The Canadian real estate market has been one of the most fascinating industries to watch throughout the post-coronavirus global economic recovery. Despite the havoc that the COVID-19 public health crisis inflicted upon the nation, enormous growth was seen in the housing sector from coast to coast. Since the Great Recession more than a decade ago, a handful of municipalities captured international headlines on account of their strong real estate market performance: Toronto, Vancouver, Montreal and Ottawa, and some may even include Hamilton in this list. Yet, today, it is the areas outside the major urban centres, small towns, and cottage country that are driving a substantial portion of the housing boom when it comes to the Ontario real estate market. The Perth real estate market is one of these.
This, according to industry experts, is creating an affordability crisis that is widespread and not solely concentrated in a small number of jurisdictions. Case in point, the Perth real estate market situated in the Stratford region is enjoying unprecedented activity and trends. Per the trends visible in the greater Ontario housing sector, this small-town market has witnessed growth that exceeds the five- and 10-year averages and shows few signs of slowing down in the months ahead.
So, what happened in Perth this spring? Let’s look at the Canadian Real Estate Association’s (CREA) April figures.
Affordability Concerns in the Perth Real Estate Market
Residential sales spiked 197.4 per cent year-over-year in April for a total of 232 units, according to the latest data from the Huron Perth Association of REALTORS®. Year-to-date, home transactions have climbed 50.1 per cent from the same time a year ago to 722 units.
But while the month-over-month and annualized numbers are jaw-dropping for the small Perth real estate market, it is the long-term trends that have been impressive, too. Home sales were 21.8 per cent above the five-year average and 27.1 per cent above the ten-year average for the month of April.
Like other small towns in Ontario, Perth’s real estate prices have gone through the roof. Looking at the MLS® Home Price Index (HPI), which industry observers say is more accurate than average or median price measurements, housing prices have picked up 39.3 per cent year-over-year in April to $505,800.
The benchmark price for single-family homes surged 39.7 per cent to $506,700, while the benchmark price for apartments jumped 14.8 per cent to $478,900. Overall, the average price of homes soared 61 per cent in April to $576,514.
The dollar value of all property transactions in April totalled $133.8 million. This represents a 379 per cent increase from April 2020, which is also an all-time high for the month.
“Sales posted one of the highest April levels in history, coming second only to the even stronger activity from April 2017,” said Kathy Dawson, President of the Huron Perth Association of REALTORS®, in a news release.
Tight Conditions in Perth Real Estate Market
The Perth real estate market is experiencing the same conditions that most other Canadian housing markets are going through; namely, limited supply and heightened demand.
The number of new listings grew 196 per cent to 296, while active residential listings were still down 49 per cent as of the end of April. Active listings for April were also 54.1 per cent below the five-year average and 76.7 per cent below the ten-year average. Figures have not been this low in the month of April in about three decades.
Moreover, the months of inventory – the number of months it would take to liquidate current supply of listings at the present rate of activity – clocked in at just 0.7. This is down from 4.3 months in April 2020 and the long-run average.
“A surge in new listings hitting the market over the past few months has kept overall inventories from hitting near-zero levels,” added Dawson. “Make no mistake though, the persistent strength in demand is keeping this market in some of the tightest conditions in history. Competition among buyers for a record low supply of listings has now driven year-over-year benchmark price growth into the neighbourhood of 40%.”
But is relief on the way? The early indicators from the first quarter suggest that new construction has flatlined compared to last year. For example, according to new data from the Canadian Mortgage and Housing Corporation (CMHC), housing starts in Stratford – which includes Huron and Perth counties – were zero in the first three months of 2021, down from 62 unit starts in the January-to-March period of 2020.
Is the Housing Bubble in Rural Ontario?
For years, the urban markets of Toronto, Hamilton, and Ottawa dominated bubble conversations during analyses of the Ontario real estate market. But, while these large housing markets are still making headlines, industry observers are closely monitoring the significant sales and valuation growth in suburbs, small towns, and rural communities.
Is it enough to declare a bubble? Robert Kavcic, senior economist at BMO Capital Markets, thinks whatever the case may be, new homebuyers in rural Ontario will be stuck with these sky-high prices for many years to come, as it is unlikely that we will witness another surge comparable to the last 12 months.