The Short Answer: Supply & Demand
What is Driving Demand?
With many companies allowing employees to work remotely, there is no longer an obligation for Canadians to live and work in larger more expensive cities. In 2020, Canada’s three largest metropolitan areas Toronto, Montreal, and Vancouver experienced the highest number of residents leaving in nearly two decades, according to Statistics Canada. Anecdotally, our real estate brokerage has experienced a significant influx of out-of-province buyers, including young professionals and retirees looking to relocate to Halifax for a variety of reasons – primarily affordability and lifestyle.
Since 2016 the supply of housing in the Halifax Market has slowly been declining (Figure 3), demand on the other hand has not only steadily increased but according to Statistics Canada, Halifax was the second fastest growing metropolitan area in Canada last year – with a 2.0% year-over-year population increase. The latest figures from Statistics Canada indicate the population of the HRM hit a record high of 448,544 in July 2020 — up 9,015 from the previous year. According to CMHC, record intraprovincial migration (people moving from rural to urban areas in NS), record inter-provincial migration (primarily from Ontario), higher immigrant retention, and record low interest rates are driving growth.
Market Trends & Supply
From 2008 – 2016 the market had been generally balanced. Starting in 2016 however, there was a steep downward trend in supply (Figure 3), corresponding with record population growth. Despite this trend, there remained a predictable inventory increase in the housing market each year – typically around late spring. In spring 2020 at the beginning of COVID-19, there was no rebound in inventory from the winter months, largely due to the hesitancy of sellers to have buyers in their homes during the uncertainty of the pandemic. This left a growing pool of buyers to compete over a record low number of listings – resulting in an exponential increase in housing prices (Figure 4) in a market that was already at its tipping point.
When looking forward, it’s important to note that this record shortage in housing inventory is also occurring in a period where we have atypically low international immigration due to limited cross-border travel. According to the Halifax Partnership, international immigration accounted for 83% of population growth in 2019. We could see the situation further worsen when immigration levels return to normal.
Figure 3: Homes for Sale in Nova Scotia 2008 – 2021
Source: NSAR MarketStats
Figure 4: Median Sales Price in Nova Scotia 2008 – 2021
Source: NSAR MarketStats
Future Outlook
Halifax has simply not been building fast enough to meet the demand driven by population growth. From a supply and demand perspective, the shortage of housing in Halifax was largely foreseeable with COVID-19 exacerbating the inevitable shortage. With strong pre-pandemic growth and record levels of population retention, most industry experts predict that housing prices will continue to trend upward, at least until housing supply meets demand, or until interest rates rise.
Despite the daunting level of competition in the market – our team recommends buying sooner rather than later as we believe there is still plenty of market increase to come. Central Halifax is quickly becoming unaffordable to many homebuyers, and those who are waiting for the bubble to burst may soon be priced out of the market entirely.