Each year, Altus Group hosts the National State of the Market — a presentation that provides our industry with an overview of residential market activity and insight into the emerging forces that will shape the next twelve months across Canada.
Over the past year, the global pandemic brought forth an acceleration of change not only within the real estate market, but across the globe. Now, the question becomes: which of those changes are here to stay and what changes are to come? We’ve broken down the five emerging trends that will shape real estate in 2021 for you below, all from this year’s National State of the Market.
1. Strong Single-Family Demand Expected To Continue
Older millennials are having a huge influence on single-family housing demand — a trend that we have seen over the course of 2020 and one that is expected to continue this year. As a result of low interest rates and more affordable pricing in suburban areas, millennials have begun transitioning to townhouses and detached homes outside of the downtown core that accommodate the growth of their families and their need for more personal space.
2. Near-Term Challenges Impacting Condo Apartment Demand Should Fade
According to Altus Group, there has been a reduction in apartment sales year over year across the country. These challenges aren’t just related to the impacts of the pandemic on consumers, but rather, to the lack of supply within the market as both the number of units and new openings dropped by 6,000 units from the year before. However, demand has weakened in urban areas especially within the downtown core as consumers have shifted from working in their offices to working from home — where their focus and attention was once on living close to work, it no longer is now. Although, according to Matthew Boukall, Vice President of Product Management Data Solutions at Altus Group, the downtown core is not expected to “empty out” anytime soon. He explains that pre-pandemic, Generation Z, the younger demographic, was just making their entrance into the housing market. While many of them may have been temporarily sidelined and forced to move back in with family or friends, they are expected to make a return back to the market and potentially back into homeownership sooner than you might expect. Once this demand is pushed back into Ontario’s urban areas and market balance returns, the near-term challenges impacting condominium and apartment demand should fade.
3. Investment & Ownership Activity May Look Different This Year
Last year’s market sales volumes were noteworthy to say the least, especially given the challenges. While we lost two to three months of sales varying by region, we had a nine-month sales year — all in the course of a global pandemic. As Matthew Boukall puts it, “the fact that we saw it wasn’t a big shock, but the fact that we saw it given the challenges of the pandemic kind of is.” Given how strong sales were, certainly in single-family housing, the reporting does suggest that consumers moved forward with the home buying process. While this was a favourable forecast for 2020, this could reduce the pool of buyers in 2021. Lower immigration levels which are a key driver of housing demand could also influence the investment and ownership activity that we see this year.
4. Pre-Existing Supply & Pricing Challenges Will Continue Into 2021
Tight supplies, pricing and affordability are some of the pre-existing and pre-pandemic challenges that are expected to continue into 2021. According to Matthew Boukall, we can expect these challenges to influence the single-family housing market quite significantly where demand has and continues to exceed supply. As a result, 2021 sales volumes could be impacted by higher pricing due to lower inventory levels and by potentially higher interest rates as well.
5. COVID-19 Will Continue To Influence Home Buying Decisions
Over the past year, we’ve had to adopt new styles of working and adapt the way that we live — factors which have and will continue to impact and influence our housing decisions post-pandemic. With many offices closed, the work environment has become much more flexible, allowing individuals the freedom to decide where to live without the pressure of having to commute to and from work. We have also seen increased savings across the country as gathering, dining and traveling restrictions have been implemented — a result of individuals spending more time at home and there being less to do. As a result of these increased savings coupled with lower interest rates, we can expect those who were employed during the pandemic to potentially fuel housing demand over the course of the next year. Those who are looking to purchase, however, will likely make housing decisions based on proximity to family and friends in an effort to maintain the relationships that they’ve strengthened over the course of the pandemic.
For more home buying resources, visit our Home Ownership page.
All information courtesy of Altus Group’s 2021 National State of the Market.