Pandemic-shift: spike in savings diverted into housing driving national median home prices up 8.6%, according to Royal LePage

Thursday Oct 29th, 2020


Despite second wave worries, the median price of a home in Canada forecast to finish year 7.0% higher than year-end 2019

  • Delayed spring market extends through Q3 as pent up demand fuels prices and sales
  • 97% of regions surveyed post price appreciation in third quarter despite economic shock of COVID-19
  • Ontario and Quebec real estate markets dominate list of highest appreciating regions, with Windsor in the top spot at 17.0%

TORONTO, October 14, 2020 –According to the Royal LePage House Price Survey and Market Survey Forecast released today, the aggregate[1] price of a home in Canada increased 8.6 per cent year-over-year to $692,964 in the third quarter, as high demand and low inventory continued to fuel a seller’s market.

The Royal LePage National House Price Composite is compiled from proprietary property data in 64 of the nation’s largest real estate markets. When broken out by housing type, the median price of a standard two-storey home rose 10.0 per cent year-over-year to $819,906, while the median price of a bungalow increased 7.0 per cent to $570,701. The median price of a condominium increased 5.3 per cent year-over-year to $510,365. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions, a leading Canadian real estate valuation company.

“Typical consumption patterns have been disrupted in 2020 as the pandemic has driven the household savings rate to levels not seen in decades,” said Phil Soper, president and CEO of Royal LePage. “Most Canadians have sharply reduced spending on discretionary goods and services involving a great deal of human interaction, and with mortgage rates at record lows, many have refocused on housing investments, be it renovations to accommodate work-from-home needs, a recreational property or a new property better suited for the times.”

Statistics Canada reported that in the first quarter of 2020, the household savings rate climbed to 7.6 per cent of disposable income, the highest rate since 1996. In the second quarter, savings spiked to 28.2 per cent, the highest savings rate since the early 1960’s. From 2015-2020, the average savings rate was approximately 3 per cent.

“In urban centres across Canada, housing inventory has failed to keep up with household formation,” continued Soper. “Chronic under-supply has created a robust pipeline of potential buyers that currently far outsizes the number of homeowners who may need to sell as a result of COVID-19 related job loss,” said Soper. “The price of condominiums, the sector hardest hit by the pandemic, has risen 5.3 per cent nationally compared to last year. When a landlord needs to sell a unit after young tenants move back to their parent’s home, and with fewer new immigrants or opportunities for short-term rental income, there are plenty of first-time buyers ready to seize the opportunity to get into the market.”

Competition amongst buyers in many regions is high. According to a recent Royal LePage Advisor Survey, during the month of September, 95.4 per cent of Royal LePage agents surveyed said detached houses in their region were attracting multiple offers and 54.1 per cent said that condominiums were attracting multiple offers. According to the national survey, 89.4 per cent of agents had to place at least two offers on behalf of their clients to purchase a home during the third quarter. Sixteen per cent had to place more than 5 offers. In Quebec, the proportion of agents that had to place more than 5 offers rose to 19.1 per cent, the highest in the country.[2]

Nationally, real estate markets in Ontario and Quebec posted the highest price appreciation. Windsor reported the highest price gain in the third quarter as the aggregate price of a home rose 17 per cent year-over-year followed by Oshawa (15.0%), Kitchener/Water/Cambridge (13.9%), Hamilton (13.7%), and Mississauga (13.5%). In Quebec, the fastest appreciating regions were in the Greater Montreal Area, where the aggregate price of a home rose 12.5 per cent year-over-year in the third quarter driven by gains made in Montreal Northshore (13.4%), Montreal East (12.3%) and Montreal Centre (12.2%).

Royal LePage expects current regional price levels to be maintained for the remainder of the year. While the national aggregate home price rose 8.6 per cent year-over-year in the third quarter of 2020, Royal LePage is forecasting that the national aggregate home price will increase 7.0 per cent year-over-year to $693,000 in the fourth quarter of 2020. The decrease between Q3 2020 gains (8.6%) and the Q4 2020 forecast (7.0%) reflects a higher national home price in Q4 2019 ($647,310) compared to Q3 2019 ($637,884).

