Since September, national home sales in Canada decreased by 0.7%, as reported by the Canadian Real Estate Association (CREA) on Monday. The CREA also reported that the average price of a resale home in Canada has risen by over 15% for the period of January to October 2020.
In March and April, the COVID-19 lockdown caused a major freeze in the housing market. CREA represents over 130,000 real estate agents in Canada and their expert opinion is taken into consideration. Last month, CREA and Canadian real estate agents said that October was the busiest ever for home sales.
Approximately 56,200 homes were resold during October which brought the tally for 2020 to 461,818. The average price of a resale home sold through CREA’s MLS system was $607,250. Compared to October 2019, there was a 15.2% increase in the resale price.
CREA stated that the average selling price can be skewed due to significantly higher listing prices in booming cities like Toronto and Vancouver. The normalized increase is 10.9% between this October and last October. Despite the adjustment, the increase is the most rapid since July 2017.
Rishi Sondhi, a TD Bank economist, noted that the volume of sales slowed in October despite the fact that resales increased over a longer period. He believes that it could be a sign that demand caused by the pandemic is coming to an end.
Sales are likely still well above fundamentally-supported levels in October in our view, they can only remain that way for so long,” Sondhi said in a research note. “As such, we look for activity to continue to cool in coming months. And the possibility of more widespread lockdowns could add further downward pressure to sales moving forward.
Changing homebuyer preferences is the main reason behind the price increases. Ever since the start of the pandemic, there has been a trend in the desire for more space and bigger properties near the outskirts of big cities. Canadians also took advantage of record low interest rates caused by the COVID-19 outbreak.
“The real price strength is in markets just outside, call it one to two hours, of the biggest urban centres,” Robert Kavcic stated, a BMO economist. “On the flip side, the big cities, while still seeing price growth, are losing ground on a relative basis. For example, Vancouver is now underperforming the Okanagan Valley; and Toronto is now significantly underperforming surrounding markets like Georgian Bay, Barrie and London/St. Thomas.”
Benjamin Tal, the deputy chief economist at CIBC, also commented on the matter. “The level of activity seen in the summer months was unsustainable and reflected aggressive utilization of pent-up demand,” Tal said. “Now it’s back to reality for housing and growth from here will be more consistent with overall economic growth. Therefore look for additional softening in activity during the winter.”
Veronica Ott attended Western University for accounting and obtained her CPA shortly after. Veronica owns and operates her own writing business with a specialization in personal finance, accounting and business related content.