Record-low Supply and Interest Rates Fuel Record October Home Prices
The average home price in Canada continued to trend higher in October as housing supply fell to a fresh record low.
The Canadian Real Estate Association reported the average sale price at $607,250 for the month, an increase of 15.2% from a year earlier.Removing the high-priced markets of Toronto and Vancouver, the national average price was $480,250, up 19.5% from a year ago.
Sales, meanwhile, were up 32.1% year-over-year and set a new record for September by a margin of 14,000 transactions, according to CREA.This marks the fourth-straight month that activity has been up in nearly all Canadian markets.
“For anyone waiting for the Canadian existing home market to begin to settle down following this summer’s surprisingly strong recovery, they’re going to have to wait a little longer,” said Shaun Cathcart, CREA’s senior economist.
“Many reasons have been suggested for why this is when many traditional drivers of the market, economic growth, employment and confidence in particular, are currently so weak,” he continued. “Something worth considering is how many households are choosing to pull up stakes and move as a result of COVID-19 and all the associated changes to our lives.
Yet, housing inventory ticked down to just 2.5 months, a fresh record low. This is how long it would take to liquidate current inventories at the current sales rate. And CREA noted that 18 Ontario markets were under one month of inventory by the end of October.
That, of course, has kept upward pressure on home prices across the country. Here’s a look at how some regional and local housing markets performed in October:
Woodstock-Ingersoll, ON (+27.4%)
Quinte & District, ON (+25.3%)
Ottawa: $536,400 (+22.4%)
Halifax: $388,418 (+19.2%)
Barrie & District (+18.6%)
Greater Montreal Area: $418,000 (+15.7%)
Greater Toronto Area: $897,700 (+10.8%)
Winnipeg: $289,400 (+8.8)
Greater Vancouver Area: $1,045,100 (+6%)
Victoria: $719,300 (+3.5%)
Calgary: $419,600 (+0.3%)
Reaction to October’s Housing Market
Analysts were in agreement that limited housing supply is the key factor keeping the country’s housing market going and going like the Energizer bunny.
“Sellers were in the driver’s seat in virtually all major markets, holding commanding sway over prices in Central Canada and most of the Atlantic region,” noted RBC economist Robert Hogue. “The main exceptions were in downtown condo segments of some of Canada’s largest cities where supply has soared.”
BMO senior economist Robert Kavcic agreed, writing, “very limited supply in areas that are seeing an influx of demand is boosting prices, with the pace across many markets ranging from solid to historic…As it turns out, 2020 will be a banner year for the Canadian housing market.”
But there are other factors at play as well.
“Clearly exceptionally low interest rates are keeping the market’s wheels well-greased at this stage. They make it easier for many first-time homebuyers and move-up buyers to jump into the market,” Hogue said. “Yet work-from-home is possibly an even more powerful driver of activity. The pandemic altered work arrangements for millions of Canadians—potentially permanently for many of them—prompting a large-scale re-evaluation of housing needs.”
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