This is an age old saying that most of you reading are likely familiar with. We assume that you do not associate this phrase with real estate when you hear it, however it can be a beneficial mindset to apply when sifting through noise from the media regarding the outlook on real estate markets – especially during this unprecedented inflationary environment.
Despite the recent real estate slowdown, here are 3 reasons why we believe you should feel optimistic about the Halifax real estate investment market:
1. Halifax has not seen as big of a slowdown compared to the bigger Canadian cities
In fact, not only has Halifax avoided as big of a slowdown, they have actually still seen an increase (despite its benchmark price peaking in May 2022 at $547,800) from February 2022 to August 2022. February 2022 is when the benchmark price in Toronto started to decline, the first out of Canada’s largest markets. At an increase of 9.4%, Halifax housing prices are up the most out of the five cities below, with Calgary being the only other city still in the green. We can attribute this to the fact that Halifax has a significant imbalance in supply and demand, which we will discuss further in the next section.
Source: Canadian Real Estate Association
2. Rental demand has not let up
With interest rates rising, many would-be buyers have been pushed into the rental market. This increased demand combined with Halifax’s already historically low vacancy rates has resulted in strong growth in the average price of rent. From 2020 to 2021 alone, rent increased a whopping 6.4%. As we can see below in the graph constructed by the Halifax Partnership, when vacancy rates decreased over time, average rents increased. This illustrates the increasing scarcity that occurs when the supply of housing does not keep up with demand. As the population of Halifax Regional Municipality continues to grow, even more pressure will be applied to the already strained rental market.
Source: The Halifax Partnership & Canada Mortgage and Housing Corporation
3. Halifax’s population will continue to grow
Halifax’s projected population growth is perhaps the the most compelling reason mentioned in this article as to why you should feel optimistic about the real estate investment market. Do not be fooled by Halifax’s benchmark price peaking in May. Although we are currently experiencing a drop in pricing, there is strong evidence to suggest that population growth will be the main driver of demand for housing in the long run. The Halifax Partnership forecasts that Halifax Regional Municipality’s population could increase from 460,000 to 650,000 over the next 15 years. In other words, 190,000 additional people may be living in Halifax Regional Municipality in another 15 years, all of which will need housing.
Additionally, supply has not been keeping up with demand. According to Statistics Canada, during the 12 months preceding July 2021, 9,262 people had moved to Halifax. Contrasting this substantial population influx with the increase in the supply of housing, supply fell short. According to Canada Mortgage and Housing Corporation, in July 2021 there were 5,859 units under construction.