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Outlook for Canada’s housing market

Single-family residential

Recovery in major markets is uncertain and varies considerably. There’s talk of a potential slowdown in the urbanization trend we’ve highlighted in previous years, although it’s too early to tell if this will turn into a long-term shift. If remote work becomes a more permanent option, some homeowners—particularly those working from home in a small space—might look outside large cities for more square footage and accessible green space.

At least one developer in the Greater Toronto Area said they were changing their strategy to accommodate this trend and looking further afield for housing developments. Open-concept homes may need to be reimagined, as people working remotely require a dedicated working space. Recent interviews have indicated that demand for low-rise homes, particularly in suburban locations, has been very strong, but there are concerns this may be just a false signal after the pandemic restrictions.

Higher unemployment and economic uncertainty, combined with lower immigration, are expected to slow housing activity across Canada, at least for the next year. The Canada Mortgage and Housing Corporation (CMHC) expects housing starts, sales and prices to fall in major cities, but Toronto, Ottawa and Montreal will recover faster than Vancouver, Edmonton and Calgary. The two Alberta cities are expected to take more time to recover since they were already suffering from the impact of low oil prices.

Condominium

CMHC is expecting a softening of prices in the condo market next year, although it’s important to note that supply has been curtailed in some cities. There was more concern in the Toronto market, where decreased short-term rental activity is leading some investors to sell, but that’s expected to be short-lived.

Still, interviewees indicated that condo living may need to be reimagined for the future of work; homeowners may not be as excited to be in a 500-square-foot condo if the pandemic continues to keep them socially distanced—particularly if they’re working from home. A number of features are being incorporated to make condos more attractive to buyers, such as videoconferencing rooms, dedicated areas for parcel and grocery deliveries, improved amenities and tools to create more connected communities.

There’s also increased interest in what one interviewee referred to as the “amenitization of communities,” where neighbourhood amenities are available within a 15-minute walking radius of the condominium. Finding and developing these types of live/work/play communities is being considered much more seriously in light of the pandemic. Ontario’s new Transit-Oriented Communities Act, which aims to rethink the relationship between transit, housing and commercial spaces, could facilitate this movement.

Purpose-built rentals

Demand for rental housing could be tempered by both a drop in immigration and uptake by university students, many of whom are taking classes virtually rather than in person.

While the asking price for rentals is either stable or has fallen in major centres like Toronto, it’s expected the rental market will eventually benefit from a slowdown in homeownership and, when borders open up again, a backlog of new immigrants. But there’s some concern about the end of government income support and wage subsidy programs, which could impact tenants’ ability to pay their rent in the coming months, as well as increased supply caused by the pause in short-term rental activity.

Looking to some of the subsectors, the outlook is mixed for both student and senior housing. For senior housing, some interviewees said they’d be avoiding it, especially given the impacts of COVID-19 and the complexities of operating these homes. Still, many interviewees felt the demographic trends are positive for this subsector in the longer term, although some suggested the operating model will need to change.

For student housing, interviewees are also facing challenges. The switch to virtual learning at post-secondary schools is dampening demand, although many interviewees believe the long-trend is positive.

Contact us

Frank Magliocco

Frank Magliocco

Real Estate Leader, PwC Canada

Tel: +1 416 228 4228

Miriam Gurza

Miriam Gurza

Managing Director, Real Estate Consulting Leader, PwC Canada

Tel: +1 416 687 8143

Fred Cassano

Fred Cassano

Partner, National Real Estate Tax Leader, PwC Canada

Tel: +1 905 418 3469

Wesley Mark

Wesley Mark

Partner, Deals & Valuations, National Real Estate Advisory Leader, PwC Canada

Tel: +1 416 814 5877

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