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Home Prices Continue to Surge During the Pandemic

Historically low mortgage rates and work-fom-home are leading the rising costs of home prices

Canadian home prices continue to see record increases during the pandemic. Part of this has been fuelled by families feeling their living quarters cramping as many work and study from home.


But in many cases, low mortgage rates incentivize home buyers, giving them the confidence to borrow more to get into that dream home.

A new record increase for the price of a home in Canada


In June 2021, Canadian home prices saw their biggest 12-month increase on record. According to the Teranet National Bank composite price index, home prices were up 16 per cent year-over-year. This beat the previous record set in June 2017 of 14.2 per cent.


June 2021 also marks the 11th month in a row where home prices have accelerated. The rise was led by five markets:

  • Halifax up 30.8 per cent
  • Hamilton up 28 per cent
  • Ottawa-Gatineau up 25.8 per cent
  • Montreal up 19.4 per cent
  • Victoria up 18.5 per cent


Surprisingly some of the traditional hot markets in the last decade saw the smallest increase coming in below the national average:

  • Toronto up 15.9 per cent
  • Vancouver 14.7 per cent
  • Quebec City 10.8 per cent
  • Winnipeg 9.9 per cent
  • Calgary six per cent
  • Edmonton 5.5 per cent


Teranet’s composite price index shows home prices were up 10 per cent or more in an unprecedented 90 per cent of 32 urban markets and up 30 per cent or more in 42 per cent of these markets.

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Flexible work may be pushing prices higher


Markets outside of big city centres have seen the most dramatic increase. Canadians working from home are now looking at a future where work could be a hybrid of home and office post-pandemic.


Many are insisting their employer offer flexible workplace solutions once COVID-19 is no longer a threat to public health.


A survey by KPMG of more than 2,000 Canadian workers found more than two-thirds of workers want the flexibility to work in the office and remotely. A further 71 per cent believe a hybrid workplace, or hybrid office, should be the standard model for all organizations.


Add to this a survey by the recruiting firm Robert Half shows one in three workers say they would quit if asked to return to the office in person on a full-time basis. Survey respondents also said they want the freedom to set office hours. They want employers to pay for commuting costs and have more relaxed dress codes for in-person meetings.


All of this indicates that the push to move away from city centres is on. The more days Canadians can work from home, the further away from their office they could be willing to live. Let's face it, a long commute one day a week doesn't seem so hard when you can live in a bigger home with more green space.


Housing forecast for 2022 and beyond


In its latest announcement, the Bank of Canada held rates steady at 0.25 per cent. Keeping Canadian borrowing costs low as the pandemic continues. The central bank reiterated its commitment to “holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the two percent inflation target is sustainably achieved.”


They say this could happen sometime in the second half of 2022, signalling to Canadians that record low-interest rates are here to stay until the Bank can achieve its ideal inflation target. At that point, it is possible that there will be a Bank of Canada interest rate hike. 


Low interest rates for another year could continue to push home prices even higher. Especially in markets that have not seen significant increases in the last decade. This could be an opportunity for more depressed markets to catch up to the gains the urban centres have experienced.  In fact, Bancroft, a small town in Ontario, was MoneySense’s top spot for their annual “Where to buy Real Estate Guide."


First time home buyers suffer most


Inevitably this will create more anxiety in the market, especially for young people who have been struggling to get on to the property ladder.  When out shopping, the fundamentals remain the same, can you afford to make the mortgage payments if rates rise?


Do your own stress test to see how much your mortgage will cost you if rates were two or three percentage points higher?


Have you considered all the costs of homeownership, property tax, utility bills, maintenance and home insurance?


Finally, have you sat down and done a long-term plan, will this house suit your lifestyle in five years? How about 10 years from now? Selling a home after owning it for a short time can be a costly experience.


READ: Check out our first time home buyers guide for helpful tips


The bottom line


There is no crystal ball to tell you where home prices or the Bank of Canada interest rate will be in the future. Still, you can save yourself a lot of money and stress by making sure you can afford the place you're buying today (even with potential rate increases).


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Overnight Lending Rate in Canada