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Fewer Housing Starts Expected for 2021

Published December 21, 2020 by Real Estate Leads

One of the most upheaval heavy years of all time is drawing to a close here. One thing that a lot of people would not have foreseen in April was how well the real estate industry in Canada would weather the COVID economic downturn as well as it did. Now that it’s late December there’s a lot of looking ahead just a few weeks into the New Year and wondering if we can expect more resilience from it.

Economists are industry experts have already forecasted a rise in median home prices for Canada next year, and that’s good news for homeowners who are looking to see more equity in their homes. And while that should be the opposite for would-be 1st time homebuyers, there is the new Liberal FTHBIA plan that is designed to help people like this get into the market.

There’s also a mixed reality for real estate agents in all of that too, as there’s a balance that’s needed to generate the type of environment where the market and business is good to all equally. Real estate is always going to be a competitive business, and that’s why our online real estate lead generation service for Canada is an excellent resource for realtors who want to be as competitive as they can when building their real estate business.

Recent news about home prices, but other news that there are fewer housing starts expected across the country next year speaks to a different perspective on the national real estate market. 

Potential for Stall Out

Q3 for 2020 saw 237,300 housing starts in all of Canada, and that is a 22.2% increase from the 2nd quarter. Home sales also went up by 93% during this same time frame, bringing home prices up 4%. Those numbers on their own might look promising, but a noticeable deceleration may be just around the corner.

In addition to reduced growth due to the repressing of the economy, we had robust housing demand that continued to rally new home sales and starts until the end of September or so. House price appreciation remained solid because of low inventory and supply bottlenecks.

We should still see housing starts exceeding 2019’s total, but new home sales have decreased and especially in the new condo segment. This should result in fewer housing starts for 2021, and with interest rates staying historically low it’s expected that fewer housing starts are going to be the norm for the next two years. This then connects to rising home prices meaning for affordability woes for some, and – more relevantly to those in the business – softened demand.

There is also the expected additional factors of the government’s massive income support programs winding down and financial institutions tightening credit standards next year.

Slower Pace

Weaker job numbers are expected going into Q1 of next year, and the effects of weaker migration and other underlying economic factors is going to slow the pace of new home builds. For Toronto in particular, it’s predicted that reduced immigration will likely curtail housing demand in Toronto’s condo sector to start 2021. Single-family housing demand should stay strong though.

In Montreal housing starts have been resilient this year, with residential construction in the city rebounding when restrictions were eased. Despite this new housing starts only went up 1% in between January and September 2020.

Condos are always a huge part of the market in metro Vancouver, and new condo sales in Vancouver weren’t good in 2020, and this is going to mean fewer housing starts this year and next year. Resale homes did go up by 17% though, and ongoing low inventory and healthy demand realities will mean there will still be ‘enough’ new housing starts in Vancouver next year to keep this part of the market equation well in place.

One of the most upheaval heavy years of all time is drawing to a close here. One thing that a lot of people would not have foreseen in April was how well the real estate industry in Canada would weather the COVID economic downturn as well as it did. Now that it’s late December there’s a lot of looking ahead just a few weeks into the New Year and wondering if we can expect more resilience from it.

Economists are industry experts have already forecasted a rise in median home prices for Canada next year, and that’s good news for homeowners who are looking to see more equity in their homes. And while that should be the opposite for would-be 1st time homebuyers, there is the new Liberal FTHBIA plan that is designed to help people like this get into the market.

There’s also a mixed reality for real estate agents in all of that too, as there’s a balance that’s needed to generate the type of environment where the market and business is good to all equally. Real estate is always going to be a competitive business, and that’s why our online real estate lead generation service for Canada is an excellent resource for realtors who want to be as competitive as they can when building their real estate business.

Recent news about home prices, but other news that there are fewer housing starts expected across the country next year speaks to a different perspective on the national real estate market. 

Potential for Stall Out

Q3 for 2020 saw 237,300 housing starts in all of Canada, and that is a 22.2% increase from the 2nd quarter. Home sales also went up by 93% during this same time frame, bringing home prices up 4%. Those numbers on their own might look promising, but a noticeable deceleration may be just around the corner.

In addition to reduced growth due to the repressing of the economy, we had robust housing demand that continued to rally new home sales and starts until the end of September or so. House price appreciation remained solid because of low inventory and supply bottlenecks.

We should still see housing starts exceeding 2019’s total, but new home sales have decreased and especially in the new condo segment. This should result in fewer housing starts for 2021, and with interest rates staying historically low it’s expected that fewer housing starts are going to be the norm for the next two years. This then connects to rising home prices meaning for affordability woes for some, and – more relevantly to those in the business – softened demand.

There is also the expected additional factors of the government’s massive income support programs winding down and financial institutions tightening credit standards next year.

Slower Pace

Weaker job numbers are expected going into Q1 of next year, and the effects of weaker migration and other underlying economic factors is going to slow the pace of new home builds. For Toronto in particular, it’s predicted that reduced immigration will likely curtail housing demand in Toronto’s condo sector to start 2021. Single-family housing demand should stay strong though.

In Montreal housing starts have been resilient this year, with residential construction in the city rebounding when restrictions were eased. Despite this new housing starts only went up 1% in between January and September 2020.

Condos are always a huge part of the market in metro Vancouver, and new condo sales in Vancouver weren’t good in 2020, and this is going to mean fewer housing starts this year and next year. Resale homes did go up by 17% though, and ongoing low inventory and healthy demand realities will mean there will still be ‘enough’ new housing starts in Vancouver next year to keep this part of the market equation well in place.

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