New figures show a slowing of price index but demand remains high
The old saying that ‘what goes up must come down’ is not necessarily true for residential real estate – but the rate at which it goes up can slow down.
Newly released analysis of Canada’s housing market shows a slowing of price escalation over recent months with January representing the third consecutive month of smaller increases.
However, the Teranet-National Bank National Composite House Price Index reveals that, despite the 0.3% month-over-month gain continuing the slower pace, the index hit a new record high last month.
But is the 250.50 reading – representing a 150% increase in prices from its June 2005 baseline – the peak?
Looking at sales data from the Canadian Real Estate Association released this week, that is unlikely.
National home sales in January reached an all-time high with sales up 2% month-over-month and actual activity up 32% year-over-year.
The traditionally-strong spring housing market is yet to come but the pandemic will continue to have an impact.
“The problem with this time of year is that the buyers and sellers that will in time define the Canadian housing story of 2021 are mostly all still waiting in the wings,” said Shaun Cathcart, CREA’s senior economist. “It’s the dead of winter and we’re only just starting to get the second wave of COVID under control. We’re unlikely to see a rush of listings until the weather and public heath situations improve, and we won’t see buyers until those homes come up for sale.”
Without a boost for supply, the market is likely to be constrained; there were only 1.9 months of inventory on a national basis at the end of January and some markets had less than 1 month’s supply.
Hamilton leads the gains
Regionally, it is Hamilton that posted the largest gain on the index for January.
At 2%, it was twice the gain of second-placed Montreal, with Victoria, Halifax, and Vancouver all posted gains of less than 1%. Quebec and Ottawa-Gatineau increased by less than the national average.
There were declines in the month-over-month index readings for Toronto, Calgary, Edmonton, and Winnipeg. This was the second consecutive month where one or more market posted a decline.
While the tight supply-high demand dynamic appears unlikely to change any time soon, there is reason to be cautious for real estate investors in some regional condo markets.
The Teranet-National Bank index shows that, in Toronto, the rise in sales volume was concentrated in single-family dwellings outside the downtown area and did not take in condos.
In the Greater Montreal market, condo listings have surged and, along with Toronto and Montreal, prices for single-family homes have far outpaced those for condos in Greater Vancouver and Victoria.
This sector of the market is being impacted by changing demands of homebuyers, often wanting larger space and/or out-of-town locations, together with lower immigration and the impact of the pandemic on the labour market, especially for younger workers.