One of Canada’s largest real estate firms says low interest rates and the need for more space amid the COVID-19 pandemic created a surge in home sales in the second quarter of 2020 and jacked up the prices across Ontario.
Royal LePage’s recent price index survey showed that homes in St. Catharines and the Niagara area were targets for Ontarians as the region posted double-digit price gains with about an 11.3 per cent increase year-over-year, pushing the average house price up to $475,835.
Broker Brad Johnstone said the Niagara region recovered after a dip in the first few months of the pandemic and May sales outpaced new listings in the market, which put significant pressure on prices.
“Buyers are prioritizing space for an improved quality of life in the new norm. Locals are moving up to larger properties and GTA-based buyers are looking for more affordability to get more house for their dollar.”
Royal LePage president and CEO Phil Soper echoed those thoughts for the rest of the country, saying the aggregate price of a home in Canada increased 6.8 per cent year-over-year to an average of $673,072 in the second quarter.
“As the reality of extended and potentially permanent work-from-home employment sunk in, people pondered both the location and size of their homes,” said Soper. “Simply put, larger homes in smaller communities have become more fashionable. As competition for these properties heats up, bidding wars are more common in what were our quieter cities and towns.”
Two-storey homes were the target of many buyers across the country in recent months, according to Soper, as house prices outpaced condos as buyers put a premium on space.
In Niagara, the average price of a two-storey home went up 11.4 per cent year-over-year to $485,038, while a bungalow rose 11.2 per cent year-over-year to $463,599.
Mississauga was the hotspot in Canada, seeing the average price rise 13.5 per cent year over year.
Royal LePage is forecasting that the aggregate price of a home in the Greater Toronto Area will increase four per cent to $882,000 in the fourth quarter of 2020 compared to the same quarter last year.
For Canada in general, Soper expects home prices to rise sharply in the second quarter as housing supply struggles to keep up with the surge in demand.
He suggests the average price across the country will rise 2.3 per cent year-over-year when 2020 comes to a close.
The latest numbers from Royal LePage contradict forecasts from the Canada Mortgage and Housing Corp. (CHMC), which predicted a drop in home prices in the country’s biggest cities, citing “severe declines” in home sales and construction.
The late-June report from the agency suggested “high unemployment” and “lower income” would slow housing starts and push sales and home prices below pre-COVID-19 levels, with the earliest recovery likely sometime in 2022.
The Crown corporation did, however, admit that prices in Ontario could recover sooner and as early as the end of 2020.
Johnstone says he’s simply not seeing that, and the numbers prove it. He says Niagara has recovered after a dip in the first few months of the pandemic and May sales outpaced new listings in the market.
“What we’re seeing is that inventory is still low because there are some people that are still nervous about COVID and everything else, but there’s buyers out there.” Johnstone told Global News. “We’re seeing an influx of GTA people that couldn’t work from home before, finding out now that they can.”
Realtors Association of Hamilton-Burlington (RAHB) president Kathy Della-Nebbia also believes the realization of working from home in a rural area is driving some of the increases in sales in southern Ontario.
Although there are no numbers to back up the behaviour, she does say it is something she hears from clients in her experiences out in the field.
“I had a viewing on a listing, and when I spoke to the co-operating broker he told me his clients were moving here because they have now decided with their employers to continue to work from home,” said Della-Nebbia. “This takes away the commuting barrier that exists for some. I’ve heard similar stories from colleagues, as well.”
Interest rates may also factor into the equation, according to Royal LePage’s Soper, as mortgage rates have tumbled steadily over the last couple of months. The rates are now in record-setting territory, with certain one- to five-year fixed rates now available for under two per cent from some discount brokers.
“Home prices shot up in the second quarter as a crush of buyers entered the market, attracted by extremely low interest rates and the perception of bargains to be had,” said Soper. “Across Ontario, Quebec and British Columbia in particular, the demand for housing outpaced the growth in supply.”
The RAHB says prices have been relatively unaffected by the pandemic in the region as they rose again in June to more than $675,223 on average, which is up 13.7 per cent from June 2019, and up three per cent from last month.
However, the agency says the pandemic is still having an effect on year-over-year sales as they slipped for the fourth straight month, down 0.2 per cent compared to June of last year.
The Toronto Regional Real Estate Board (TRREB) noted a “considerable” recovery in June compared to May, noting that more buyers and sellers were interacting in the market as the province slowly began to reopen.
Sales across in the Toronto region increased 89 per cent month to month, with listings up 77 per cent, which is also up year-over-year by two per cent.
The average home price for all property types across the Toronto region in June was $930,869, representing a 12 per cent increase month-over-month and an eight per cent annual increase, according to the TRREB.
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