Just like
COVID-19 is mutating now and then, so is the real estate market. After all
(unfortunately), everything is now directly correlated with this virus. The
sudden brisk in home prices in Canada was one of the things we all witnessed in
2020. And real estate trends in 2021 expect the same.
However, there
is a ray of hope that things may change as 2021 drags on, both in favour of
buyers and sellers. It is expected that with time, the country's economy would
start stabilizing, home prices would witness a steady growth (unlike the
previous year), and immigrants would also start returning to the country.
According to
Robert Hogue, economist Royal Bank of Canada (RBC), the real estate market may
start cooling down gradually:
The strong annual tally will mask a gradual cooling in the market through the year, however. We expect low supply to become a growing constraint, pandemic-induced market churn (resulting from changes in housing needs) to wane, and a slight rise in longer-term interest rates and material erosion of affordability to cool demand by a few degrees.
It is also expected
that things will stabilise with the spread of the coronavirus vaccine in the country. And housing prices may also slow down.
According to Financial Post, RBC further predicted
that by the end of 2021, resales might go down as low as 515,000 units a year
from a healthy trend of 552,300 units sold in 2020. And a dip in home prices in
the country from 8.5% to 8.4%.
This raises
questions for home buyers; should they buy now or wait for the year-end? And
for homeowners, if they must release their current owning to gain some profits
rather than making a slight loss when selling the property by the year-end.
Where it is
said that the prices' growth might slow down (even move slightly in a downward
direction), the prices are not expected to go down as low as they were in 2019.
Real estate is
one of the sectors which are always rising. Even during the first wave of COVID-19,
the market did see a slump. But for a little while. And then, by the end of
2020, everything was fully recovered.
According to
the Canadian Real Estate Association (CREA), the country's average home price was $607,280in December 2020, showing a hike of 17.1% compared to the same month of 2019.
According to
Capital Economics, the first quarter of 2021 will also witness a surge in
prices by up to 10% compared to the same period last year. This surge is mainly
because of high demand (buyers are more than sellers) and low-interest rates.
However, later
this year, Capital Economics expects the price growth to calm down and touch
5%, instead of 10% by the end of 2021, and a further dip to touch 2% by the end
of 2022.
Elaborating
this expectation further, let us assume you buy a bungalow for $1,000,000 now.
It could be sold for $1,100,000 by the end of Q1 of 2021 (10% growth). Reaches
$1,155,000 by the end of 2021 (instead of $1,210,000 as the growth is now just
5%). And by the end of 2022, the bungalow could be sold for $1,178,100 (2%
growth in 2022).
Urbanation
expects something similar. According to Shaun Hildebrand, Senior Vice President, Urbanation:
A lot of demand is being pulled forward due to low rates and distorted buyer psychology as many that weren't planning on moving are now wanting a change, and others think they need to get into the market now before it's ˜too late,'
An eventual recovery in the economy and immigration will be important for the market as vaccines are introduced, but they will have a lagged effect, and we could be dealing with a bit of a hangover later this year, specifically for (Toronto's suburban) houses.
While Urbanation
is quite optimistic about real estate trends for the year, they hope the
economy to revive soon. With better household income, one could still afford a higher rate of interest in the future.
After the
pandemic, it is quite evident that more and more Canadians would be preferring
to own a house rather than renting one.
This statement
is further supported by the Toronto Regional Real Estate Board (TRREB).
According to the Market Year in Review &Outlook Report 2020, TRREB is of the view:
As such, the underlying demand for housing resulting from new household growth in the GTHA is expected to amount to more than 50,000 units per year in comparison, only 42,000 new homes were built per year over the last 5 years.
As home prices
in Canada, they will witness an upward trend. Buyers are unlikely to change
their decision to own a house. COVID-19 has changed the way people think. They
are preferring buying a home rather than renting one. And with this virus to
stay among us, it is observed that many desire to buy a bungalow in the suburbs rather than in the big cities.