TORONTO -- If you鈥檝e been sitting on the sidelines of the real estate market with a chunk of savings hoping for house prices to plummet, 2021 probably won鈥檛 be your year, Canadian real estate market experts say.
The COVID-19 pandemic didn鈥檛 devastate Canada鈥檚 hottest housing markets the way some forecasters predicted. In fact, in cities like Toronto and Vancouver, fierce competition for detached houses meant back-to-back months of record-breaking prices.
CTVNews.ca chatted with real estate agents and experts in Vancouver, Calgary, Toronto and Montreal to get their predictions for where the market is headed. While each expert expects 2021鈥檚 market to look a little different, they all anticipate that prices for mid-range detached homes will only go up as more Canadians seek out home offices and backyards to make life with COVID-19 a little more comfortable.
Ultra-low interest rates, introduced in the early days of the pandemic, are making those purchases particularly attractive for first-time buyers who haven鈥檛 seen their livelihoods jeopardized by COVID-19.
鈥淐OVID has made people appreciate the space that they live in 鈥 or on the flip side, not appreciate it,鈥 Vancouver-based agent Mark Wiens told CTVNews.ca earlier in December. 鈥淭hey鈥檙e taking a more critical eye to where they live.鈥
While bidding wars for houses are poised to heat up in many parts of the country, condos are a different story. All the experts agreed that small one-bedroom condos in downtown cores have already seen a price hit in 2020, and these prices aren鈥檛 expected to quickly rebound in early 2021.
That鈥檚 bad news for condo owners looking to sell, but possibly good news for anyone keen to buy a small space in hopes that, eventually, the perks of downtown living will return.
TORONTO: RECORD HOUSE PRICES, BUT CONDOS STRUGGLING
The Toronto real estate market has shown no signs of slowing down. Agents sold a 25-per-cent increase from the year prior. The same month, the average price for detached homes jumped to $1,204,844, a 14.8-per-cent increase from October 2019.
Lauren Haw, CEO of Zoocasa, a real estate agency that offers market analysis, said a big reason for that surge was pent-up demand from the early months of the pandemic, when many buyers and sellers froze.
"Everybody locked in their homes discovered the things they wanted to change. Some people wanted to change their homes, invest in a bigger kitchen. Some other people decided, 鈥業 want a big change, I鈥檓 going to move out of the city,鈥欌 she said.
That鈥檚 translated into a 鈥渟mall-town revival,鈥 Haw said, with cities and towns throughout southern Ontario seeing fierce competition for houses.
鈥淲e will see that trend continue to happen,鈥 Haw said. 鈥淧eople who said, 鈥業'm gonna buy this $600,000 one-bedroom condo in downtown Toronto,鈥 are now saying, 鈥業 can work from home in Barrie, Ancaster, Guelph or London.鈥 And people in London are doing the same and moving to Strathroy and Woodstock.鈥
If the economy continues to recover from COVID-19 shutdowns and interest rates remain low, that will likely translate into upward pressure on housing prices, Haw said.
In October, as Toronto house prices broke records again, the UBS Global Real Estate Bubble Index ranked Toronto third in the world on a list of cities most at risk of experiencing a property bubble. Vancouver, the only other city on the list, ranked eighth.
Haw doesn鈥檛 expect the bubble to burst in 2021.
鈥淚 don鈥檛 see a price correction coming in 2021. That being said, it鈥檚 been 30 years since a major correction in the Toronto real estate market,鈥 she said.
"But this pandemic didn鈥檛 do it. What鈥檚 it going to take? I don鈥檛 know what it will be that will drive the Toronto market into price decline.鈥
Where she does expect to see prices suffer is in one-bedroom condos, particularly in buildings downtown with a high proportion of renters and Airbnbs. Condo sales fell 8.5 per cent in the city of Toronto in October, with far less interest in smaller units in the densely populated core.
鈥淚 don鈥檛 think we鈥檙e currently at the bottom of condo prices, so I do think urban condo prices will continue to suffer in Q1,鈥 Haw said, adding that a vaccine could change that.
鈥淚鈥檇 hope that means service centres start to recover, the economy starts to rebound, businesses rebound, everyone runs to their local restaurants, which will be good for the economy, so we see renters come back to the city. If renters come back, we won鈥檛 see investors need to sell off one-bedroom condos.鈥
VANCOUVER: 鈥楢N INCREDIBLE YEAR鈥
Vancouver remains a seller鈥檚 market, . In November, the benchmark price of a Vancouver home hit $1,044,000, up 5.8 per cent from November 2019. The number of sales passed 3,000 for the first time since 2015, which marked the second-best November in the last 10 years.
In one word, 2020 has been 鈥渋ncredible,鈥 according to Vancouver agent Mark Wiens.
鈥淓xcept for April and May, we鈥檝e seen huge year-over-year increases in the number of sales each month,鈥 Wiens said.
For 2021, Wiens said he expects to see the prices of houses continue to rise at high levels, with all the time spent at home this winter giving people more time to reconsider their living situations.
鈥淭here is momentum going on and it鈥檚 not going break up any time soon,鈥 he said.
Vancouver鈥檚 housing market has long been supported by foreign buyers. When COVID-19 arrived and the border shut down, there were concerns that the housing market could be rattled.
Simply put, that didn鈥檛 happen, Wiens said.
