Canadian home sales, prices hit record high in July as low mortgage rates drive buyers into market
Canadian home sales and prices surged to a record high in July, as buyers flooded the market and took advantage of low mortgage rates after the coronavirus pandemic briefly slowed activity in the spring.
The number of homes sold jumped 26 per cent on a seasonally adjusted basis from June to July, according to the Canadian Real Estate Association, with Toronto, Montreal and Vancouver soaring along with surrounding regions such as Hamilton-Burlington in Ontario and Fraser Valley in British Columbia.
The seasonally adjusted home price index, an industry calculation of a typical home sold, reached a record high of $637,600 last month – up 2.3 per cent over June, the largest month-to-month increase since early 2017 when real estate markets were on a tear.
Before the pandemic struck in March, the real estate markets in Vancouver, most of Southern Ontario, Toronto, Ottawa and Montreal were showing signs of overheating, with a shortage of properties triggering bidding wars.
“What we saw in July is mainly activity delayed from the spring,” said Robert Hogue, senior economist with Royal Bank of Canada. “Lower mortgage rates also probably helped a number of first-time buyers enter the market last month and work-from-home arrangements caused some people to make a move,” he said.
With the popular five-year fixed mortgage currently less than 2 per cent, there is more demand today than before the COVID-19 pandemic.
“I am seeing more home buyers and more investors than pre-COVID,” said mortgage broker Bernadette Laxamana, president of Karista Mortgage in B.C. “With the rates being so low, it’s costing them less per month to buy and more of their payment is going to principal versus interest,” she said.
Realtors have described a spike in demand for larger properties and outdoor space, as the majority of office workers were forced to work from home. This has spurred “activity that otherwise would not have happened in a non-COVID-19 world,” said Shaun Cathcart, CREA’s senior economist.
Areas such as Niagara, London, Hamilton, Burlington and Guelph in Ontario are experiencing a spike in activity and prices. The home price index for Guelph rose 3 per cent month to month to $608,100. In Victoria, the index was up 1 per cent to $719,300.
In Montreal and region, the second-largest real estate market in the country, sales jumped 37 per cent to a record high, with robust demand in the areas surrounding the downtown core. The home price index also reached a record of $401,200 across all property types, according to CREA, 2.8 per cent higher than the previous month.