Canada’s real estate markets continue to snap back after COVID-19 lockdowns put a damper on the typically busy spring market.
The Canadian Real Estate Association (CREA) says national home sales jumped 63 per cent month-over-month in June. Sales are up 150 per cent from April.
“While June’s housing numbers were mostly back at normal levels, we are obviously not back to normal at this point,” said Shaun Cathcart, CREA’s Senior Economist, in a release.
“I guess the bigger picture is one of cautious optimism. The market has recovered much faster than many would have thought, but what happens later this year remains a big question mark.”
The Fraser Valley led the way with a 99.7 per cent increase, followed by the Greater Toronto Area (83.8 per cent), Montreal (75.1 per cent), and Greater Vancouver (60.3 per cent).
The MLS Home Price Index (HPI) rose 0.5 per cent month-over-month and 5.4 per cent year-over-year.
“Frankly, that’s a much earlier turn than we had expected in this key measure, let alone what the housing bears anticipated,” said Douglas Porter, BMO chief economist, in a note.
“Home sales, prices and starts have effectively regained all the ground lost during the shutdown. However, fair point that some of this outsized strength is simply pent-up demand for the lost sales from the key spring season, and it remains to be seen if the momentum can be maintained.”
Emergency COVID-19 measures, like mortgage deferrals and CERB, have helped keep Canadians afloat during the pandemic. But those programs are set to wind down, so the longer term outlook could be much different.
“For those who lost their job or are already stretching their salaries to continue to pay their mortgage, the ending of programs such as CERB could significantly impact the course of their existing and future housing purchase or selling plans. In the short term, until the end of 2020, there appears to be enough pent up demand to maintain a sellers’ market in major centres,” said John Lusink, president of Right at Home Realty,
“If people are unable to get back to work or government support programs are not renewed, we could see an impact on the real estate market, albeit very unlikely to the extent we saw in 2008-2009 or the early 90’s.”
Lusink says low inventory has brought about multiple offers, which has allowed sellers to put a higher prices on their properties.
Immigration rates are also set to decline, but Royal LePage President and CEO Phil Soper, says that won’t have a large effect.
“Research into the home purchase behaviour of new Canadians leads us to believe that the pandemic-driven drop in immigration will have only a muted impact on our housing market. We found that only 15 per cent of immigrants purchased a home in their first three years in Canada. Note that by ten years of residence, newcomers have a higher rate of homeownership than those born in the country – their desire to own is strong, but it takes time to realize that dream,” said Soper.
“There will be an indirect impact on housing, as these new arrivals would have driven demand for rental accommodation. Add to this the near shutdown of short-term, Airbnb-style rentals and we could see landlords selling underutilized properties. It appears that there is a line-up of first-time buyers, encouraged by historically low interest rates, to acquire these homes.”
Anyone currently in the market, or planning to get in can expect low mortgage rates for the foreseeable future. The Bank of Canada maintained its key overnight rate today. During a press conference, governor Tiff Macklem was clear in his messaging.
“The message to Canadians is that interest rates are very low and they’re going to be there for a long time. We recognize that Canadians and Canadian businesses are facing an unusual amount of uncertainty, so we have been unusually clear about the future path for interest rates,” said Macklem.
“If you’ve got a mortgage or if you’re considering to make a major purchase or you’re a business and you’re considering to make an investment, you can be confident that interest rates will be low for a long time.”
James Laird, Co-founder of Ratehub.ca, says buyers should get a pre-approval now to know how much house they can afford and to take advantage of low rates.
“As the real estate market continues to rebound competitive pressure between mortgage lenders is causing both fixed and variable rates to inch down on a continuous basis.”
“For Canadians that are currently shopping for a home they should get a pre-approval to lock in today’s rates for up to 120 days. Anyone with a mortgage coming up for renewal or who is considering a refinance should shop around to take advantage of the historically low rates.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.