The juxtaposition couldn’t have been more fitting as 2020 drew to a close: just when the second wave of the pandemic reached new troubling heights, many of Canada’s housing markets recorded their strongest December ever. The year just ended will easily go down as the most surprising in the history of Canada’s housing market. The worst global pandemic in generations clearly couldn’t stop (or did just briefly) Canadians’ desire to own a home. In fact, rock-bottom interest rates, high household savings and changing housing needs turned up the heat even more. December resales were astoundingly strong for what is typically a quiet period. They surged between 32% (Montreal, Ottawa and Edmonton) and 65% y/y (Toronto) based on early results from local real estate boards. Suburbs attracted a lot of interest again. Property values continued to appreciate at accelerating rates in most markets. Downtown condo prices still bucked the trend due to ample inventories in Canada’s largest cities—the downturn in the rental market has prompted many condo investors to sell. That said, softer condo prices are now drawing more buyers in. Existing condo sales soared virtually everywhere in December. We expect condos’ growing affordability advantage over single-detached homes will boost demand in 2021.
Despite coming to a near-standstill last spring, the GTA market had its third-strongest year on record in 2020. December results were nothing short of spectacular with resales up 65% from a year ago. We estimate this translates into an advance of more than 30% from November on a seasonally-adjusted basis. Overall prices accelerated further under extremely tight demand-supply conditions. The region’s aggregate MLS Home Price Index (HPI) climbed 11.1% above its year-ago level, led by a 15% gain in the detached home index. Condo prices, however, remained much more subdued, rising only 2.4% y/y. This reflects still-significant condo inventories—active listings were up 159% in the GTA, and 172% in the 416 area alone. Yet it was condo sales that caught our attention. They surged 75% y/y (with similar advances in both the 416 and 905 areas), suggesting buyers were out in full force looking for bargains. We expect a dearth of single-detached home supply (active listings are down 44% y/y) will slow activity in that segment while keeping price increases on an accelerating path in the near term.
2020 ended on a high note in the Vancouver area. December resales were the strongest ever (up 53% y/y and more than 30% m/m based on our own calculation) and prices picked up more steam (aggregate MLS HPI rising 5.4% y/y). Demand continued to be supercharged but it was an increase in sellers—including those of single-detached homes—that set the stage for more transactions to take place. Still, available supply remains short for detached homes, which is turning up the heat on prices.
Trends remained almost universally solid across Canada. Calgary (up 40% y/y), Edmonton (up 32%), Ottawa (up 32%) and Montreal (up 32%) all recorded further significant sales increases. Single-detached homes were still generally on top of buyers’ list though interest in condos also picked up considerably—in part due to more plentiful inventories. Prices continued to firm in Calgary and Edmonton (mostly for single-detached, however) and escalated rapidly in Ottawa and Montreal where demand-supply conditions have been exceedingly tight for some time.
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Robert Hogue is a member of the Macroeconomic and Regional Analysis Group, with RBC Economics. He is responsible for providing analysis and forecasts for the Canadian housing market and for the provincial economies. His publications include Housing Trends and Affordability, Provincial Outlook and provincial budget commentaries.
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