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Canada housing market update - 2021 review

Another stunning year of Canadian real estate activity is in the books. A lot has changed, even since just last year, so we’ve pulled together some data and charts to help make sense of it all. We can’t cover everything, so if you wish to explore these charts and data on your own, we recommend trying our interactive home price analysis tool. The majority of the data here is from the Canadian Real Estate Associate (CREA). In particular, we are looking at the MLS Home Price Index (HPI) which, per CREA, is the most advanced and accurate tool to gauge home price levels and trends.

The national benchmark price was $798,200 in December 2021, representing a month-over-month gain of $16,700 (2.1%) and a year-over-year gain of $167,500 (26.6%). Home prices grew even faster in 2021 than 2020, with price growth reaching the highest pace on record. This pace cannot continue forever, but it is uncertain how long it will persist and whether prices will correct or merely stabilize at a slower pace. After the previous record growth in 2016/2017, prices certainly slowed but never actually declined on a year-over-year basis. Looking back further on this chart, national home prices have not fallen on a year-over-year basis since 2009.

As any corrections on a national scale have been very short-lived, Canada’s benchmark home price has now more than tripled since 2005. No, wages have not quite kept up with that pace.

While national prices may not have corrected after the rapid growth in 2016/2017, this was not the case for Canada’s priciest markets. Greater Vancouver reached its peak year-over-year growth of 32.1% in July 2016, then faced high volatility in the following three years. In 18 of the next 36 months, prices declined on a month-over-month basis. From November 2018 to January 2020, Greater Vancouver home prices were negative on a year-over-year basis. Greater Toronto also experienced rapid price growth hitting 31.5% year-over-year during its April 2017 peak, yet the following correction period only lasted five months. Demand-side policies in both cities were largely responsible for the price deceleration observed. Yet despite the minor corrections in both cities, Greater Vancouver home prices are up 31.3% and Greater Toronto home prices are up 46.8% since their respective 2016 and 2017 peaks. Holding through the brief downturns has certainly paid off.

Greater Vancouver and Greater Toronto recovered quickly but this is not always the case. Calgary has seen prices stagnate for 15 years and in October 2021 finally saw prices exceed the previous high from January 2015. Back in February 2021, Calgary home prices were actually lower than they were in 2007.

National home prices haven’t fallen by more than 1.0% on a month-over-month basis since July 2017. In 2021, month-over-month price growth peaked at 4.3% ($27,600) in February 2021 – compare this to wages which typically increase by less than 3.0% on a year-over-year basis.

Breaking down the previous chart by city/region, we can see how cities across the country have generally moved in a wave. We can see that in every month except April 2020, the vast majority of cities saw prices increase.

It is impossible to guess how much longer prices will continue rising, and whether it will be followed by a correction or price stabilization. One thing that is certain is we won't see prices stabilize or correct until there is much more inventory on the market. For example, we can see in this chart how inventory levels in Ontario are at record lows, and few cities had more than one month of inventory as of December 2021.

From December 2019 to December 2021, the national benchmark home price increased by $241,000, or 43%. The price difference when you compare Greater Toronto and Greater Vancouver to the remaining major cities has become impossible to ignore – especially since buying in these cities now means living far from the core for many people without existing equity. When the only affordable homes come with a painful commute, people are going to be looking elsewhere.

Our recent analysis shows how entry-level detached homes under $800,000 in the Greater Toronto Area are becoming further and further from Toronto’s downtown core. We know that many have been cashing out on their Toronto homes and moving to cheaper cities or different provinces, which can be seen in the next chart looking at price growth in small Ontario towns.

The towns in the above chart saw modest growth from 2006 to 2015. Prices began to pick up for the next few years but it wasn’t until 2020 that home prices took more of a meme-stock trajectory.

Home prices in many small Ontario towns have more than doubled since just January 2018. Leading the way was Bancroft, which is almost 200 kilometers away from Toronto.

Bancroft home prices were approximately $200,000 higher than the long-term trend line in December 2021. Prices in this small Ontario town have tripled since just March 2016 – yes, tripled.

It isn’t just Ontario that has seen rising home prices lately. Every single city and region where CREA releases benchmark data saw prices increase from December 2020 to December 2021. Only five cities (prairie cities and St. John’s, Newfoundland) saw prices grow less than 10.0%. The majority of cities grew between 25.0% and 40.0%.

COVID-19 has led to some Canadians looking for more space. While larger home types have grown the most, all types of homes have seen a significant price change. While apartments saw low growth in 2020, this was not the case in 2021. The 2021 benchmark price for an apartment is now only $9,000 less than the 2018 benchmark for a single-family home.

Greater Vancouver is one city where apartments did not experience nearly the same level of growth as larger home types. Two-storey homes were 2.8x the price of apartments in December 2021, or a gap of $1.4 million. This compares to Greater Toronto, where two-storey homes were 2.1x the price of apartments in December 2021, or a gap of $785,000.

There is so much more we can get into, but hopefully this has provided some clarity as to what happened with Canada's housing market in 2021. Be sure to subscribe and follow us on Twitter to stay up-to-date throughout 2022!

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