Since the beginning of the coronavirus pandemic, the Newfoundland and Labrador real estate market has seen the best of times and the most modest of times. In other words, the Atlantic Canada housing market has enjoyed a pandemic boom, but prices have not mirrored what was taking place in British Columbia or Ontario.
Despite climbing interest rates that have ostensibly impacted many major urban centres, small towns and rural communities across the country, Newfoundland and Labrador have held steady. The province and its municipalities have not fallen off a cliff. Instead, despite waning demand, prices have remained intact and affordable.
So, what occurred in the eastern province’s real estate market? Let’s explore the latest data!
A Spotlight on Newfoundland Real Estate
New real estate association data confirmed that demand is showing signs of cooling off in one of Canada’s most affordable housing markets.
According to the Newfoundland and Labrador Association of REALTORS® (NLAR), residential property sales tumbled 4.7 per cent year-over-year in August, totalling 667 units. Year-to-date, home sales were relatively flat from the same time a year ago, with 4,229 units exchanging hands in the first eight months of 2022.
On a historical basis, home sales were 16.5 per cent above the five-year average in the Newfoundland and Labrador real estate market. They were also nearly 30 per cent above the decade average for this time of the year.
Newfoundland and Labrador real estate prices remained strong in August, as MLS® Home Price Index (HPI) surged at an annualized pace of 8.9 per cent in August to $286,000. The overall composite HPI benchmark price index is considered more accurate than relying on average or median price measurements.
Meanwhile, prices for various residential property categories continued their upward trajectory from a year ago. Here is how these housing types performed in August:
- Single-Family Homes: +9% to $288,000
- Townhomes: +5.9% to $276,200
- Apartments: +10.4% to $222,000
The average sales price for homes sold in August jumped 8.1 per cent year-over-year to $300,490. Year-to-date, they were also up more than seven per cent to $292,714.
The Newfoundland and Labrador housing market conditions were robust because of inadequate inventory levels in August.
The number of new residential listings tumbled 16.8 per cent to 889 new units, the lowest reading in the month of August in more than five years. Active listings were down nearly 34 per cent to 3,069 units, a decade low. New listings were 11.4 per cent below the five-year average, while active listings were close to 38 per cent below the five-year average.
Months of inventory, which gauges the number of months it would take to exhaust current supplies at the present level of sales activity, dropped from 6.6 a year ago to 4.6. This is also below the long-run average of ten months for this time of the year.
New housing construction activity has been decent, according to fresh statistics from Canada Mortgage and Housing Corporation (CMHC). Housing starts totalled 90 units in August, up 50 per cent from the same month last year. Year-to-date, there have been 535 housing starts, up more than 39 per cent from the first eight months of 2021.
How is the St. John’s Housing Market?
Residential sales activity slowed down considerably in the St. John’s real estate market. But local housing experts contend that this may have more to do with demand outpacing supply, as competition is still sizzling amid the broader Canadian real estate market downturn.
NLAR data show that home sales were down 11 per cent year-over-year in St. John’s, with single detached home transactions plummeting more than 22 per cent.
The overall MLS® HPI composite benchmark price for homes in St. John’s advanced by $322,500 in August, up 8.4 per cent year-over-year. In addition, the benchmark price for single-family homes in St. John’s surged 8.8 per cent year-over-year to $334,100. The benchmark price for townhomes jumped 5.9 per cent, while apartment prices spiked 11.8 per cent to $221,500.
“The story is different elsewhere in the country. In the rest of the Prairies and the Atlantic Region, prices are holding up better,” TD Bank wrote in a research note. “The former has been supported by some of the best affordability conditions in the country, while the latter region is drawing support from robust population growth and relatively tight conditions.”
What About 2023?
While higher interest rates were expected in 2022, many market analysts did not anticipate the Bank of Canada (BoC) would be as aggressive as it has been. This is mainly because experts did not think inflation would run this high for this long. Therefore, the prolonged slump in the Canadian real estate market may be slightly more surprising than initially expected.
So, does this mean 2023 could be preparing for a significant crash? Industry analysts have been apprehensive about using the term “crash.” Still, they have warned about notable corrections and sharp downturns throughout the country’s housing sector, except for perhaps Atlantic Canada.
Although TD Bank is projecting a 20 to 25 per cent decline in average home prices in Canada in the first quarter of 2023, the NLAR thinks conditions will be a more tepid decline of two per cent in prices in 2023.