How COVID-19 has affected Canadian Real Estate prices

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COVID-19 has affected the world in ways no one could have seen coming at the start of 2020. While it may have had adverse eaffects on almost every part of our lives, how has COVID-19 affected Canadian Real Estate Prices and the market in general? The short answer is that it increased prices across the country, or at least slowed the declines in slower markets. The degree of these effects were strongest for single family homes and then weakened through duplexes, townhomes and were weakest for condominiums. The virus had this effect by manipulating both supply and demand for Real Estate.

Increased demand: COVID-19 increased the demand for housing for two reasons. One, a lot of people now working for home decided to take the plunge to get something more comfortable. This is why Single-family detached homes seen the greatest increase and condos seen the least. The dropping interest rates that started at the beginning of the pandemic also had a big effect on demand. On a $400,000 mortgage, the roughly ~0.7% drop on interest rates over the last year equalled out to a savings of over $125 a month on mortgage payments. That is quite significant and could have been the deciding factor for a lot of people to finally take the home ownership plunge.

How can we tell the demand increased? Sales are up across many of Canada’s major cities including Vancouver, Montreal, Edmonton and Toronto. Toronto even hit their 3rd highest recorded sales total in a year. One notable exception was Calgary who was just shy of last years totals.

Decreased Supply: Between lockdowns occurring, the inconvenience of an increase in safety precautions, and the added danger of having people coming through your home, people were less inclined to sell in 2020. This is especially so in the slower markets where people did not have the inclination of increased selling prices.

How can we tell supply is down? It is a little more difficult to see. The price increases caused by the increased demand have offset the COVID-19 effects on supply. That being said, house listing inventory is down in Edmonton, Calgary, Montreal and even Vancouver. Calgary is the best example for showing this because there was no added benefit to selling this year. Even though Calgary experienced less sales – inventory also went down a fairly significant amount. Toronto is the one exception as it breaks sales records and the prices in the GTA continue to the moon.

The pandemic increasing demand and lowering supply has ultimately led to 4 of the previously mentioned cities hitting an increase in their “Sales / New Listings” statistic. Montreal most notably increased by almost 30%! I could not find this information for Vancouver.

So how did all of these things affect home prices in each city? Prices are up. Prices of residential homes are up in all previously mentioned cities but Calgary. In some cities, double digit percentage increases were seen.

Montreal did not have data on overall residential prices, just the Median prices for Single-family and condominiums, which also went up.

COVID-19 also hit the new housing market. The initial lockdowns slowed or stopped job sites. This resulted in fewer homes being completed than otherwise would have been. The pandemic also hurt the supply chain for building materials causing a significant increase in building prices. For this reason, the new homes that were/are being built now also cost more.

You may be asking yourself, how has the massive levels of unemployment and job loss not hurt the Canadian Real Estate Markets? They probably have slightly, a large portion of these job losses were for lower income jobs that would not have been in a position to buy a house either way. Certainly there are exceptions, but this is the trend.

For more information on any of the 5 cities mentioned in this post, check our annual 2020 review for each city:

Toronto 2020 Review

Vancouver 2020 Review

Montreal 2020 Review

Edmonton 2020 Review

Calgary 2020 Review

We will also be providing monthly market statistics reports each of these 5 cities as well. You can find them here, or subscribe to our newsletter below!

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