2021 set to be record year for real estate in Canada – CREA

Canada should soon emerge from current market challenges brought on largely by COVID-19, and return to more normal, if uncertain conditions. This is among the key points of the Canadian Real Estate Association (CREA)’s updated forecast for home sales activity.

“Canadian housing markets appear to be stabilizing somewhere in between pre- and peak-pandemic levels – which is to say, still extremely unbalanced,” says Shaun Cathcart, CREA’s senior economist.

Supply concerns

Supply concerns remain across much of Canada, but mass vaccinations and (eventual) full reopening of economies, along with the associated migration and international immigration, present some uncertainty to the outlook over the balance of 2021 and into 2022 – but only from a timing standpoint, CREA says. These challenges will ultimately act as tailwinds for housing demand; 2021 will almost certainly be a record year for home sales in Canada. Meanwhile, 2022 is expected to see significantly fewer MLS transactions, but is still expected to mark the second-best year on record for Canadian home sales.

Another risk to the forecast was to be the federal election, in which ideas on how to fix the housing market took a prominent place. While Canadians can be encouraged that all the major parties were looking at longer-term solutions to the supply shortage issue, it also highlights how there are no quick fixes. Scarce availability of materials and skilled labour during the pandemic is not likely to be corrected on-demand, and there are other barriers to building, such as approvals processes.

“Ideas on how to fix the housing market (took) centre stage in this election, with many long-simmering issues having had a big spotlight shone on them over the last year-and-a-half by COVID,” says CREA Chair Cliff Stevenson.

“So, it may be easier said than done, but the conversation is a welcome change after a decade of demand-side tweaks,” CREA says. “We’ll see what initiatives are kicked off (after the election on Sept. 20).”

Record-setting

About 656,300 properties are forecast to trade hands via Canadian MLS systems in 2021, CREA says. This would be a record-setting number, and an increase of 18.8 per cent over 2020. However, this forecast does represent a downward revision from previous estimates, as sales fell more rapidly than predicted this spring.

The strength of demand in 2021 has been geographically broad-based, and CREA anticipates strong sales growth in every province with the exception of Quebec, where the second half of 2020 was comparatively stronger than the first five months of 2021.

The national average home price is forecast to rise by 19.9 per cent on an annual basis to $680,000 in 2021, little changed from CREA’s previous forecast. This historically large increase reflects the current unprecedented imbalance of supply and demand, still close to two months of inventory nationally.

On a monthly and quarterly basis, sales are forecast to continue trending slowly back towards more typical levels through the latter months of 2021 and into 2022. Limited supply and higher prices are expected to tap the brakes on activity in 2022 compared to 2021, although the increased churn in resale markets resulting from the COVID-related shake-up to so many people’s lives may continue to boost activity above what was normal before the pandemic. It is possible, in fact, that many of the moves associated with changes related to remote work won’t play out until further down the road when we have more certainty about what the future will look like post-COVID.

National home sales are forecast to fall by 12.1 per cent to around 577,000 units in 2022. This easing trend is expected to play out across Canada, with buyers facing both higher prices and a lack of available supply, while at the same time the urgency to purchase a home base to ride out the pandemic continuing to fade. Still, with supply at record lows, the national average home price is forecast to rise by 5.6 per cent on an annual basis to about $718,000 in 2022.