One of the most compelling trends in the Ontario real estate market over this past year has been the rise of rural housing markets. Although industry observers stop short of calling it an “exodus,” many households are scrapping home-buying dreams within the province’s major urban centres, like Toronto and Hamilton, and relocating to suburban areas, small towns and rural communities. This shift has been incredible to monitor in real-time.
In 2020, according to Statistics Canada data, Toronto lost more than 50,000 people to other parts of the province. The decline was part of a broader trend of homebuyers who sought greener pastures outside the Greater Toronto Area (GTA) amid rising housing costs, remote work opportunities, employment uncertainty, and the fear of living in a hyper-dense city in the middle of a pandemic. Whether or not this will continue in 2021 remains to be seen, but households are discovering how wonderful the rest of the province is – and it shows in real estate valuations.
From Windsor to London to North Bay to Thunder Bay, the Ontario real estate market is booming. But as demand strengthens, supply is failing to keep up, which is causing significant shortages throughout the sector. Small cottage country markets and rural jurisdictions are particularly feeling the pinch.
Ultimately, prices skyrocketed in quiet towns as homeowners cashed in on the wave of homebuyers. Listings are few and far between, inventories are at multi-year lows, and historically low interest rates are giving consumers more purchasing power.
But will the situation ease this year? Not quite, says the Canadian Real Estate Association (CREA).
Province-Wide Housing Shortages in the Ontario Real Estate Market
CREA recently released its forecast for the Canadian housing market for the year. The report highlighted the economic fundamentals in Ontario, alluding to the province’s strong demand and falling supply that will lead to higher prices.
“Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province. This shortage is expected to limit sales activity in 2021,” the report stated. “The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties.”
But while valuations are surging amid dwindling stocks and lower borrowing costs, the Building Industry and Land Development Association (BILD) is recommending that municipalities start to implement changes to housing regulations. The group notes that building housing in the GTA takes too long and costs too much, which makes increasing new home supplies a challenging task.
“The Ontario government has taken action. Now it’s the municipalities’ turn. They need to update their processes and bylaws in order for many of the changes introduced by the province to achieve their intended outcome. Depending on the change, municipalities have up to two years to come into compliance with the new provincial rules and regulations,” wrote Dave Wilkes, President and CEO of BILD, in an op-ed.
“The GTA’s housing supply challenge developed over decades and can only be addressed through a concerted effort by municipalities, the provincial government and industry over many years.”
Despite the group’s concerns, new housing construction has gone up over the last year in various parts of Ontario, even in the midst of the COVID-19 public health crisis.
According to Canada Mortgage and Housing Corporation (CMHC), housing starts increased 16.28 per cent in 2020, reaching close to 79,000. It should not come as a surprise that Toronto witnessed a 25-per-cent jump in housing starts. But places like Peterborough, North Bay and Sudbury have also seen rising housing starts.
Will this be enough to add inventory and ease prices? The next 12 to 18 months will be crucial to forecasting the health of the Ontario real estate market.
A Sneak Peek into 2021
Until the market imbalance normalizes, the Ontario housing sector is forecast to emulate its 2020 performance in 2021. According to the RE/MAX Canadian Housing Market Outlook (2021), the province is projected to see an average sale price increase of between seven and 12 per cent, led by gains in Cornwall, Hamilton-Burlington, Kingston, Kitchener-Waterloo, Niagara and Thunder Bay.
Move-up and move-over buyers, urban-to-suburban homebuyers, and tumbling supply levels will be the most significant factors driving the provincial housing market this year.
With interest rates expected to remain low for longer, the real estate industry adapting to the evolving coronavirus pandemic situation, and with the federal and provincial governments extending financial support to households, the Ontario housing market’s predicted gains should not be too surprising. As long as the demand continues to intensify and the supply fails to match buyer interest, the province will continue to be the envy of the Great White North.