Across the Canadian real estate market, there is one common trend: low inventories amid strengthening demand. And this is causing many housing markets, from major urban centres to rural communities, to see a massive spike in valuations. Sky-high prices are no longer confined to Toronto, Vancouver, Montreal, and Ottawa. It is the small cities and suburbs and historically low interest rates that are truly driving this real estate boom.
Will there be a reprieve coming soon? The Canadian Real Estate Association (CREA) believes that the only way housing prices can hit the pause button on their ascent is if there is “a big surge in supply.”
“The best case scenario would be if we see a lot of sellers who were gun-shy to engage in the market last year making a move this year,” said CREA’s senior economist Shaun Cathcart, in a news release. “A big surge in supply is what so many markets really need this year to get people into the homes they want, and to keep prices from accelerating any more than they already are.”
The proof is in the data. While national real estate sales were up 35.2 per cent year-over-year in January, prices also climbed 13.5 per cent. At the same time, the number of newly listed homes dropped 13.3 per cent, and national sales-to-new listings ratio tightened to a record high 90.7 per cent.
Ultimately, the current state of the Canadian real estate market comes down to this: there is a limited supply of homes to satisfy surging demand.
But a new study suggests that Canadian housing starts trended higher in January, so there could be some alleviation occurring by the end of the year and heading into 2022. According to the Canada Mortgage and Housing Corporation (CMHC), housing starts rose 2.6 per cent month-over-month in January to 244,963. Multiple urban starts, single-detached urban starts, and rural starts all increased to kick off 2021. Growth was seen in multiple areas, including the BC real estate market.
“The national trend in housing starts increased in January,” said Bob Dugan, CMHC’s chief economist, in a statement. “Both single- and multi-family SAAR starts rebounded strongly in January from declines in December, driving the overall trend higher. Single-family starts were particularly strong in Montréal, reaching their highest level since February 2008.”
What about British Columbia’s red-hot housing market?
Where Are the Most Housing Starts Within the BC Real Estate Market?
There has been notable growth across the province and in several key markets in the BC real estate market. But where were some of the most housing starts reported in British Columbia? Here are the most recent CMHC numbers:
British Columbia | January 2021
Housing Starts: 25,430
Vancouver | January 2021
Housing Starts: 1,394
Total Absorptions: 1,138
Victoria | January 2021
Housing Starts: 216
Total Absorptions: 116
Surrey | January 2021
Housing Starts: 166
Total Absorptions: 242
Kamloops | January 2021
Housing Starts: 127
Total Absorptions: 21
Kelowna | January 2021
Housing Starts: 77
Total Absorptions: 20
CMHC numbers also revealed that the total value of issued building permits in BC declined by close to 43 per cent year-over-year in January. Nationwide, the total value of issued building permits increased by about 21 per cent.
BC Real Estate Market on Fire
British Columbia had always been one of the hottest real estate markets in the Great White North. The British Columbia Real Estate Association (BCREA) reported a record-setting month in February, with demand outpacing supply; residential transactions spiking 89 per cent year-over-year, and housing prices shot up 17 per cent.
“Near-record sales in Metro Vancouver, combined with unprecedented housing demand outside of Metro Vancouver, continues to drive a blistering pace of home sales in BC,” said Brendon Ogmundson, a chief economist at the BCREA, in a press release.
Of course, Vancouver has always dominated the housing industry headlines, especially during the pandemic. For example, the Real Estate Board of Greater Vancouver (REBGV) reported that home sales soared at an annualised rate of 73 per cent in February, tilting the market in favour of sellers. And prices do not seem to be deterring homebuyers.
Many reports have asserted that bidding wars have returned with a vengeance, with hundreds of home-hungry consumers competing for shrinking supplies. In many cases, buyers are paying more than $500,000 over the list price of detached homes. As the Vancouver Sun recently reported, one recent sale went more than $1.6 million over the asking price.
BC will likely witness greater growth for the rest of the year, with interest rates anticipated to stay lower for longer and homebuyers seeking more living space. If sales activity in winter was red hot, spring could be on fire. And until a wave of new stock is added to local market inventories, these fires will continue to burn!
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