Frenzy of Buying Caps Record Year for Canadian Housing Market

(Bloomberg) -- The Canadian housing market capped off a record 2020 with a frenzied final month amid a rush to take advantage of low mortgage rates and buy bigger homes to ride out the Covid-19 pandemic.

National home sales rose 7.2% in December from the previous month, pushing total transactions for the year to a record 551,392 units, according to data released Friday from the Canadian Real Estate Association. Benchmark home prices were up 1.5% on the month, bringing them 13.1% higher from year ago levels, while average home prices across the country reached a record $607,280, according to the release.

The results were the strongest ever for December, the agency said.

With banks offering mortgage rates below 1% for the first time ever and a pandemic-induced desire for home offices and backyards, 2020 brought many Canadians both a need for bigger dwellings and increased ability to afford them. And even as a resurgence of coronavirus infections brings new lockdowns, a historic dearth of housing supply across the country leaves little prospect for the market cooling off in 2021.

“We see little that will stop activity or prices from reaching new heights in the year ahead,” Robert Hogue, an economist at Royal Bank of Canada, said in a report to investors earlier this week. “Low available supply is the reason property values will continue to go up.”

While there were some regional nuance in prices, sales spiked in nearly every market across the country.

“This sweeping strength in sales heavily suggests that what’s driving this market are broad overall factors, and not local economic factors,” Doug Porter, chief economist at Bank of Montreal, said in a report Friday. “Specifically, the plunge in interest rates last year and the pandemic-driven move to upgrade have lifted all markets, and overwhelmed the dampening effect of lower population growth and weak job markets.”

With competition continuing to heat up in Canada’s largest cities, prospective homeowners betting work-from-home policies will outlast the pandemic have been looking further afield to the suburbs and even rural areas. The largest benchmark price increases in December -- up more than 30% from last year -- were seen in agricultural districts nearly two hours outside Toronto.

“The stat to watch in 2021 will be new listings, particularly in the spring -- how many existing owners will put their homes up for sale?” Shaun Cathcart, the real estate association’s senior economist, said in the release. “We have record-high demand and record-low supply to start the year. How that plays out in the sales and price data will depend on how many homes become available to buy in the months ahead.”

(Updates with details throughout.)