It's a tale we're all more than familiar with by now: rock-bottom interest rates, changing housing needs, and high household savings coupled with a fear of missing out and low inventory have pushed Canadian home prices to new levels.
Case in point: RBC economist Robert Hogue says in the past six months alone, single-family homes have surged $100,000 (or nearly 15%) in value in Canada -- marking the steepest increase for the national benchmark price on record.
While the country’s most expensive markets, Vancouver and Toronto, recorded above-average gains of $143,000 and $139,000, respectively, it was markets in the periphery that led the way.
According to Hogue, single-family home prices soared $147,000 in Barrie and $145,000 in the Fraser Valley since August, while Hamilton-Burlington saw home prices up $137,000, Kitchener-Waterloo up $114,000, and London-St. Thomas up $104,000.
READ: 2021 to Be Another Record-Setting Year in Canadian Real Estate: CREA
Single-detached homes also got a lot more expensive in other BC markets, virtually in all of southern Ontario, and in parts of Quebec and the Atlantic Provinces.
That being said, as Hogue has pointed out: calling Canada’s housing market ‘hot’ right now is an understatement.
"Prices have passed the boiling point in many parts of the country as eager buyers outbid one another amid low single-family home inventories," says Hogue.
While historically-low interest rates and increased household savings are obvious factors encouraging buyers to move (or make the investment plunge), Hogue says there's more at play here.
The RBC economist says rapid property appreciation has opened the door to speculation and instilled buyers with a sense of urgency -- fearing they might miss out on buying a home they can afford now if they wait any longer.
This, plus a recent uptick in longer-term interest rates might also be dialling up the eagerness to act with some seeing the increase as a turning point for interest rates, explained Hogue.
"In short, self-reinforcing price dynamics have taken hold in many parts of Canada, and are poised to keep things boiling in the near term."
However, there is an exception to these trends: downtown condo apartments -- so far, that is.
In the past six months, Hogue says condo prices have only increased around $12,000 in Canada.
Though, a strong pick-up in condo activity and firming demand-supply conditions since December, point toward stronger condo prices later this year.
"We expect this category’s affordability advantage to generate increasing buyer interest as vaccinations against COVID-19 reach critical mass and authorities further ease restrictions," says Hogue.
As for what's to come, Hogue says his base-case scenario sees prices continuing to appreciate throughout 2021, albeit at a slower pace as we near 2022.
A "creeping-up" of longer-term interest rates, deteriorating affordability, the possibility of a return to the office, and a possible policy intervention could also help cool homebuyer demand, and set the stage for a "soft landing" for national housing prices.
"We think modest outright price declines could be in the cards over the medium term, perhaps by the latter stages of 2022 when interest rates rise more broadly," added Hogue.
That being said, if you've been thinking about entering the buyers market but you're worried about increasing high prices, you may see some much-needed declines by next year... hopefully.
