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  • Barbara Singh

How Likely is a Canadian Real Estate Crash in 2021

The Pandemic May Have Derailed Our Plans But it Has Not Derailed the Canadian Real Estate Market

Yes, many of the real estate experts predicted a doomsday scenario when it came to the real estate market in Canada and the anticipated devastating effects Covid-19 would have on the housing sector. Numbers were being projected by mortgage and real estate experts as high as an 18% overall drop in housing values over the course of 2020 as the war raged on against the global pandemic and the race ramped up to find a suitable vaccine to start protecting us against the virus.

Did it happen? The answer is a resounding no. The opposite scenario actually played out across the country when it came to the real estate sector. From the hot Vancouver housing market right across the country to the resurgence of housing sales in the Atlantic Canada region, the Canadian real estate market saw a record number of housing sales and increases in the average selling price of houses, particularly, single detached properties.

According to the Royal Bank of Canada home resales across the country increased by 13% which has not been seen since 2016 when even the notion of a global pandemic was off the radar for most Canadians.

In some markets, such as the red hot Vancouver real estate market, home prices across the province are up a whopping 58% entering 2021 compared to the same time last year according to the British Columbia Real Estate Association. Buyers are quickly outstripping available inventory which is at a historic low as we enter the new year.

The same phenomenon played out across the housing market in all Provinces including Atlantic Canada. Despite local lockdowns in all four Maritime Provinces, the housing inventory has been cut by 50% due to out of Province buyers who are snapping up local property in record numbers.

According to Atlantic Canada based realtors, homes are selling at asking price and even over asking price as we enter 2021. For example, In Prince Edward Island housing sales increased by 24.5% over the last year and Newfoundland saw a 39.5% increase during this same time.

How Likely is it That This Trend Will Continue in 2021?

So are we going to see a real estate crash in 2021? Will this trend towards limited inventory, rising house prices and record sales continue into 2021 or is the stage set for a market housing crash? The much talked about and dreaded burst in the housing bubble; RBC is projecting that there is little risk of a real estate housing downward decline in 2021. The projection is for housing prices and record high numbers of housing sales to continue to increase well into 2021, especially in the key housing markets of Toronto and the surrounding GTA and Vancouver.

What is driving the surge in the real estate market, despite the widespread lockdown, curfews and closed business across the GTA and the country as a whole? Several factors have converged to produce ideal conditions for the housing market and put homeowners in the GTA and elsewhere in the driving seat, creating a sellers market.

1. Low Inventory- the number of buyers are outnumbering considerably the number of houses available for sale- demand is outstripping housing inventory in the Toronto and Vancouver markets in particular.

2. Historically Low Interest Rates- early in 2020 when the Pandemic took its grip, the Federal Government and the Bank of Canada stepped in to help prevent a potential crash in the Canadian real estate market, enacting dramatic measures. These measures included providing 150,000 billion dollars to mortgage backed securities to help finance the mortgage market and cutting the BOC interest rate to 0.25% which in turn lowered mortgage interest rates to as low as less than 1% on some mortgage terms by December of last year.

3. Desire to Buy Property and Move Away From Urban Locations- The Pandemic opened the eyes of many to the importance of enjoying their home and living arrangements as so many of us were forced to and continue to spend a great deal of time in our homes. Many homeowners and potential borrowers looked to buy property in outlying regions of major cities to get more bang for their buck while taking advantage of record breaking low mortgage interest rates.

2021 Should Continue to See a Robust Housing Market- No Crash in Sight

Toronto and the GTA should expect to see the influx in housing sales and escalation of housing prices continue well into the year. Although the Toronto downtown condo market did take a hit over 2020 with a 8% drop in condo sales as more and more urbanites choose to abandon ship and hit the suburbs and beyond, single detached dwellings continue to sell in high numbers. Simply put, there is no anticipated and imminent risk of a burst in the bubble according to real estate experts from coast to coast.

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