For Canada’s housing market, 2020 was a year like no other.
The onset of the COVID-19 pandemic in March pushed markets across the country off course, resulting in record-low spring sales followed by a swift post-lockdown recovery that remains in motion. As we approach the new year, now’s the time to consider how the ripple effects of the pandemic will impact home buyers and sellers in 2021, whether you’re a first-time purchaser or an experienced homeowner.
John Pasalis, a REALTOR® and founder, president and broker of Realosophy Realty, shares his predictions for key housing market trends that we’ll see in 2021.
Low-rise sales will remain strong, but price gains will moderate
Canadian home sales skyrocketed following the springtime market plunge. According to the latest figures from the Canadian Real Estate Association (CREA), sales activity has been up in almost all local markets on an annual basis for the last four months.
The low-rise housing segment in particular has seen dramatic sales increases throughout 2020, especially in suburban and rural communities. This segment includes housing types like detached, semi-detached and townhomes. A combination of factors have been attributed to the sales recovery (and then some) of low-rise housing, from historically-low interest rates to the rise in demand from urban dwellers migrating from cities.
Pasalis predicts the low-rise market to remain strong and stable in 2021 with moderate price growth compared to what we’ve seen this year.
“I do think in the low-rise segment we’re going to continue to see prices trend up into 2021. But again, I think the price growth is going to be moderate,” said Pasalis. “In a lot of these outer suburbs, house prices are going up something like 20-plus per cent a year, and I don’t think that’s going to continue.”
While the national market should remain tilted in the seller’s favour, Pasalis says low-rise price growth will dip to low double-digit territory over the next 12 months.
Condo sales activity likely to remain sluggish
It’s quite clean condominium and low-rise sales have been on diverging paths in 2020.
While sales have climbed in outer-city communities, downtown condos have seen much lower levels of activity. Pasalis explains with city offices not planning to reopen anytime soon, alongside deep cuts in downtown newcomer and student renters, he anticipates condo markets will remain cool into the summer of 2021, likely until there’s a return to normalcy in downtown Cores.
In the first quarter of 2021, Pasalis says we’re likely going to see statistics showing condo prices are down year-over-year, with prices having been at their peak in January and February of 2020, before the onset of the COVID-19 pandemic.
Low interest rates will continue to drive investor demand
According to the Bank of Canada, interest rates are not expected to rise until 2023. Pasalis believes this could fuel demand from real estate investors. Even in the event of a further slowdown in the condo market, cheap interest rates will make investing an attractive prospect for many in 2021.
“I think it’s going to help fuel demand from end-users and from investors just looking to capitalize on price growth in a really, really low rate environment,” said Pasalis.
The urban exodus expected to slow down
Post-spring lockdown, many city residents moved outside of urban centres in search of home office space, greater privacy and backyards that are otherwise hard to find in downtown areas. This phenomenon, often referred to as the urban exodus, took off as a large portion of the workforce found itself working from home this year.
However, Pasalis sees this urban migration waning in 2021.
“I think the interesting trend will be what happens in the future when many of these jobs [will] require people to go back to the office,” said Pasalis. “How many can manage the commute and [for] how many days a week? Are we going to see a return to at least people moving back closer to the city if the commute becomes challenging?”
New immigration could support rental and resale recovery
In October, the federal government announced its plan to bring 1.2 million immigrants to the country over the next three years to make up for the pandemic-driven shortfall in newcomers that arrived in 2020.
While population growth is critical to robust housing market activity, Pasalis says the type of newcomers to Canada will influence which segments will benefit the most.
“If you think about it, someone who is a non-permanent resident is less likely to go out and buy a house,” said Pasalis. “Whereas, some people who are immigrating here and plan to be here permanently, and especially if they’re well-off and have savings, are more likely to purchase a home.”
With the government’s immigration plan expected to start in 2021, it’s a matter of waiting to see which segments see the most immediate impact.
Source: Michelle McNally, Real Estate 101, Realtor.ca