OTTAWA, Ontario (Monday, March 8, 2021) — The Canadian Real Estate Association (CREA) has forecasted, that home sales activity, via its Multiple Listing Service® (MLS®), will remain relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions.
Over the past several years, record levels of international immigration, low interest rates and an increasing share of millennials entering their home buying years, have helped make the housing market a significant source of strength for the Canadian economy.
Following the initial stages of the COVID-19 pandemic, economic activity picked up and continues to improve slowly, and the recent government support programs for individuals and businesses have also helped the overall economy, through the most severe parts of the pandemic, to date.
Mortgage interest rates have declined to record lows in 2020, including the Bank of Canada’s benchmark five-year rate, used by Canada’s largest banks, to qualify applicants under the B-20 mortgage stress test. With the Bank of Canada committing to keep interest rates low into 2023, mortgage interest rates are expected to remain near current levels through 2021.
Recent national sales trends have improved more than anticipated, over the second half of 2020, and new listings, in most of the country, have also recovered.
However, while sales activity rebounded to record-high levels, new listings only recovered to about their five-year average in most markets. The relative strength of demand for homes, compared with supply, has meant sales activity has been eroding active inventory, which was already scarce in many markets, pre-pandemic — a trend since 2015.
The increase in demand has impacted every part of the country, including the Prairies and Newfoundland and Labrador. While these regions aren’t experiencing the same intensity of upward price pressures as the rest of the country, compared with previous years, demand is strengthening and prices have indeed started to increase.
Despite the historic setback to last year’s spring market, caused by the pandemic, CREA projected national sales to hit a record of 544,413 units in 2020, representing an 11.1% increase from 2019 levels.
The strength of the Canadian housing market was broad-based, with every province, except Alberta, registering a year-over-year increase in sales. British Columbia and Quebec stand out as large contributors to the overall gain.
On a monthly basis, sales are forecast to ease back to more typical levels throughout 2021; however, presuming there’s a more normal spring market in 2021, the year, as a whole, is expected to see more home sales than in 2020.
National home sales are forecast to rise by 7.2% to around 584,000 units this year. All provinces, except Ontario, are forecast to see increased sales activity in 2021, as low interest rates and improving economic fundamentals allow people to get into the markets where homes are available for sale.
Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province. This shortage is expected to limit sales activity in 2021. The strength of demand, particularly for larger single-family properties, will drive the average price higher, as potential buyers compete for the most desirable properties.