After nearly a year of dealing with, and working through, the COVID-19 health crisis, housing demand continues to outpace supply. As a result, home prices continue to steadily increase, which has lead to some early signs of overheating in Canada’s housing market.
Looking ahead, Canadians need to be ready to embrace new emerging opportunities in the housing market, according to a recently released report on the outlook for Canada’s housing sector from PricewaterhouseCoopers (PwC), which included a survey and interviews of industry players in the Canadian real estate market.
The report looks at emerging trends in the various areas of Canada's commercial real estate to its housing market, and PwC says the pandemic has accelerated changes and shifted the outlook across all asset classes.
"If there was a common theme in our interviews with real estate companies this year, it was uncertainty. We found diverging views on several important issues, ranging from a potential uptick in suburbanization to long-term shifts in office vacancies due to remote working to the outlook for Canada’s recovery from the COVID-19 pandemic," reads the report.
READ: The GTA Saw 11.4B in Residential Sales in February, It’s Biggest Month Ever
At the forefront of Canada's housing market is single-family residential homes, particularly those outside of large cities, which have seen accelerated growth this year -- with home sales in January up 35.2% compared with a year earlier, setting a record for the month by a considerable margin, according to the Canadian Real Estate Association (CREA).
Though, if remote work becomes a more permanent option, some homeowners -- particularly those working from home in a small space --might continue to look outside large cities for more square footage and accessible green space.
Because of this, PwC says a developer in the Greater Toronto Area that it interviewed said they were changing their strategy to accommodate this trend and looking further afield for housing developments.
As a result, PwC says open-concept homes may need to be reimagined, as people working remotely require a dedicated working space.
What's more, higher unemployment and economic uncertainty, combined with lower immigration, are expected to slow housing activity across Canada, at least for the next year.
Subsequently, the Canada Mortgage and Housing Corporation (CMHC) says it expects housing starts, sales, and prices to fall in major cities, but Toronto, Ottawa, and Montreal will recover faster than Vancouver, Edmonton, and Calgary. The two Alberta cities are expected to take more time to recover since they were already suffering from the impact of low oil prices.
When looking at the condo segment, PwC says we can expect a softening of prices by 2022, although it’s important to note that supply has been curtailed in some cities. There is more concern for the Toronto market, where decreased short-term rental activity is leading some investors to sell, though that’s expected to be short-lived.
Still, PwC says its interviewees indicated that condo living may need to be reimagined for the future of work -- as homeowners may not be as excited to be in a 500-square-foot condo if the pandemic continues to keep them socially distanced -- especially if they’re working from home.
As a result, a number of features are being incorporated to make condos more attractive to buyers, such as videoconferencing rooms, dedicated areas for parcel and grocery deliveries, improved amenities and tools to create more connected communities.
PwC said there’s also a growing interest in what they referred to as the “amenitization of communities,” where neighbourhood amenities are available within a 15-minute walking radius of the condominium.
"Finding and developing these types of live/work/play communities is being considered much more seriously in light of the pandemic. Ontario’s new Transit-Oriented Communities Act, which aims to rethink the relationship between transit, housing and commercial spaces, could facilitate this movement," reads the report.
The multinational professional services network of firms also has predictions for Canada's rental sector and said demand for rental housing could be tempered by both a drop in immigration and uptake by university students, many of whom are currently taking classes virtually rather than in person.
While the asking price for rentals is either stable or has already fallen in major centres -- like Toronto, for example, where rents have been declining for months -- it’s expected the rental market will eventually benefit from a slowdown in homeownership and, when borders open up again, a backlog of new immigrants.
But there are some concerns regarding the end of government income support and wage subsidy programs, which are only temporary, as they could impact tenants’ ability to pay their rent in the coming months, as well as increased supply caused by the pause in short-term rental activity.
However, just like the pandemic, the Canadian housing market remains largely unpredictable, and only time will tell how 2021 (and beyond) will actually pan out.
