House prices up by 8.57% during 2020
Canada’s housing market continues to rise strongly, despite the economic repercussions brought by the COVID-19 pandemic. House prices in the country’s eleven major cities rose by 8.57% during 2020, in contrast to a fall of 0.29% the previous year. Quarter-on-quarter, house prices increased 2.43% in Q4 2020.
Sales rising strongly, construction activity gaining momentum
Demand has rebounded quickly with sales surging by 47.2% in December 2020 from a year earlier, the biggest y-o-y growth in 11 years, according to the Canadian Real Estate Association (CREA). For the whole year of 2020, home sales reached a new record of 551,392 units, up 12.6% from a year earlier and 2.3% above the previous peak set in 2016.
Housing starts rose by 4.4% y-o-y to 217,802 units in 2020 and completions increased 6.1% to 198,636 units over the same period.
To reduce speculative buying the central bank has in recent years taken action repeatedly – raising mortgage downpayment requirements and reducing amortization periods, among others. This resulted in a sharp slowdown in house price growth in 2018 and 2019. But as the impact of these curbs have waned the housing market has bounced back despite the pandemic.
Rents, rental yields: moderate yields, around 4% to 6%
Toronto apartment costs are around $9,409 per sq.m.
| Canada: typical city centre apartment buying price, monthly rent (120 sq. m) | |||
| Buying price | Rate per month | Yield | |
| Montreal | $348,600 | $1,564 | 5.38% |
| Toronto | $1,129,080 | $3,740 | 3.98% |
Recent news: Sharp economic contraction
Canada’s economy contracted by around 5.1% last year, as consumer spending and business activity almost ground to a halt due to the COVID-19 pandemic.
Recently, International Monetary Fund (IMF) slashed its 2021 growth forecast for Canada to a modest 3.6%, from its initial projection of a 5.2% growth, amidst new curbs due to an infection surge. Yet the Bank of Canada (BoC) is still optimistic, projecting a full-year growth of around 4% in 2021, and close to 5% in 2022.
In January 2021, the BoC kept its key rate unchanged at 0.25%, after cutting it three times in March 2020 (cumulative rate cut of 150 basis points).