Keeping perspective on the Canadian residential real estate market during the COVID-19 pandemic and what to expect for the rest of 2020 was the focus of a recent Altus Group webinar.
“COVID created a 10-month sales year” due to a lack of April and May activity, said Altus Group Data Solutions vice-president of product management Matthew Boukall. “How we’re seeing the market rebound indicates pent-up demand, that was in the market prior to COVID, is coming back where supply exists.”
Factors affecting residential markets during the pandemic have included: closed sales centres and fewer open houses; increased unemployment; mortgage approval challenges, as banks became more cautious; fewer new project launches; consumers obeying stay-at-home messages from government and health authorities; and general COVID-19 and economic uncertainty.
Low housing inventory levels have continued in Eastern Canada.
In Western Canada, slower sales have allowed supply to increase, particularly in Alberta where the economy continues to struggle.
Condominium apartment and land sales
Condominium apartment sales were down 15 per cent from 2019 levels through Q1 and Q2 2020 in Vancouver, despite strong sales through the first two months of the year and increased activity in June.
New condo prices have dropped by three per cent.
While the Greater Toronto Area (GTA) averaged 10 to 15 new condo launches per month in recent springs, that number was down to three during the height of COVID-19 restrictions this year.
After a strong start to 2020, year-to-date sales are now 32 per cent below 2019 levels due to dropoffs in April and May. However, new condo prices have still risen by 12 per cent.
In Montreal, Boukall cited slower sales in 2019 and through early 2020 after incredible growth in condo demand in 2017 and 2018.
Land sale activity and dollar volumes are down across the country, other than Calgary, but Boukall said it’s too soon to say if that’s entirely related to the pandemic.
“Developers are seeing uncertainty and are likely to pull back some of their sales volumes.”
Western Canada market snapshots
Vancouver was feeling the impact of government policies meant to slow rapidly rising house prices prior to COVID-19. While prices have trended lower, they’re still a challenge for many consumers.
Foreign investment activity has been lower and long approval timelines and high development charges have made it challenging to bring new projects to market.
On the upside, COVID-19 restrictions were less severe in Vancouver than in other parts of Canada and sales launches during the pandemic shutdown saw reasonably strong demand.
Improving affordability and new supply should bring buyers back to the market, while incentives have attracted consumers and improved sales.
Edmonton’s challenges include weak demand for multifamily ownership the past two years. Prices may have declined as far as they can go, however, and more supply is shifting to purpose-built rental to satisfy demand.
No new inventory has been brought to the market as pre-sales have been challenging amid existing unsold inventory.
A plus for homebuyers is that Edmonton has the most affordable housing stock among major Canadian cities.
Resale activity has been recovering and demand for family-friendly housing options, such as townhouses, has been strong. Investment in public infrastructure is improving the viability of Edmonton’s downtown.
A larger supply of new homes in Calgary’s suburbs is creating more competition and price pressure, while an increasing supply of new purpose-built rental product may be dissuading condo unit investors.
Townhouse demand has been robust in new greenfield communities in Calgary. Downsizing and empty-nester demand remains strong, and a resale recovery could boost the market this fall.
Sales activity was less impacted by COVID-19 in Calgary than in other cities.
Eastern Canada market snapshots
High development charges, long approval cycles and construction challenges have made it harder for developers to bring projects to the market in the GTA.
Rising prices, particularly in apartment condo product, is making some regions unaffordable.
Historically low resale inventories are pushing buyers into the new home market, particularly downtown. Despite new supply, the rental market remains very tight with continued upward pressure on rents.
Ontario’s Greater Golden Horseshoe (GGH) region, including Kitchener-Waterloo and Hamilton, has less focused demand than in the GTA and new projects generally face a slower sales pace at launch.
Office demand and job growth remains focused in downtown Toronto, which means long commutes for those living in this region as transit infrastructure continues to lag demand.
Resale prices remain comparably affordable and better-supplied in the GGH than in the GTA. Available land for family-friendly townhouse and single-family housing is also in greater supply and more affordable.
Flexible work environments and an increase in working from home could shift the nature of housing demand throughout the GGH.
“In the medium term, those that can work from home may start to shift where they look for housing, certainly if they’re in Toronto or Vancouver,” said Boukall.
Construction delays resulting from COVID-19 restrictions will impact deliveries of new homes in Montreal. Pending government policies targeting housing affordability and a potential foreign buyer tax could impact the market in 2021.
Real estate prices remain much more affordable in Montreal than in Vancouver and Toronto. Resale inventories remain very tight, which could push more consumers to new housing.
The housing market for empty-nesters and downsizers should also remain robust.
Elevated construction activity, particularly for purpose-built rental properties, will deliver a significantly higher number of units in 2021.
Looking to 2021
COVID-19 has resulted in a significant increase in unemployment, particularly among younger people and those in lower income brackets. That could impact ownership demand, pushing more people to affordable rental product.
Rental investors also face challenges due to layoffs and rising unemployment, small business bankruptcies, declines in household discretionary income and consumer confidence, and more stringent financing conditions.
This could reduce condo sales.
While housing starts are expected to be negatively impacted this year, it’s anticipated they’ll rebound in 2021.
Government support programs may be hiding the true impact of the pandemic on the economy and consumers. Boukall believes the housing market could be negatively affected as these programs end.
Global factors that will have a more significant role in the Canadian housing market over the next two years are: a decreased number of immigrants and international students due to travel restrictions; and uncertain economic growth and demand for exports.