Canada’s housing market headed for another record year in 2021
8 reasons why the market will continue to flourish through 2021
We continue to be host to the busiest real estate market we’ve seen in our 18 year careers. Here are are the 8 key factors for the uptick in the market:
1. Record low interest rates
Interest rates are expected to remain low for the rest of 2021. Sub 1.5% mortgage rates are commonplace and buyers see this as a great opportunity to take on increased household debt.
“The decline in interest rates since last spring gave a sizable break to buyers by lowering debt service costs. This has undoubtedly attracted more buyers into the market. We expect interest rates to stay low though we see long-term rates starting to creep slightly higher this year. It’s important to remember that when rates are at rock-bottom levels like they are today, it doesn’t take much of an increase to jack up debt service costs. So the slightest rate increase could compel many buyers to exit. Any sudden, larger increase would pose a risk to the market.”
RBC Economic Report 2021
2. Need for extra space to work from home
People are working from home more than ever and homeowners feel there will be a continued need to work from home moving forward. The typical couple that have been be okay with living in a 1 bedroom downtown now have to consider the need for two workstations in addition to a place to sleep, and if they are considering a family, they will likely want to leap frog from the “2 bedroom upgrade” and go straight to a 3 bedroom option, or more.
3. Growing families leaving the downtown core
The idea of walking to work is no longer necessary or desirable. Given that many people are only coming into work offices one or two days a week, there is less priority in having a short commute. This has caused people to no longer see the benefits of living close to their office. Recent data shows that the larger the strata complex the lower the increase in value relative to the overall market in comparison to townhomes, ½ duplexes and detached homes. We will continue to see this trend throughout 2021 and beyond as more businesses shift towards having employees work from home.
4. A premium on having private outdoor space
No longer having the ability to go out for large social events, concerts and gatherings has created a large demand for being able to entertain and spend time outside at home. As a result homes such as ½ duplexes with private yards, townhomes with rooftop patios and of course detached homes are all selling at a premium.
5. Change in lifestyle – spending more time at home.
There is no place like home. Instead of spending entertainment budgets on weekend getaways, travelling and dining out, people are investing in their homes. Home theaters, gyms and hobby rooms are all places that we are spending our time these days. All these activities require more space. We are seeing garages being converted into home gyms and offices while condo owners are building their own outdoor sanctuaries complete with covered gazebos, hot tubs and outdoor fitness stations.
6. Market compression
Even though interest rates are low, banks are still tight on lending criteria, and as a result most buyers are landing between $700,000 – $2,500,000. This is resulting in competitive offers in all these segments of the market:
The hottest price points in the market are :
- Spacious condos under $1,000,000
- Townhomes and ½ duplexes with 3 + bedrooms under $1,600,000
- Detached homes with rental income under $2,500,000
7. Lack of supply in our landlocked city
The downtown core is surrounded by water on all sides, and it’s no secret that the Lower Mainland is landlocked, wedged between an area framed by mountains to the north, the sea to the west, the US-Canada border to the south, and the Agricultural Land Reserve (ALR) to the east. This has effectively limited the region’s ability to expand outwards with the same type of sprawl seen in other regions like Toronto and Calgary, resulting in only 2.5 million people living in the Lower Mainland. Metro Vancouver is currently facing an affordability crisis, it’s an issue facing the entire region. But while much of the debate has centred on foreign investment, maybe it’s time we addressed the elephant in the room and started to look at our city’s geography as a factor in the increasingly unattainable housing market.
8. Migration to suburban lifestyle
Given the lack of space in the city, buyers are moving away from Vancouver proper creating hot real estate markets throughout the suburban markets of great Vancouver.
We are in uncertain times and we will continue to provide our clients with guidance through this uncharted territory. If you would like to have a meeting with us to discuss your current real estate situation and plan your goals, don’t hesitate to reach out.
We look forward to continuing to be of service to our many loyal clients and friends.