This article was written by Michael LeBlanc, CEO of FCT.
Over the last several decades, Canadian cities have grown both outward and upward, reflecting housing trends and preferences which ebb and flow over time. While some Canadians are going further afield in a quest for affordable housing, many others are seeking multi-family dwelling units such as apartments and condominiums in the larger cities.
The emergence of apartments and apartment-condominiums in Canada’s largest urban centres not only reflects a change in lifestyle choice for much of the population, but also underscores important demographic, economic, and societal shifts related to increased rates of immigration, declining household size, changing household characteristics, ageing populations, rising prices for single-family homes, land shortages, and restrictive development policies.
Each of these factors, separately and combined, has had a remarkable impact on the Canadian real estate market.
While real estate experts study and track these trends, the unanticipated onset of COVID-19 simultaneously accelerated and paused a number of them in ways that could not have been foreseen. Prior to COVID-19, Canada’s major urban centres were witnessing a rise in demand for multi-dwelling family units, a trend that was expected to persist for the foreseeable future.
However, from the early days of the global pandemic, it was clear that this was changing. As rates of infection rose, lockdowns became more strict and remote work became the new normal, which fueled an exodus of people from the city to the suburbs or rural areas.
These trends, combined with advancements in technology and an economy that is becoming increasingly reliant upon real estate, have had a profound impact on the Canadian real estate landscape. Below is a look at the evolution of real estate in Canada, along with an overview of the current landscape and the ongoing impact of technology.
The History of Real Estate in Canada
Formal, organized markets to bring residential home buyers and sellers together have been around for well over 100 years in Canada, with the first real estate board having been created in 1888 in Vancouver -- a mere two decades following the country’s founding in 1867.
By 1943, a coalition of real estate boards from across Canada formed a national association to reflect the nationwide character of the industry. In the following decades, as the country grew, the industry evolved to keep pace with changing demographics, lifestyles, and housing preferences.
The 1950s were characterized by the rise of the small but affordable single-family suburban home, the preferred housing choice of millions of returning servicemen and their young families. By the late 1950s, more than half of all new residential construction in Canada were single-family homes.
By contrast, the 1960s were characterized by booming demand for apartments and multi-family dwellings, fueled mainly by a growing influx of recent immigrants to Canada from Europe and developing nations. The affordability of multi-family dwellings made them an attractive alternative to single-family homes.
With growing consumer affluence, the 1970s and 1980s saw a 40% decline in multi-family units and the return to single-family dwellings, with multi- and single developments balancing out and accounting for an equal proportion of new construction.
Shifting yet again, the 1990s took a heavy toll on the Canadian real estate market, as an era characterized by high interest rates, recessionary economic conditions in the early years of the decade, along with a decrease in residential construction.
By the 21st century and with the arrival of the internet, demand resumed its upward swing due to the decline in mortgage rates and effortless access to listings through the CREA-operated realtor.ca, as well as the rise in popularity and availability of condominiums. At the national level, apartment condominiums have increasingly become the dominant type of condominium construction since the early 2000s.
How It’s Going
Fast forward to today and residential real estate remains an important economic indicator, holding even more weight as the market has continued to boom over the last decade. Particularly during the pandemic, which saw a sustained low-interest-rate environment and household savings increase, the housing market has surged remarkably.
Rapid growth in residential investment and homeownership has created an economy that is more dependent on real estate than ever. In Q4-02020, the residential investment ratio reached an astonishing 9.27%, up 9.02% from the previous quarter. Indeed, Canadian residential investment is currently growing at a rapid speed, in spite of the pandemic -- from 2019 to 2020, residential investment soared 22.3% higher, accounting for over $200 billion.
The real estate market has also gained recognition as an important and relatively “safe” investment, allowing people to increase their net worth, as the value in real estate is expected to grow over time.
The Impact of Technology
Another vital factor to the evolution of the industry over the past decade -- as both a disrupter and opportunity provider -- is technology. Historically, the real estate industry relied on face-to-face transactions, physical listings, open houses, and client walk-ins. Technology has not only reshaped the industry externally through customers’ buying habits but has also impacted the industry internally with the widespread availability of data and listings online.
Today’s buyers are the most empowered and educated in history thanks to technology, which provides access to more data than ever before. With a few clicks, potential buyers can see what properties are available, how much they’re listed for and, in some instances, how much they sold for. This allows for more transparency and realistic expectations when entering the market and gives buyers a strategic advantage when putting in offers.
Technology has also greatly enabled real estate professionals. Seamless service is now paramount to better client service, and cutting-edge technology better integrates the number of industries involved in a real estate transaction. Real estate agents can differentiate themselves by setting high standards of knowledge and service.
The Canadian real estate market landscape continues to evolve in ways that reflect changing demographics, consumer preferences, economic conditions, and public policies that impact the cost of property ownership.
To the surprise of many, the impact of the current pandemic has, for the most part, propelled the market instead of restraining it.
At the same time, the technological infrastructure of the real estate market is increasingly well-developed, which has improved market transparency and listing access to a degree which promises to make the market more efficient and fairer for all buyers and sellers.
Looking toward the future, technologies such as cloud-based infrastructure will continue to take the industry by storm, ushering in the era of smart real estate. Leveraging advanced property intelligence and innovative technology solutions, all with an eye to maximizing data security, will undoubtedly remain a key driver impacting the industry and driving it forward for years to come.