A Look at the Niagara Real Estate Market

The Niagara real estate market has been one of the hottest in the Ontario housing market since the early days of the coronavirus pandemic. Indeed, the Niagara region experienced price growth of +27 per cent between 2020 and 2021, according to a RE/MAX report. But now that rising interest rates and broader uncertainty are causing Canada’s sizzling housing market to moderate, can Niagara real estate sustain its gains?

In recent months, the Niagara housing market has been going through a series of developments: easing demand, growing supply and elevated prices, leading market watchers to estimate that this pocket of the Ontario real estate market can maintain its momentum, even in the face of higher rates, because of its strong economy.

While it might be too early to judge where Niagara is headed, recent data suggest that this real estate market is resilient, despite the bombardment of changes happening. Here is a look at how the Niagara housing market performed to finish the second quarter of 2022.

A Look at the Niagara Real Estate Market

Residential property sales declined at an annualized rate of 44.3 per cent in June, totalling just 543 units, according to the Niagara Association of REALTORS®. Year-to-date housing transactions fell 27.6 per cent year-over-year, with just over 4,100 units changing hands in the first six months of 2022.

Demand may be easing in the Niagara real estate market, but prices remained elevated. In June, the MLS® Home Price Index (HPI) surged 14.7 per cent year-over-year to $753,200.

The average price of homes sold in June rose at a modest pace of 5.1 per cent to $742,281. In addition, the year-to-date average price, which industry observers consider to be more comprehensive, surged by 22 per cent to $841,945

Here is a breakdown of how property categories performed in June:

• Single-Family Homes: +14.6 per cent to $769,400
• Townhouses: +18.4 per cent to $697,400
• Apartments: +19.5 per cent to $514,300

On the supply front, the number of new residential listings climbed by 28.5 per cent the same time a year ago to 1,691 units. Incidentally, this was the largest number of new listings on record in the month of June. Active residential listings spiked more than 107 per cent year-over-year to 2,021 units.

On a historical basis, new listings were 24.1 per cent above the five-year average, while active listings were nearly 12 per cent above the five-year average.

Moreover, the number of months of inventory, which measures the number of months it would take to exhaust current stocks at the present rate of sales activity, rose to 3.7. This is up from just one month at the end of June 2021. Also, this was higher than the long-run average of 2.7 months.

Additionally, according to Canada Mortgage Housing Corporation (CMHC), new housing construction has remained strong so far this year. Despite housing starts taking a slight dip in June compared to the same time a year ago, starts are up close to six per cent to 1,329 units.

Is More Growth Possible?

The entire Canadian real estate market is taking a breather from the meteoric ascent in the wake of the coronavirus pandemic. But while a broad array of forecasts suggest that the nation’s housing sector is cooling off, it does not necessarily mean this is the new normal.

For the Niagara housing market, more economic gains are on the horizon, which could support the real estate industry once the correction has been completed and real estate conditions have stabilized.

According to the Conference Board of Canada (CBoC), the St. Catharines-Niagara economy is projected to grow 4.4 per cent in 2022 and 2.6 per cent in 2023. Although experts contend this is an optimistic projection, CBoC economist Viktor Cicman suggests it is certainly achievable.

A key factor for Niagara’s economic growth? Travel and tourism, which is steadily being revived again.

“Because of such a large decline that happened in 2020, one would expect, just naturally, that if things start to pick-up, nearly back to where it was, you’re going to get strong growth rate. That’s what happened last year,” he said. “There is a lot of pent-up demand for services or going out to places, restaurants, hotels, tourism — despite some of the virus still around, despite some of the costs increasing.”

That said, first-time homebuyers could be waiting for home prices to come down from the current level of around $750,000, which is much higher than the national average.

Until then, it will be a waiting game to determine who blinks first: the sellers or the buyers.