Reviving Canada's Real Estate Market: A Glimpse of Hope for Condominiums and Residential Properties
A recent surge in the Canadian resale housing market might be signaling a much-awaited revival, with promising implications for the construction of new condominiums and other residential properties. As apartment rents continue to soar, this development could indicate a positive shift in the real estate industry.
In April, the Toronto Regional Real Estate Board (TRREB) recorded 7,531 sales across the region, reflecting a 5.2% decrease from the previous year but a noteworthy 9% increase from March. A similar trend was observed in price movement, with the average existing home selling for $1,153,269 last month – down 7.8% from a year earlier, but up 4% from March.
TRREB President Paul Baron commented on these numbers, stating that competition among buyers is intensifying in many GTA neighborhoods. "Look for first-time buyers to lead this recovery, as high average rents move more closely in line with the cost of ownership," he said.
The booming rental market is making homeownership increasingly appealing, as demonstrated by TRREB's statistics. In March, the average rent for a one-bedroom condominium in the Greater Toronto Area rose 15.1% from the previous year to $2,474 per month.
Bank of Montreal Chief Economist Doug Porter believes that the Bank of Canada's decision to pause rate hikes may have instilled confidence in potential buyers, encouraging them to re-enter the market. "April is a very important month because it's one of the biggest months of the year for home sales. It's only one month of data, but it's very clear that there are many signs the market does look like it is stabilizing," he told CoStar News.
However, the increased demand for homes is accompanied by a supply shortage. TRREB reported a 38.3% decline in new listings in April compared to the previous year, which could potentially stimulate new construction. Nevertheless, this process will not happen overnight. The Canada Mortgage and Housing Corp (CMHC), which advises the federal government on policy, has already projected that new home construction may decrease by as much as 32% this year compared to 2022.
Porter, who was not initially optimistic about the housing market, admits that these numbers are encouraging. "If you were bullish on the housing market, and frankly, I wasn't three months ago, you have to be bullish on these numbers," he said. "It could take a little while, but if the resale market shows a real pulse, that will encourage builders, and we will easily avoid CMHC's worst scenario."
Canadian Market Shows Signs of Recovery
The Canadian real estate market is experiencing a rebound in pricing and sales strength, with local boards across the country reporting positive trends. National data from the Canadian Real Estate Association will be released later this month, but early indicators suggest a revitalization in the market.
In Vancouver, British Columbia's largest city, the Real Estate Board of Greater Vancouver (REBGV) reported a benchmark price for all residential properties at $1,170,700 in April. This figure represents a 7.4% decline compared to last year, but a 2.4% increase from March. Andrew Lis, REBGV's Director of Economics and Data Analytics, attributes this trend to near record-low inventory levels, which create competitive conditions and drive price escalation despite elevated borrowing costs.
A similar situation has been observed in Quebec, where the Quebec Professional Association of Real Estate Brokers (QPAREB) reported an improvement in pricing even as levels remain lower than last year. The median price of single-family homes in the province stood at $400,000, down 4% from Q1 2022 but up 3% compared to Q4 2022. Charles Brant, Market Analysis Director for QPAREB, credits the strength of the labor market for the resilience of households and the limited number of properties available on the market.
Carl Gomez, Chief Economist and Head of Market Analytics with CoStar in Canada, believes the market has reached its lowest point. Sales are picking up as potential buyers and sellers anticipate the end of the downturn. However, the shortage of new listings continues to limit the market's growth. Gomez suggests that an increase in prices could lead to more listings, but the frantic activity experienced during the pandemic is unlikely to return without a significant drop in borrowing costs.
Royal LePage, one of Canada's leading residential real estate companies, recently updated its forecast for a stronger-than-anticipated start to 2023. According to the company's internal data, the market is showing signs of a turnaround. Phil Soper, President and CEO of Royal LePage, notes that many buyers who paused their search due to uncertainty surrounding prices and interest rates have now resumed their home buying plans. However, these buyers now face the challenge of a severe shortage of homes for sale.
With the Canadian real estate market showing promising signs of recovery, it is crucial for potential buyers and sellers to stay informed and adapt to the changing landscape. As interest rates and market conditions continue to fluctuate, staying up-to-date on the latest trends will be key to making well-informed decisions in this competitive industry.