Will the Canadian Housing Market Momentum Continue in 2021? Or Will The Real Estate Market Crash in 2021?

Changing Season…Continuing Real Estate Housing Market Momentum

> We hope you’re enjoying the finer Canadian weather as we begin to enjoy the arriving spring warmth, even while social distancing from family and friends. While health officials remind us that we still do have to be vigilant, the warmer weather does seem to add hope that these unusual times will soon come to an end.

As the season is changing we are seeing the housing market continue to gain momentum. We are seeing lots of activity in the Canadian real estate market, with low interest rates helping to stimulate the housing market.

As our economy improves, we continue to see activity in housing markets across the board. With the ever-evolving real estate market, and so many different metrics making media headlines, it’s no surprise that Canadian home buyers and sellers can be anxious. When you have questions about the real estate market, we are here with answers… How are buyers looking for properties? What selling strategies are getting the best possible price? What types of homes are getting the most attention?

Even if it’s just curiosity, we can share statistics and trends so you’re always in-the-know. > > > As your trusted real estate information resource, count on our specialized service and negotiating smarts to help you make informed decisions.

3 Reasons the Canada Housing Market Could Continue to Soar

In late April,  I was discussing with some clients whether the Canada housing market will correct in the near term. The Canadian real estate market has built considerable momentum in the face of the COVID-19 pandemic. Even international observers are beginning to pay close attention to the momentum in the Canadian market. Today, I want to look at three reasons the Canada housing market could continue to soar in 2021.

The state of Canada housing as we move into May

The Bank of Canada (BoC) hosted its policy meeting last month. It retained Canada’s benchmark rate at 0.25%. The central bank also revealed that it would reduce its bond-buying efforts. BoC officials have refrained from commenting frequently on the state of the housing market. However, in its Quarterly Monetary Policy Report, BoC Governor Tiff Macklem warned that “it would be a mistake” for Canadians to treat housing as an investment opportunity. “High prices could result in stretched borrowing and lending,” he said. “Leaving some households and financial institutions more financial vulnerable to an economic downturn.”

Investors will eagerly await data on home sales and prices in April. March saw a significant jump in both. Spring is typically the busiest season for home sales, so activity should remain robust. Despite some warnings, policymakers are not jumping to curb the conditions that are fueling this red-hot market.

Reason 1: Low interest rates

Canadian lenders and prospective buyers have both benefited from historically low interest rates over the past year. This environment has provided a friendly environment for the real estate industry. Banks and alternative lenders are on a roll in this market.

Home Capital (TSX:HCG) and Equitable Group (TSX:EQB) have been strong holds during this real estate boom. Shares of Home Capital have climbed 90% year-over-year as of mid-afternoon trading on May 3. Equitable Group stock is up 115% from the same period in 2020. Both alternative lenders are thriving due to the scorching Canada housing market.

Net earnings per share rose 45% from the prior year to $3.33 at Home Capital in 2020. Meanwhile, mortgage originations came in at $6.95 billion – up from $5.66 billion in 2019. Equitable Group’s customer base increased 82% to 173,000 in 2020. Loans under management rose 7% to $33.3 billion. Overall, it was an impressive year for both on the back of a surging Canada housing market.

Reason 2: Canada housing demand is rising

Soaring prices have not curbed demand. On the contrary, sales numbers seem to indicate that more Canadians than ever are chomping at the bit. In March, Canada posted 70,000 home sales. This shattered the previous monthly record of 22,000.

Officials have warned Canadians not to see homes as investment vehicles that are bound to increase in value. Of course, it is impossible for citizens to ignore the rise in valuations we have seen in recent years. More Canadians are going to want to get in on the party.

Reason 3: Supply is not keeping up

Last month, Finance Minister Chrystia Freeland said the country needed a boost in housing supply to help solve the affordability crisis. Supply in major metropolitan areas such as Toronto, Hamilton & GTA has lagged significantly behind demand. Moreover, Canada is catching up with its vaccine rollout. Immigration into the country is set to bounce back in a big way in the months and years ahead. This will create even more pent up demand in a Canada housing market suffering from low supply.

Conclusion – Canadian Market Crash in 2021?

In conclusion, it is safe to say that the Canadian real estate market appears to have enough support and balance of  supply & demand to avoid any type of market crash in 2021. But then again only God can predict the market 100%, so in the meantime, buckle up as 2021 Canadian real estate market continues to gain momentum. If you have any questions about the market feel free to contact market expert Realtor Sean Findlay. 

More “Stress” Added to the Mortgage Stress Test?

Housing markets are on fire and governments at every level are exploring ways to reduce the heat without actually touching the market.

Over the past few months, there was a lot of speculation that a Capital Gains Tax on the sale of a principal residence would be introduced to both offset some of the pandemic spending and gently apply the brakes to the housing market. The Federal Budget came and went without that announcement. There was a sigh of relief as public sentiment really is not in favour this type of tax.

 In an alternate move to cool the housing market, last month, The Office of the Superintendent of Financial Institutions (OSFI) announced that it was considering an adjustment of the minimum qualifying rate for uninsured mortgages – also known as the “stress test.” The minimum qualifying rate looks to protect Lenders as it aims to ensure borrowers will have the ability to make mortgage payments in the event of a future mortgage interest rate increase.

> > An announcement is scheduled by May 24, 2021. A “stress test” update would come into effect June 1, 2021.

> > Since the global credit crisis of 2008, our government institutions have introduced more than 40 home financing restrictions in an effort to guide the Canadian housing market.

Call Before You Dig & Eliminate Service Cuts

It’s the time of year where many people are improving their outside spaces. Planting a tree? Digging fence post holes or deck support holes? It’s pretty crowded underground – gas pipelines, electrical services, telephone and cable TV, plus water and sewer connections. And it’s not just your home, your neighbours’ connections likely run under your property as well.

>> Not only could it be loss of service, digging could cause injury – imagine hitting a gas pipe or an electrical line.

> > Even if you’ve hired a contractor and they say, “don’t worry”, make the call. It’s your property. It’s your responsibility. And if you break it… or cut it… as well as safety, there’s a repair bill to consider.

Good For The Planet… Good For Your Wallet

CMHC offers a premium refund of up to 25% on CMHC mortgage loan insurance premium when you buy or build an energy-efficient home, or you buy an existing home and make energy-saving renovations.

> > Energy-efficient homes have less of an environmental impact and often have a lower cost of maintenance. Qualifying properties could be eligible for a premium refund of either 15% or 25% depending on the level of energy efficiency achieved.

> > You may be eligible if: > • Purchasing an energy-efficient home. > • Purchasing a house and make energy-saving renovations. > • Renovating your existing home to make it more energy-efficient. > • Purchasing a condominium unit in high rise buildings built to the LEED Canada New Construction standard (Certified, Silver, Gold and Platinum). Or the building is designed to be either 20% or 40% more energy-efficient than compliance with the applicable building code.

Check out: www.cmhc.ca and CMHCs Green Home Website where you’ll find the online Energy-Efficient Premium Refund Form to find out if you qualify for a CMHC Green Home Program Refund.

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