The desire to own a home appears unabated but rentals could see greater impact due to burden faced by certain demographics
With many business closed for ever or facing that prospect; and millions of people fearful about their job security and financial future; one part of the Canadian economy remains resilient.
The housing market, while impacted heavily at the peak of the pandemic, has bounced back faster than many other sectors and the outlook remains broadly positive.
New data this week from the two largest housing markets in Canada support the view that there is plenty of pent-up demand.
The Toronto Regional Real Estate Board (TREBB) reported that there were 11,081 sales through its MLS system last month, up 29.5% from a year ago to set a new record for the month of July. Low-rise homes were most in demand.
The overall average selling price was up by 16.9% year-over-year to $943,710.
“Competition between buyers continued to increase in many segments of the GTA ownership housing market in July, which fueled a further acceleration in year-over-year price growth in July compared to June. On top of this, we also experienced stronger sales growth in the more-expensive detached market segment, which helps explain why annual growth in the overall average selling price was stronger than growth for the MLS® HPI Composite benchmark,” said Jason Mercer, TRREB’s Chief Market Analyst.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 3,128 in July 2020, up 22.3%year-over-year and up 28% from June 2020.
The MLS Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,031,400, up 4.5% year-over-year.
Rental market pressure?
The strength of the Canadian housing market was further highlighted Thursday as Home Capital reported its latest results with solid growth.
“You can see from the results we are reporting today that people still want to own homes, and not even a global health crisis has changed that,” said YousryBissada, Home Capital’s CEO.
However, Home Capital’s latest report noted a tightening of its risk appetite to reflect potential issues from indebted households and an uncertain economy.
A new report from industry body Mortgage Professionals of Canada (MPC) was upbeat.
"What we have seen clearly is that the vast majority of home owners are not feeling a long-term financial impact related to COVID-19, and that potential home buyers are still very much in the market for a home, signs of which are being seen in regions across the country,"said Paul Taylor, President and CEO of MPC.
But the MPC report also sounded a cautious note, especially for the rental market, adding to concerns for real estate investors following reports about the changing commercial sector.
"The greatest economic effects of COVID-19 have been experienced by young age groups and people in lower wage occupations. In consequence, the housing market impacts will likely be greater in the rental sector than for homeownership,” added Taylor.
MPC’s research suggests most homeowners are expecting only a short-term disruption to their employment and little concern about meeting their financial obligations.
"A large majority of mortgage holders (72%) do not foresee any difficulty in making ongoing mortgage payments," added Taylor. "There is a quite small minority (5%) of mortgage holders who expect that they will have a lot of difficulty with future mortgage payments. Yet, hundreds of thousands of Canadians have joined the mortgage deferral program, because they are uncertain about their future situations, and they want to have as much flexibility as possible."