Knowledge is power when it comes to being successful in the Canadian real estate market. It can be intimidating to decode market studies and real estate statistics as a homebuyer or seller, but by understanding the key takeaways and important shifts in recent trends, you can make informed decisions with confidence.
New housing market trends in Canada
Here’s a breakdown of Royal Bank of Canada’s (RBC) most recent market reports on summer’s housing trends and predictions on the future of the market — along with tips on what that means for homebuyers and sellers.
There are fewer homes on the market
There are fewer homes available for buyers, with home resales falling in June 2021 for the third consecutive month. Single-family detached homes became more elusive, meaning more buyers chose condos or apartments. As a result, the supply of affordable condos or townhouses has also decreased.
The MLS Home Price Index (HPI) gauges the price of homes in neighbourhoods across Canada. The composite HPI for Canada rose 0.9% from May to June of 2021, increasing the average home price to $726,900.
There are more homebuyers than listings
High demand and low supply in the housing market means more bidding wars, even in smaller markets, and higher prices for homes across Canada. For buyers, even less desirable homes have generated competing offers and final sale prices dramatically over the original asking.
The sales-to-new listings ratio in Canada continues to heavily favour sellers in every local market. While it’s still important to price your home reasonably — high demand may help incite bidding — forecasts suggest that it will remain a seller’s market for the coming months.
Home prices continue to rise
The MLS Home Price Index (HPI) gauges the price of homes in neighbourhoods across Canada. The composite HPI for Canada rose 0.9% from May to June of 2021, increasing the average home price to $726,900. The yearly rise in home prices was sharp too, increasing 24.4% from June 2020 to June 2021.
While resales are down, they are still historically strong — restrained only by a lack of listings — which will likely keep prices high in the short term. However, the next year will likely see a lower year-over-year increase than the almost 25% increase we’ve just seen, according to RBC’s report.
While Canadian home prices have risen across provinces, some high-demand areas in cottage country (like Bancroft, Kawartha Lakes, and Peterborough) experienced the sharpest rise. This is another trend that might taper off as pandemic restrictions lift, since many city dwellers purchased country homes over the pandemic and might be attracted to cities when they’re fully open again.
New Brunswick, British Columbia, Southern Ontario and Manitoba also all experienced steady climbs in home prices. Some areas like St. John and Ottawa experienced slight declines –– and while it’s too early to tell, this could hint that prices have peaked.
How does the current market affect affordability?
It’s a tough market for buyers right now and these trends look like they’ll continue in the near future, according to the RBC reports. Housing affordability is the worst it’s been in the last 31 years, according to RBC’s affordability measure. At 52%, housing affordability hasn’t been this unattainable since 1990 –– rising by 0.9 percentage points in the first quarter of 2021.
On the bright side for buyers, a few markets live outside these norms; Atlantic Canada and the Prairies still offer markets ripe with affordable options. The cost of homeownership grew most remarkably in Toronto, Vancouver, Victoria, and Montreal. While several markets reflected condo price declines, condo prices in big cities look like they’re going up — and are likely to keep rising — as less condos become available. Smaller cities and rural areas generated special interest during pandemic restrictions, as people reconsidered the cost of big-city living amid shutdowns. In places like Toronto, houses and townhomes became less affordable and more people considered condo or apartment purchases, even as these prices rose as well.
What are your next steps?
Even in challenging markets, knowing the facts can help you to make a game plan to buy or sell your home.
Set realistic expectations
Once you’re excited about a specific home, it’s easy to be tempted into a bidding war or to lose sight of what you can actually afford in a high-demand market. Clearly define the home you can afford, your must-haves, and the home prices in areas you’re considering, well before you start looking at homes.
You can use online tools to help calculate your financial limits. Talk through what compromises you might make to find a more affordable property. For example, perhaps you don’t need a house with a yard if a nice park is within walking distance.
If you’re selling, consider comparable home prices in your neighbourhood, track the value of your home with RBC’s home value calculator, and connect with an agent for the most accurate assessment of your home’s value.
Get pre-approved for a mortgage so that you know your margins, or get pre-qualified without affecting your credit score. Once you’ve been pre-approved or pre-qualified, you can establish your down payment. Don’t forget to forecast other costs, like closing costs, home inspections, appraisals, and administrative fees.
As a seller, a comparative market analysis will help you establish the sale value of your home. Remember that even in a seller’s market, pricing too high won’t benefit you and a potential bidding war could work to your benefit. Don’t skip steps like professionally taken photos, artful home staging, or property updates that help make your home more desirable. A fresh coat of paint and a well-maintained yard will help potential buyers imagine themselves living here. An experienced local agent can help you determine the best price for your home and identify the right time to sell.
Do your research
- It might be worth exploring properties outside of the area you anticipate living in. In Vancouver, the average buyer spends almost 75% of their income to cover ownership costs.In Toronto this percentage is 67.7%. Prairie Provinces and Atlantic Canada boast lower long-run average ownership costs, so if you’re buying in a market with high demand and prices, make sure you have a clear sense of the benefits that make it worth the cost of moving there.
- Canada offers first-time homebuyer benefits and incentives like The First-Time Home Buyer Incentive, The Home Buyer’s Amount, and The Home Buyer’s Plan (HBP) .
- For tips on navigating the market as a buyer or seller, explore our blog.
Houseful can help support your real estate journey
Houseful helps you navigate the complex homebuying and selling process with a tailored home search experience, professional support, and resources to inform your decisions.
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