“Home price gains realized this quarter are forecast to be sustained through December,” said Soper. “While the pace of price growth is expected to slow considerably in the final weeks of this most unusual year, it is highly unlikely we will see housing values back up.”

Canada added 378,000 jobs in September, with most of the gains in full-time work. The unemployment rate has now fallen to 9.0 per cent, a 1.2 percentage point improvement from August[3] as the economy claws back pandemic related losses. Another positive development for Canada’s investment housing market is the federal government announcement that international students will be allowed to enter Canada if they are attending a designated learning institution with provincially approved COVID-19 protocols in place.[4]

Soper added that while today’s mortgage rates at extremely low levels have created a window of first-home buying opportunity for many young families, Millennials and Generation Z who do not have the capacity to buy today are shouldering the negative impact of COVID-19 on the Canadian real estate market.

“Young adults are less likely to have been the homeowners who watched real estate equity build over the past few months. Many have lost their jobs during the pandemic,” said Soper. “If policy makers do not make increasing the supply of homes for rent or purchase a priority, there will be negative social consequences for years to come. COVID-19 has stimulated the demand for additional housing in ways that few could have foreseen.”

COVID-19 and changing consumer behavior

As a second wave of COVID-19 takes hold in Canada’s more populous regions, Royal LePage is expecting a change in buyer psychology compared to the period when the country first faced the novel coronavirus. Real estate activity fell to as low as one-third of normal in the spring, as citizens sheltered at home. For the balance of the pandemic, Canadians are expected to prioritize homeownership and seek out as much indoor and outdoor space as they can afford to improve their quality of life while work-from-home and social distancing measures remain part of daily lives.

Many of the tools needed to provide high quality real estate services remotely were available to Royal LePage agents prior to the COVID-19 pandemic, which allowed for minimal disruption in assisting buyers and sellers to adjust to the new norm of transacting.

“Canadians recognize that if they are working with a reputable agent who takes the necessary precautions, going to a scheduled viewing is a relatively low risk undertaking.  Almost all of the home buying or selling process can now be completed virtually,” said Soper. “We continue to advise against open houses. Highly motivated buyers are encouraged to schedule a viewing after taking a virtual tour to confirm their level of interest.” 


Greater Toronto Area

The aggregate price of a home in the Greater Toronto Area (GTA) increased 11.0 per cent year-over-year to $922,421 in the third quarter of 2020.When broken down by housing type, the median price of a standard two-storey home increased 12.2 per cent year-over-year to $1,082,502 in the third quarter, and the price of a bungalow rose 10.6 per cent year-over-year to $887,156. During the same period, condominiums in the region continued to see healthy price appreciation, with the median price rising 6.8 per cent year-over-year to $599,826.

Similar strong home price gains were seen in the City of Toronto where the aggregate price of a home rose 11.1 per cent year-over-year to $975,980. Broken out by housing type, the median price of a standard two-storey home increased 15.5 per cent year-over-year to $1,483,510, and the price of a bungalow rose 11.3 per cent year-over-year to $974,295. During the same period, the median price of a condominium grew 4.9 per cent year-over-year to $644,903.

“Demand from the delayed spring market has continued through the third quarter. The seasonal slowdown is expected in the coming months but given the recent strength of September, we will likely see a more brisk fourth quarter market than the previous year,” said Debra Harris, Vice President, Royal LePage Real Estate Services Limited.

Harris added that while active listings are up, the sales to listings ratio and decrease in days on market indicate that properties are being quickly absorbed by demand.

“The detached home market is outperforming the condo market but condo demand is still considered healthy. Condo sales were up 15% in September compared to September 2019. In Toronto, we are used to strong seller markets and a balanced market can seem quiet by comparison,” said Harris.

Royal LePage is forecasting that the aggregate price of a home in the Greater Toronto Area will increase 8.5 per cent in the fourth quarter of 2020 compared to the same quarter last year.

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