Owning a real estate property in Canada is a rite of passage for most Canadians and the largest single investment they make in their lifetime. The Canadian economy banks big on real estate and is largely driven by the property sector. However, with the pandemic hitting Canada’s shores unexpectedly resulting in a lockdown situation and a subsequent slowdown of the economy, has hit homebuyers hard.
With oil prices falling to the lowest level, the vulnerability was visible in the property markets of Toronto and Vancouver. Job losses and an air of uncertainty drove the country’s housing prices down between 9% and 18%. Though predictions are rife that the housing market will take time to recover from this crisis, the buying desire for homes hasn’t died down altogether.
People in Canada have hit the pause button in the last two months, but the same fence-sitters are now jumping back in. For people who want to buy a home for the long-term, real estate is the best and the safest investment.
According to Canada Mortgage and Housing Corporation (CMHC), Canada’s housing prices have increased by 5% over the years annually. What’s also starkly evident is that the market is largely immune to financial shocks which were evident during the 2008 financial meltdown when a housing market collapse didn’t materialize.
Canadians have understood that the foundation of the housing market is on solid ground and that erosion in demand and supply due to the ongoing pandemic for a small period of time won’t raze the sector to the ground.
The demand for homes is still strong which is evident in Canada’s home sales rising by 57% in May from the previous month. Transactions for existing properties touched 26,111 in May, though the figure is the lowest since May 1966.
In the Greater Toronto Area, 24% of the real estate sales in May were for $1million and 76% of them were under $1million. The pent-up demand has suddenly seen a spurt, mainly due to a large cohort of people arriving in Toronto last year. These people added themselves up to the already existing homebuyers waiting at the entry-level line of the property market, vying to grab a piece of real estate in Toronto.
What’s heartening to watch is that things are moving in the right direction. The property market has ignited again and with new changes and adjustments happening every month, it’s just a matter of time that Canada’s realty market will bloom again. Bidding wars are back in prime real estate hotspots as well as in places where houses are reasonably priced. Some realtors are having clients that are involved in multiple offer scenarios.
One of the biggest setbacks in Canada’s housing market before the pandemic struck was the ongoing high mortgage rates. But of late, with massive government spending and a series of cuts in mortgage rates, the thought of investing in a home looks more affordable. And with stocks bleeding nearly to death, Canadians are looking to drop their money on real estate to keep themselves safe.
Because a drop in the value of a home for a short term isn’t the same as a drop in the value of a stock. Since homes are not bought and sold frequently as stocks, it allows time for a drop in home value to recover gradually.
Why Canadians have a particular affinity to homes is that it is a tangible asset and it doesn’t matter to them what price the market puts on their property as long as they get to live within it. And the fact that Canada’s housing prices have historically moved up year-on-year, an investment in a home seems to be a practical one.
Besides a home generating rental income, people in Canada sometimes borrow from banks at low-interest rates putting their home as collateral.
The pandemic has also taught the Canadians that no matter how many economic downturns come and go, having a home is one of the most prized assets. And the demand for homes will stay forever because it’s the ultimate desire of a human being.