Average Canadian home price hits $816,720 — up 20% over past year
The price of an average Canadian home hit $816,720 in February, its highest level on record, according to the Canadian Real Estate Association.
The group, which represents 100,000 real estate agents across the country, said on Tuesday it was the second-busiest February in history for home sales, second only to the all-time high for the year. last.
Some 58,209 homes changed hands during the month, and an increase in new listings in the second half of the month suggests the momentum could also translate into strong selling in March.
The average sale price of $816,720 represents a 20% increase over last year’s level.
CREA says the average selling price can be misleading since it’s skewed by sales in big, expensive markets like Toronto and Vancouver. Just removing those two cities from the numbers shaves more than $178,000 off the average, the real estate group notes, which is why it calculates a second number, known as the house price index, to adjust to the volume and type of housing sold.
But this metric is also growing at its fastest pace on record, up 29% since last year. It rose 3.5% in February alone – also the biggest monthly jump on record.
The pandemic has had a counter-intuitive impact on the housing market in Canada. In March and April 2020, sales volumes and price growth slowed as buyers reacted to the uncertainty by keeping their wallets closed. But in the nearly two years since, the market has been in an absolute tear, with record high borrowing costs – which have been kept in place to stimulate the economy during the pandemic – fueling housing demand so far. insatiable.
Feverish demand
For those at the heart of this wave of demand, the frenzy can be overwhelming, which is why some buyers are resorting to unconventional methods just to enter the market.
Lauren Schreiber and her husband have been looking for some time to buy a house for themselves and their two children, without success. With average prices in the Toronto where they live exceeding $1 million, they have repeatedly found themselves outbid on homes, even when offering well above the asking price.
They’re on a tight budget, so they work with a company called Ourboro that helps potential buyers find money for a down payment.
There is a catch, however — in exchange for the help, Ourboro gets a stake in the house and is entitled to a share of the gains when the owner sells.
“It’s a concession to go into buying a house with strings attached, but to get there, that’s what we have to do,” Schreiber said.
Although the plan is not without risk, with two children in a cramped apartment, Schreiber says they are grateful for any help they can get.
“We’ve been watching our friends and neighbors being renovated for years,” she said. “We want to move forward and really be able to have some security and put down roots.”
The concept is not new. Other companies, including Options For Homes, have used a similar model for years, entering into contracts with buyers to increase down payments in exchange for equity interests in the condo that the owner can redeem at the time of sale, or sooner. he prefers it. Unlike Ourboro, Options For Homes is also the developer building the condo.
Torontonian Heather Benway has worked twice with Options to purchase two condos in the past 15 years. “Not only investing young, but learning how to budget and save properly at that age made a huge, huge difference for me,” she said in an interview.
WATCH | Heather Benway credits Options For Homes with helping:
These unconventional methods may have worked well for Benway, but ultimately the current high prices are inflated by record amounts of cheap debt.
And any homeowner with a mortgage should be prepared for some math on that front, as the Bank of Canada just raised its benchmark interest rate for the first time in two years.
Economists say there could be as many as half a dozen rate hikes coming this year, which would take the central bank rate to 2%.
That’s why “the next few months could be telling,” said Robert Kavcic, an economist at Bank of Montreal. “Demand was buoyed by expectations of higher prices and a last ditch effort to lock in cyclical low mortgage rates,” he said. “But sentiment can change quickly, and this market could find an equilibrium very quickly as soon as it senses lower prices.”
Hot market in the oil patch
Prices are up across the country, but Kavcic said one in particular seems to be really heating up: Calgary.
Benchmark prices in the city have risen at an annualized rate of nearly 35% over the past three months, he said. “Fastest clip since the heady days of 2006. Relative affordability and $100 oil have clearly drawn investors to this market.”
Although very hot, the average price in the city is still relatively affordable, which has recently attracted buyers like Nathaly and Rob Turner to move to the city. They were looking for a home in Ottawa where they lived and worked last year, only to find that by the time they could save enough on a down payment, the prices had gotten out of their reach.
“Every time we try to generate a deposit to enter the market, it gets further and further away from what we could actually afford,” Rob told CBC in an interview. “Every time we made an offer, the houses were $100,000 or $150,000 more than the asking price.”
When an opportunity to move to Calgary for work presented itself, they jumped at the chance and were thrilled to find that the city’s housing market was more affordable than where they came from. Calgary’s benchmark home price is just over $487,000, according to CREA, compared to over $718,000 in Ottawa.
“It’s definitely a huge sigh of relief to be able to own a home now and have a place of our own,” Nathaly said.