A “mix of exuberance and haste” has sent Canadian single-family home prices into the stratosphere and many parts of the country have seen “self-reinforcing price dynamics” take hold.
That’s the message from RBC Senior Economist Robert Hogue, who in commentary published earlier this month, wrote that in the past six months the benchmark price of a Canadian single-family home has risen by $100,000. That’s a 15 percent increase in value in only half a year’s time, which ranks as the sharpest increase to the national benchmark price of all time.
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In line with the well-documented shift in buyer interest to suburban markets, the country’s most expensive cities for real estate — Vancouver and Toronto — didn’t record the largest single-family home price gains in the period Hogue looked at.
Homebuyers in Barrie, an hour north of Toronto, have seen single-family home prices jump by $147,000 since August. Meantime, in Fraser Valley, a region east of Vancouver that contains the small cities of Abbotsford and Chilliwack, recorded a $145,000 increase in the single-family home prices during the same period.
Vancouver and Toronto were no slouches either, with Hogue noting prices had increased $143,000 and $139,000, respectively, over the last six months.
“Clearly homebuyers continue to be a force to be reckoned with a year into the pandemic. Rock-bottom interest rates, changing housing needs and high household savings seem to have motivated many to make a move — or take the investment plunge,” Hogue wrote.
Speculation has also arrived on the heels of the steep increase in home prices, the economist said. Buyer “FOMO” — the idea a homebuyer may lose out on a property they can afford if they wait too long — is another dynamic at play in the red-hot market.
While Hogue writes that an “overheated market” increases the risk of a future price correction, RBC’s economics team continues to forecast persistent price appreciation for the remainder of the year with the pace of the gains gradually declining.
“A creeping-up of longer-term interest rates, deteriorating affordability, the resumption of office work and possible policy intervention will eventually cool homebuyer demand and set the stage for a soft landing,” Hogue wrote.
Earlier this month, TD Economist Ksenia Bushmeneva wrote that price moderation may come by way of an increase in listings hitting the market from sellers who are more confident in the improving economic outlook.