Across Canada, national home sales in February 2023 rose 2.3 percent compared to the previous month, and the average price was about $50,000 higher. However, according to a report released by the Canadian Real Estate Association (CREA), February home sales dropped 40 percent compared to last year. That decline comes despite February sales in Real Estate Canada being comparable to what was recorded during the same month in 2018 and 2019, before the COVID-19 pandemic.
Housing supply fell, with newly listed properties down 7.9 percent from January. The average price of a Canadian home sold in February was $662,437, an 18.9 percent decrease from last year—though more than in January, thanks to sales gains in Canada’s major markets, Toronto and Vancouver.
The report also noted that prices in other markets like Calgary, St. John’s, Regina, and Saskatoon are still close to their peaks, even as high prices generally ease up across the country, including in parts of Ontario and B.C.
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The Potential of a More Robust Housing Market
According to Gill Oudil, the chair of the real estate association, the data from February suggests the potential for a more robust market. However, she reiterated the same conclusion as last month, stating that the true state of the 2023 market can only be determined in the spring season.
The spring season is the busiest time in Canadian real estate, with the largest number of homes being listed for sale, as buyers are eager to make purchases before the summer months.
Oudil also commented that while there is yet to be an indication of this in the sales or listings data, she anticipates that homeowners are preparing their properties for the market and prospective buyers are obtaining mortgage pre-approvals.
Increasing Rentals in Canada
With the housing shortage in Canada, more and more people are turning to rentals as a solution. According to a recent report, the Royal Bank of Canada estimates a deficit of 25,000 to 30,000 rental stock units across Canada. While building more rental units can help alleviate the housing shortage, it is not the only solution. Converting existing properties like condos and commercial buildings can also increase rental stock. In addition, adding rental suites to existing homes can provide more affordable housing options.
Canada faces a critical rental housing shortage projected to quadruple to 120,000 units by 2026. To achieve an optimal vacancy rate of 3%, Canada needs to add 332,000 rental units over the next three years, which marks a 20% annual increase compared to the 70,000 units built in 2022.
The research also revealed that the country’s vacancy rate has fallen to 1.9%, its lowest point in 21 years, while competition for units has led to the highest annual increase in rent growth on record. The report recommends building more supply, turning condo units into rentals, converting commercial buildings, and adding rental suites to existing homes to address the crisis.
Summary
Despite the current shortfall in housing supply for rental properties and house listings, there are many positive factors to consider in the Canadian real estate market. While various factors can affect the market, such as Canada’s economy, interest rates, and global economies, experts predict that real estate prices will continue to rise in the mid to long term. Therefore, it is an excellent time to consider investing in real estate or buying your first home before the market becomes too competitive.
Hema Chandrashekar
Sr. Content Editor, Save Max
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