographics. Millennial buyers anticipate that prices will rise across the next two years, motivating those who haven’t purchased to do so within the next 24 months, he said.
“These Millennials are very sophisticated and are looking at what it costs for them to rent, and now with interest rates that we’ve never seen in our lifetime, they’re doing [a] very close analysis,” said Dinani. “Owning is very similar in terms of monthly borrowing costs to renting.”
In 2021, we could start to see offices reopening on a part-time basis. For some buyers who relocated to rural or remote areas, this could prompt them to buy a pied-à-terre condo in the city, which will help to cut down on commuting times, says Morrison.
“The smaller condos that weren’t selling last year, [buyers are] now going to have to buy something so they have a place to stay during the week when they’re going to be working because they’re not going to commute two hours each way to get into the office,” she said.
Private outdoor spaces, larger interiors, and room for working from home were high on the priority list for buyers in 2020. This year, the pandemic will likely continue to influence these preferences among buyers who will still need to spend a significant amount of time at home, Morrison says. Space for a desk or a full-fledged home office is one of the most coveted home features, she explains, among both renters and home buyers.
“Now that we’ve suffered this year of lockdown, you wonder what’s next. Could this possibly happen again in the future? And if it does, [buyers] want some outdoor space,” said Morrison.
If you’re thinking about buying or selling a property in 2021, recruit the help of an experienced REALTOR® who can help guide you through current market conditions and trends.