Canada’s housing market is still on fire, not just in big cities but in small towns too, across the nation even as the country continues to deal with the fallout of the pandemic.
As the spring housing market – typically the busiest time of the year for homebuying activity – begins, the underlying factors fuelling the skyrocketing prices show little sign of abating, say Scotiabank’s Head of Real Estate Secured Lending John Webster and economist Farah Omran.
The many factors continuing to drive demand include ultra-low interest rates, record-high immigration levels and millennials looking to buy for the first time, while working from home during the pandemic has driven more people to seek out housing with more space, said Webster. Meanwhile, the supply of single-family homes is not keeping pace, he added.
The initial assumption was that restrictions on home viewings amid the pandemic would have a negative impact on housing demand, but the opposite occurred, he added.
“It's very curious, you know, to have record growth like we've had in our mortgage business during a time that we're facing one of the biggest crises in our lifetimes,” Webster said.
In the latest episode of Pandenomics – our podcast series looking at the impact of COVID-19 on the economy – Webster and Omran discuss what is fuelling the homebuying frenzy across the country and why it’s unlikely to cool down anytime soon.
The flight to the suburbs by homebuyers priced out of the big cities has also been accelerated, says Omran.
“What this crisis has done is really just speed up already existing trends, as crises usually do. In this case, it's migration from central cities to suburbs. … You don't need to drive to work. People are leaving downtown to suburbs, exurbs, what some would call cottage country, which is where we're seeing really most of the price increase.”
The pandemic has also accelerated demand for secondary and recreational properties, Webster said, driving up demand in rural or more remote areas.
“That need to be out in the open air became much more intensified because of the pandemic,” he said.
Omran says it's really hard in the current environment to anticipate where the housing market will be in a year or three years from now.
“But as long as we have this pent-up demand and as long as we have this record-low supply, prices will continue to increase.”
Listen to other housing-related episodes: