(Bloomberg) -- Canada’s housing market hit new all-time highs in August, with sales and prices reaching records.
Transactions jumped 6.2% in August, the fourth straight month of strong gains after the market froze at the height of the Covid-19 pandemic, the Canadian Real Estate Association said Tuesday in a statement. Sales are now 33.5% above year-earlier levels. Benchmark prices rose 1.7% in August and are now 9.4% higher than in August 2019.
Canada’s housing market is not only defying expectations of a slowdown but is booming, even as the economy suffers from the deepest downturn since the Great Depression. Pent-up demand for homes combined with tight inventory levels and historically low interest rates are driving gains.
“It has been a record-setting summer in many housing markets across Canada as realtors and their clients play catch up following the loss of so much of the 2020 spring market,” Costa Poulopoulos, chair of the Ottawa-based group, said in the statement.
Sales in the first eight months of this year are now at the same level as they were at this point in 2019, showing the market has fully offset April’s plunge.
Low interest rates and government income support during Covid-19 have likely fueled demand for housing.
While the strength of that demand has surprised most economists, skepticism remains on how much hotter it can run. Pent-up demand has been largely satisfied now that activity is back to historical levels, and current Covid-19 restrictions remain, limiting upside.
There are also plenty of potential headwinds, including a second virus wave, weaker population growth from closed borders and the withdrawal of federal emergency programs.
“The Canadian housing market has come back stronger than even the most hardened bulls imagined, and policy makers seem willing to let it run,” Robert Kavcic, senior economist at Bank of Montreal, said in a report. “That said, it’s looking like pent-up demand is just about running its course, and we’ll see where underlying sales settle.”
While new listings rose 10.6% in August, markets remain tight. There were just 2.6 months of inventory on a national basis in August, the lowest reading on record.
(Updates with chart, economist comment in ninth paragraph.)
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