Since the start of the pandemic, a series of COVID-induced lockdowns have forced people to reassess their living arrangements, resulting in a surge of interest regarding real estate and renovations.
A recent report by Point2Homes analyzed real estate-related searches in Google Trends. Recapping housing trends in 2021, the following four graphs offer a glimpse into the mindset of homebuyers, owners and renters who were looking to either update or upgrade their residence during the past year.
A spike in “houses for sale near me” searches at the start of the pandemic has translated to a surge of activity. According to the Canadian Real Estate Association (CREA), 2021 was the busiest year ever for Canada’s housing market, with increased activity draining supply and driving up prices across the country.
The CREA’s most recent figures show 630,634 residential properties trading hands so far during 2021, shattering the annual record of 552,423 sales set during 2020.
Meanwhile, Canadian home prices have reached an average of $720,850, representing a 19.6 per cent year-over-year increase.
The nation’s most expensive housing markets — British Columbia and Ontario — saw steady growth in average home prices, with high transaction numbers in both provinces helping boost Canada’s national average.
Vancouver’s housing market has reached an average price of $1.21 million, a 16 per cent increase year-over-year, while Toronto prices surged 22 per cent to an average of $1.16 million.
A dip in search traffic toward the end of 2021 could reflect potential homebuyers who are still drawn to “houses for sale” but dropping the “near me” requirement.
Driven by people increasingly leaving the Greater Toronto Area in search of affordability, New Brunswick led the Atlantic provinces in terms of year-over-year price gains with a 33 per cent change in average home prices, while Nova Scotia has seen a 21 per cent increase.
Ballooning mortgage debt
Policy makers at the Bank of Canada slashed interest rates to record lows at the start of the pandemic to stimulate the economy. That trend is reflected in both search traffic for “mortgage refinancing” and record high levels of mortgage debt.
Many Canadians opted to use the equity in their home to invest in other properties, contributing to the rise in real estate activity and home prices.
A lending guideline reversal from the Canada Mortgage and Housing Corporation (CMHC) in July abandoned last year’s CMHC changes that increased restrictions for mortgage insurance, specifically regarding credit score requirements and debt service limits. The reversal made it easier for borrowers to qualify for a CMHC-insured mortgage.
At the same time, an increase to the mortgage stress test benchmark rate in June made it harder to qualify for a mortgage. While that move was expected to cool Canada’s housing market, the slowdown remains to be seen.
Search traffic eased near the end of the year and future rate hikes are expected from the Bank of Canada in 2022, but until then the target overnight rate remains at 0.25 per cent.
Renovation resurgence ended
Four factors help explain why home improvement searches peaked last winter.
– Motivated by lockdown measures, homeowners who weren’t looking to relocate turned their attention and resources to renovation projects at the start of the pandemic.
– Work-from-home mandates increased the importance of a home office, ensuring enough space and comfort to attend meetings and make business calls.
– Spending more time at home translated to an increase in disposable income, providing an opportunity to invest in everything from simple upgrades to full-blown makeovers.
– As the housing market heated up, an increasing number of sellers upgraded their properties to attract buyers and drive up prices.
Interest in home renovation projects dropped during the course of the year as the economy reopened and pandemic restrictions eased. However, renovation projects could be on the upswing again with recent lockdown measures enacted amid concerns about the Omicron variant.
Rental markets recovering
According to rentals.ca, rents steadily declined during the first year of the pandemic due to steep discounts offered by individual investor landlords who were focused on maintaining tenants amid increasing vacancy rates.
Meanwhile, pandemic uncertainty forced postsecondary institutions to convert classes to online learning, impacting vacancy rates and housing patterns in several urban centres.
However, both rents and vacancy rates have rebounded during the second half of 2021, with figures approaching pre-pandemic levels. Search traffic has remained steady throughout the year, while pandemic-related restrictions have increased the demand for larger rental properties.
Reflecting the same conditions as home prices, rents in New Brunswick and Nova Scotia have surged during the last year, spurred by Ontario residents moving back east and working from home, which has significantly reduced supply and increased rental rates.