From the stock market to the way we work, nothing is exactly “normal” right now. It’s impossible to look at a dramatic societal shift and not attribute it to the pandemic. But the housing market is a little bit of a different story.
Yes, many Canadians flocked to buy homes as interest rates dropped to record lows. Many chose to buy new homes in response to their new lifestyle, no longer needing to live in certain areas, or needing more space to work. No doubt, these COVID-related factors had a huge impact on the housing market. But they don’t tell the whole story of its explosive growth.
Long before March 2020, conditions were in place for the housing market to heat up. Low interest rates and evolving housing preferences might have caused an early onset. But the market conditions we’re experiencing were inevitable for one simple reason:
Demand far outweighs supply.
This isn’t just a symptom of the pandemic. Since 2016, the number of housing units per 1,000 Canadians has fallen from 427 to 424. The G7 average is 471. That number might not seem that much higher, but think about it this way: for Canada to catch up to the G7 ratio, we would need to build 1.8 million additional dwellings.
What does this mean?
Housing prices in Canada will likely remain high long after the pandemic is gone. Interest rates may not stay as low, and housing preferences may stabilize, but Canada’s inventory discrepancy is a good sign for homeowners.
The true test of the market will come once the subsidies run out. However, with immigration ramping up, and 300,000-500,000 Canadians moving to large urban centres this year, the housing market should stay healthy for the foreseeable future.
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Steve Garganis: 416-224-0114; firstname.lastname@example.org