For more than a year, London has been one of the many red-hot markets in the Ontario real estate sector.
London maintained a reputation as an appealing town for relocation and enjoyed sizeable gains even before the coronavirus pandemic. However, the activity over the last 18 months has been remarkable, to say the least. Like many other Ontario real estate markets – from major urban centres to small rural towns – the London real estate market has been booming. However, London’s sky-high sales and price gains could begin levelling off like the rest of the province and broader national housing industry.
With more supply coming to market and tight inventories showing signs of alleviating, the question is whether London real estate could come back down to earth over the next year. This could help ease the province-wide housing affordability crisis and offer new opportunities for homebuyers who were forced to the sidelines during an unprecedented and impressive rally.
So, is optimism reigning supreme through the London real estate market? Or is it time to be bearish?
Optimism Remains in the London Ontario Real Estate Market
According to the London & St. Thomas Association of REALTORS® (LSTAR), residential sales tumbled 17.9 per cent year-over-year in July, totalling 993 units. Year-to-date, housing transactions in the London real estate market climbed 34.6 per cent from the same time last year, clocking in at 7,377 units.
Despite falling annualized sales, prices in the London housing sector remain strong. The average price climbed 26.6 per cent year-over-year in July to $614,913, while the median price jumped 27.8 per cent to $575,000. As a result, the total dollar value of the London real estate market in July advanced 3.9 per cent to more than $610.6 million.
Once again, like the broader Ontario housing market, supply has played an important role in the southwestern Ontario town. In July, new residential listings fell 10.7 per cent to 1,196, and active listings plunged 33.6 per cent to 822.
The number of months of inventory, which gauges how long it would take to exhaust current inventories at the present rate of sales activity, fell to 0.8. This is down from 1.0 at the same last year and below the five-year average of 2.4 months.
New supply is coming to the market as residential construction is going through the roof. According to Canada Mortgage and Housing Corporation (CMHC), housing starts surged to 635 in July, up from 331 in July 2020. In the first seven months of this year, housing starts have increased to just short of 4,000. In the January-to-July period of 2020, housing starts totalled 1,851.
“July’s average sales price was slightly lower than the year-to-date value, which reflects the moderating trend seen across the country, reinforcing, at the same time, the idea that our local real estate market is starting to level off. However, the high demand for housing and the historically low inventory levels that we are currently experiencing still make for a robust housing market, where the sellers have the upper hand,” said LSTAR 2021 President Jack Lane in a news release.
“All potential buyers and sellers should understand that each housing transaction is unique and does not necessarily reflect the activity across the entire marketplace. A property’s value depends on the housing type, its geographical location and features, as well as many other factors that REALTORS® are familiar with and can use to accurately evaluate it. That is why it’s always advisable to have a REALTOR® in your corner when you are thinking to either buy or sell a home.”
Can the London Real Estate Market Sustain the Current Boom?
Despite the enormous pricing gains over the last 18 months, LSTAR representatives assert that the London real estate market, based on benchmark and average sales prices, is “relatively affordable when compared to houses from some other major Ontario and Canadian centres.”
Indeed, the starting average price for a detached home in Toronto is $1 million. Residential-class properties in the Ottawa housing market are selling for an average of $750,000. The latest numbers show the average house price in Hamilton is just short of $800,000.
The most recent data suggest that the skyrocketing housing market in London could be starting to level off, creating opportunities for young families and first-time homebuyers, whether they are from the area, moving in from out of town, or even from out of province. Overall, London is beginning to return to pre-pandemic levels of activity, which is welcome news for young buyers who are eagerly waiting for property prices in this local housing market to become more accessible.