Despite the pandemic bringing the economy to a near standstill last spring, Canada’s real estate market smashed records in 2020, as buyers regained confidence and returned to the market in full force to compete for larger properties despite the dwindling levels of supply.
The result? Canadian home buyers are now facing the tightest real estate market on record, with a buying frenzy that shows no signs of slowing down. Though, there is one obstacle standing in the way of potential buyers: inventory -- which is running very low in many parts of the country, especially for single-family homes.
The new year began just how 2020 ended, with national home sales and prices setting records, the Canadian Real Estate Association (CREA) said on Tuesday.
Home sales in January were up 35.2% compared with a year earlier, setting a record for the month by a considerable margin, while also inching up 2% month-over-month from December.
In January, the actual national average price of a home sold set a new record after reaching $621,525, a 22.8% jump from the same month last year.
Fuelling prices was a sharp drop in new listings last month, down 13.3% from December, which was led by double-digit declines in the GTA, Hamilton-Burlington, London and St. Thomas, Ottawa, Montreal, Quebec, and Halifax Dartmouth
READ: January Another Record-Setting Month for National Home Sales
As a result, CREA says Canada has only 1.9 months of housing inventory available -- the lowest reading on record for this measure. At the local market level, some 35 Ontario markets were under one month of inventory at the end of January.
This comes as the national sales-to-new listings ratio, a measure of a market’s tightness, rose to 90.7% last month -- the highest level on record. The previous monthly record was 81.5%, which was set 19 years ago.
Fuelling the purchasing frenzy is historically low mortgage rates and shifting buying behaviours, as more homeowners look for larger living spaces. Though, the growing lack of supply amid the pandemic's second wave and renewed lockdown measures continue to impact the market.
“The problem with this time of year is that the buyers and sellers that will, in time, define the Canadian housing story of 2021 are mostly all still waiting in the wings,” said Shaun Cathcart, CREA’s Senior Economist.
“It’s the dead of winter and we’re only just starting to get the second wave of COVID under control. We’re unlikely to see a rush of listings until the weather and public health situations improve, and we won’t see buyers until those homes come up for sale.”
Cathcart says the “best-case scenario” would see a lot of sellers who were apprehensive about entering the market last year, make a move in 2021.
“A big surge in supply is what so many markets really need this year to get people into the homes they want, and to keep prices from accelerating any more than they already are,” added Cathcart.
Though, it's not just Canada's real estate market that's facing tighter conditions, as Ontario's Muskoka region is also seeing its tightest market conditions ever following record-smashing January sales.
This lack of inventory is being particularly felt in the waterfront category, according to new data from CREA. Waterfront property sales numbered 76 units in January 2021 -- this count more than doubles that of the same month in 2020, surpassing the year earlier by 117.1% and setting a new sales record for the month of January.
With files from Kayla Gladysz.