鈥淧eople believed the market was solely fuelled by foreign buyers, that things would collapse because of travel restrictions 鈥 it hasn鈥檛 changed anything at all,鈥 he said.
Similar to Toronto, Vancouver鈥檚 downtown condo market has taken a hit, with a three-per-cent decrease year over year in prices.
Wiens said that presents an opportunity for buyers.
鈥淲hat I鈥檓 telling all my buyers is to buy downtown immediately, if you鈥檝e considering it,鈥 he said.
鈥淚f you think about the downtown market, what makes it great is the lifestyle, restaurants, bars clubs, that stuff is shut down and it鈥檚 going to come back and it鈥檚 going to come back hard.鈥
While the market for houses will likely remain competitive in early 2021, the first few months of the year could be the time to find a deal for downtown condos, Wiens said.
鈥淪o you鈥檒l still be looking at a discount if you buy downtown in March 2021, I believe,鈥 Wiens said.
As for a price collapse, Wiens agrees that 2021 isn鈥檛 the year, pointing to the high demand.
鈥淎 bubble burst is not imminent. It's just not going to happen. It鈥檚 really not.鈥
CALGARY: 鈥楢 DOUBLE WHAMMY鈥
It鈥檚 a less rosy picture in Calgary. The pandemic arrived at a time when the city was still grappling with the repercussions of the struggling oil sector. Year-to-date sales were down
Calgary-based agent Justin Havre pointed out that the average price for detached homes is flat in Calgary, at 0.74 per cent higher than in 2019. Fewer houses are being listed, with inventory down about 12 per cent.
The reason Calgary is facing challenges has a lot to do with the oil industry, Havre said.
鈥淲e experienced a bit of a double whammy because we鈥檙e very reliant on the energy sector here in Calgary, and we鈥檝e been in a downturn since 2014, 2015 when oil prices collapsed. And so when they collapsed again, we were like, 鈥楥ome on.鈥欌
Based on economic indicators, such as Alberta having the second-highest unemployment rate in the country, Havre said he鈥檚 surprised the market is doing as well as it is.
鈥淚t鈥檚 very interesting that we鈥檙e seeing the activity that we鈥檙e seeing, and we鈥檙e pleasantly surprised,鈥 he said.
The biggest drop in prices has been seen in the downtown condo market and luxury real estate over $1 million, Havre said. In one case, a house that sold for $11 million a few years ago sold in 2020 for $6 million -- a staggering drop that Havre said suggests luxury buyers are simply not interested in making a move.
Looking ahead, he expects 2021 will be another tough for Calgary, with more struggling homeowners facing foreclosure in the first half of the year.
鈥淭he writing is on the wall with 21 per cent of mortgages being deferred. Many of those people deferred them because of loss of jobs,鈥 he said. 鈥淚f they haven鈥檛 been able to find employment, and then they haven鈥檛 been able to sell their property, foreclosure may be the unfortunate circumstance for some people.鈥
As for opportunities to buy, Havre echoed the sentiment that condos in the downtown core will likely see reduced prices for a little while.
鈥淭here will be some great opportunities for buyers in the downtown area,鈥 he said. 鈥淏ut the pandemic has really made people think long and hard about what it's like to live in apartment buildings. Do they feel comfortable living in such high-density environments when we are still in a pandemic?鈥
MONTREAL: VACCINE COULD COOL PRICES
Montreal saw a major jump among all property types in 2020, with the city seeing compared to November 2019. Median prices also jumped, with single-family homes up 17 per cent and condos up 14 per cent.
A limited supply of houses on the market helped fuel that price rally, with more buyers desperate for extra space competing for fewer properties, according to Montreal-based real estate agent Georges Bardagi.
The pandemic is also pushing people outside city centres, he said.
鈥淪o they say, 鈥榃hy pay $500,000 for a 500-square-foot condo when for the same price I can have a pool, a basement office, and I don鈥檛 have to commute to the city anymore?鈥欌 he said.
Montreal鈥檚 condo market is a bit of an outlier, Bardagi said, compared to cites like Toronto and Vancouver. Prices in Montreal haven鈥檛 seen the same drop in price because Montreal simply doesn鈥檛 have the same number of condos.
鈥淚t鈥檚 still very much a growing market,鈥 he said. 鈥淭he demand for condos downtown has slowed down like everywhere else, but I think the effect is probably smaller in Montreal.鈥
While the emergence of the pandemic was expected to knock down housing prices, Bardagi suggested that, now, the opposite is true: as vaccines are introduced and the economy returns to normal, he suspects more people will feel comfortable listing their houses. With more properties on the market, housing prices should stabilize, he says.
鈥淲e expect Q1 and Q2 to be more of the same until a vaccine comes in and we come back to a somewhat more regular situation, which will probably be in the summer or next fall,鈥 he said.
One factor that could make a major difference is when Canada decides to reopen the borders. Bardagi said he anticipates a surge of foreign buyers who鈥檝e been waiting in the wings will flood the market.
鈥淚f that happens in the second half of 2021 or the first half of 2022, it鈥檒l be a game changer,鈥 he said. 鈥淭here will be planes full of people who want to move here and buy here.鈥
Bardagi said it can sometimes be easy to forget how attractive life in Canada can be to outsiders, and that a new wave of international buyers could throw gasoline on an already burning real estate market.
鈥淏esides winter and road construction, it鈥檚 a great place to live.鈥
