House prices up by 12.34% during the year to Q3 2021
After a two-year slowdown, Canada’s housing market is now growing impressively again. Real house prices in the country’s eleven major cities rose by a huge 12.34% during the year to Q3 2021, a sharp acceleration from the prior year’s 6.17% growth. In fact it was the second highest y-o-y increase since Q2 2017. Quarter-on-quarter, house prices increased 2.06% in Q3.
Demand is surging; construction activity rising strongly, too
Sales have reached new record highs. The actual number of sales transactions totaled 581,275 residential properties in the first ten months of 2021, surpassing the annual record of 552,423 sales for all of 2020, according to the Canadian Real Estate Association (CREA). Residential construction is also rising sharply. Housing starts surged 31.7% y-o-y to 202,924 units in the first three quarters of 2021 and completions increased 12.9% to 166,816 units over the same period.
The central bank has taken action repeatedly – raising mortgage downpayment requirements and reducing amortization periods, among others – in an effort to reduce speculative buying and avoid a disastrous housing market crash. This resulted in a sharp slowdown in house price growth in 2018 and 2019. But as the impact of these curbs wane, the housing market bounced back last year 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|
Recent news: Canada’s economy contracted by around 5.4% last year, as consumer spending and business activity almost ground to a halt due to the COVID-19 pandemic, according to Statistics Canada. It was the steepest annual decline since quarterly data were first recorded in 1961.
As economic conditions continue to improve, the International Monetary Fund (IMF) forecasts the Canadian economy to grow by 5.7%, buoyed by strong consumption and business investment, as well as a rebound in exports. However, the Bank of Canada (BoC)’s latest growth projection is much more conservative, at 5%.
In October 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).