Buying a home is a major financial milestone for many Canadians; owning a property doesn’t just provide them with shelter, but is usually the largest asset in their portfolios, too. With gains outpacing most money markets, a homeowner’s equity can provide capital for anything from home renovations to retirement planning.

And amid the onslaught of the global pandemic, home has become so much more than a place to live. For many, where we live has also become our office, school, gym and restaurant. It’s where we have sheltered in place to prevent the spread of the COVID-19 virus, in hopes of keeping ourselves, our loved ones, and our communities, safe.

“As the pandemic has made homeownership more important than ever, it has driven new trends in home buying psychology,” says Lauren Haw, CEO and Broker of Record at Toronto-headquartered Zoocasa Realty. “More buyers are looking to upsize their homes and are looking to markets where it’s most affordable to do so. As well, the ability to work from home has untethered many from living near business centres, and has offered buyers the flexibility to relocate [farther afield] to markets they may not have previously considered.”

How COVID “supercharged” the Canadian housing market

This new urgency has “supercharged” what was already a frothy housing market, according to the Canadian Real Estate Association. Initially, the shock of lockdowns and economic uncertainty did cause a nationwide lull between February and March 2020, with sales and listings plunging 14.3% and 12.5%, respectively. However, the market recovered to normal seasonal levels by June 2020, with sales soaring 15.2% year over year, and 63% from May 2020—much faster than the industry had anticipated.

Buyers venturing outside their current regions to find a dream home have brought big city market dynamics with them. Formerly sleepy small towns are now grappling with a rapid depletion of inventory, bidding wars and homes selling for considerably higher than they were listed for, both due to overwhelming demand and the practice of pricing properties artificially low to attract more potential buyers and sparking a bidding war. The latter is a tactic frequently used in larger urban markets, and had not been typically seen in small towns prior to the pandemic.    

Conditions across the country came to a head in March of this year, when CREA reported the highest level of home sales ever, up 76.2% from the pit of the lockdown, with the average price across all home types (including one- and two-storey single-family homes, semi-detached homes, townhouses, and condos) up 31.6% year over year to an average of $716,828. Single-family homes experienced the largest price increase annually, with the benchmark up 25% to $795,700, with similar increases for ground related housing with greater square footage; townhouse prices rose 18% to $586,700 nationally. However, the condo sector bore the brunt of buyers’ fears early on in the pandemic, as people living within close proximity was considered a health risk; the price benchmark grew just 5.3% to $498,000 year over year.

The national sales-to-new-listings ratio (SNLR), which measures the level of buying competition in the market, sits at a scorching 80.5%, indicating steep sellers’ conditions, with more than 80% of Canada’s markets considered “unbalanced” in terms of supply and demand.

This is sounding alarm bells for policymakers, prompting the Canadian government to take action to cool sizzling price growth: A new national foreign buyer tax was introduced in the most recent federal budget, while the banking regulator has proposed a tougher mortgage stress test, to take effect in June of 2021.

The local unemployment rate was 7% in 2021, below the national average of 7.5%.

Those looking to live here will enjoy all the amenities a big city has to offer, as London has a well-established arts, culture, and music scene, and hosts many festivals annually. It also offers nature lovers plenty of opportunity to get outside; the Thames River forks through the centre of the city, and there are a number of large parks with trails such as Springbanks Park, Victoria Park, Gibbons Park and the Fanshawe Conservation Area.

Pre-COVID real estate market

London-area real estate has enjoyed steady demand and value appreciation in recent years, and the supply of homes for sale was already historically low prior to the impact of COVID-19. 

According to the London & St. Thomas Association of Realtors (LSTAR), there was every indication the market was poised for a busy spring in February 2020 with 740 sales, clocking in 23.7% higher than the previous year and home prices increasing 13% to an average of $445,535. Inventory was the lowest it had been in 10 years, at 1.8 months. Zoocasa’s Average Price Index reveals a price of $436,433 across all home types in 2020, an increase of 16% year over year, and 77% over three years.

Impact of COVID

Like most housing markets across Ontario, the London–St. Thomas region absorbed a temporary plunge as lockdown requirements took hold in April 2020. The number of homes trading hands fell more than 50% to 469, the lowest volume of April transactions since 1978, and 55% below 10-year levels.

As open houses were prohibited due to social distancing guidelines, sellers were hesitant to enter the market, causing listings to fall 50.3% year over year. Average home prices in London remained flat, inching up 0.4% to $423,143.

The market remained below seasonal activity throughout May, but had bounced back by June due to the reopened economy and renewed buyer appetite. Sales soared 13.8% from the year prior at 1,188 transactions, and up 77.8% from May. Prices rose 17.8% annually to $473,998, while the sales-to-new-listings ratio (SNLR), hit 78.5%, indicating a strong sellers’ market. In all, LSTAR reports it was the second biggest June ever.

Future outlook

As has been the case with many smaller- and mid-sized cities in southern Ontario, London real estate has remained in consistently high demand throughout the pandemic. As more buyers now have a work-from-home lifestyle, they’ve widened their home search net; with its big-city amenities and comparatively lower price tag, London has been a particularly attractive buyer destination.

That has pushed housing supply even lower, and is putting upward pressure on prices. As of March 2021, there was just 0.4 months of inventory on the market, while sales soared by 56% to 1,296 transactions—the hottest March on record—and the average price rose to $634,799. 

“Overall, we’ve had a huge increase in demand due to COVID as buyers are able to work remotely and are attracted to London for its lower average prices, great community feel and the ease of getting to GTA if need be,” says local real estate agent Meghan Caddey.

 

“Young families like London for its larger backyards and variety of outdoor activities—the bike path that runs across the city is especially popular. The city is also attractive to retirees because it has a small town feel, great hospitals, and it’s easy to get around.“

Caddey adds in addition to resale properties, demand is booming for new builds, with many buyers on wait lists as developers release more lots.

METHODOLOGY

To determine which cities and neighbourhoods offer home buyers the greatest value in 2021, we took a look at the data from top real estate markets across Canada. Various cities, regions and neighbourhoods are ranked against each other within the same geography, where possible. 

Overall rankings and score measures consider the current average home price, price growth in recent years, as well neighbourhood characteristics and economics. Value and neighbourhood economics are equally weighted within the overall score evaluation. All rankings are based on data available at the time of publishing. 

Value and home growth

We considered the 2020 average home price relative to the overall regional average and normalized it against adjacent neighbourhoods, with more affordable home prices contributing positively. The ranking calculation also takes into account the one-year, three-year and five-year home value growth, with more weight assigned to the recent growth and decreasing value weight contributed when including previous time periods. Recent comparables are better indicators than sales from five years ago. However, a positive and steady trend of home value growth was also considered in the overall calculation.  

Neighbourhood economics

This considers the percentage of households who own versus rent, education level ranges as a percentage in each household, median incomes of individuals and overall household income levels, as these are all factors in evaluating economic and affordability indexes. 

We’ve presented additional regional preference factors that are not used to calculate the ranking, but do offer insight on the neighbourhood amenities, accessibility and percentage of households with children. This can assist in assessment of the lifestyle that might be associated with each area.

Data is sourced and made available from the following: Statistics Canada, Canadian Real Estate Association (CREA), Toronto Regional Real Estate Board (TRREB), Barrie & District Association of Realtors (BDAR), Nova Scotia Association of Realtors (NSAR), Real Estate Board of Greater Vancouver (REBGV), Calgary Real Estate Board (CREB), Realtors Association of Edmonton (RAE), WalkScore.

Article by Moneysense.ca | Zoocasa