One of the most compelling developments in the last quarter was the surge from modest to record-breaking growth in small towns across the country. This trend is quite pronounced in a region that has suffered financial hardship for the past decade: Atlantic Canada. Could the post-COVID-19 real estate market be the real stimulus the eastern region needed? As one of New Brunswick’s major urban centers, the housing market in Moncton is booming.
With record-breaking sales activity and substantial property valuations, Moncton’s real estate sector has never been so hot. The region attracts home buyers from all over the country, and it is possible that Moncton is poised to become a top new destination for marine real estate.
So what’s going on in Moncton? On the one hand, a breathtaking September performance. But can the city maintain these trends to wrap up 2020 and move into 2021?
Growing demand in the Moncton housing market
According to the Greater Moncton REALTORS® du Grand Moncton, residential property sales rose 39.7 percent in September from the same point in time a year ago. That is a All-time record for the month of September. Home sales have also increased by 7.4 percent compared to the previous year since the beginning of the year.
Moncton’s property prices also posted significant gains in September. The composite reference price of the MLS® Home Price Index (HPI) rose 13.7 percent to $ 220,500 in September. The reference price for a duplex rose 12.9 percent to $ 216,400, while a single-family home rose 13.9 percent year-over-year to $ 230,500. Townhouses rose 11.9 percent to $ 171,000 and house prices rose 7 percent to $ 199,500.
The total value of all US dollar residential real estate sales was $ 124.6 million, an increase of 113.6 percent since September 2019. It was a record high for the month and the highest US dollar value of homes sold in history.
So what is driving this threefold growth? Two tendencies: unexpected demand and low supply.
“Market activity in Greater Moncton remained strong in September,” said Parise Cormier, president of Greater Moncton REALTORS® du Grand Moncton, in a press release. “Although new listings have increased year over year, they are struggling to keep up with the pace of sales. The central story for our region is still the unexpectedly strong demand for this time of the year, combined with the lowest inventory in 15 years. These two factors contribute to the upward pressure on prices. “
In fact, the number of new home entries rose year-on-year by 12.5 percent – the highest number of new entries in September since 2015. Active home entries, however, fell by 34.6 percent by the end of September. In addition, there were 2.5 months of inventory at the end of September, compared to 5.4 months at the same point in time a year ago. This key figure indicates how many months it would take to sell the current housing stock at the current selling price.
Can Moncton keep this momentum through the fall cycle and through 2021? These strong fundamentals could allow additional growth in the New Brunswick community as part of the uptrend in the broader housing market in Atlantic Canada.
Is Moncton at risk of overheating?
Canada Mortgage and Housing Corporation (CMHC) has identified several cities in the Canadian real estate market that may face “overvalued” homes. The Crown Corporation found that the country’s booming housing market is moderately fragile and listed six cities that could potentially be overheated:
CMHC chief economist Bob Dugan told reporters on a conference call that the extent of the nationwide overvaluation is “likely underestimated” due to the temporary surge in disposable income amid state income supplements.
“Conversely, Ottawa, Montréal, Moncton and Halifax in eastern Canada entered the second quarter of 2020 with emerging imbalances in their respective housing markets,” said CMHC. “Observed house prices in all four had increased prior to the COVID-19 outbreak and continued to rise in the second quarter despite the general weakness in housing market fundamentals. This has to be used to detect moderate Evidence of overvaluation in Moncton and Halifax, while sustained spike in property price growth in Ottawa and Montréal has accelerated prices. The housing markets in Ottawa, Moncton and Halifax are now all rated at an overall moderate level of vulnerability. “
The housing market in Atlantic Canada
Moncton is only part of the broader, booming housing market in Atlantic Canada. From Halifax to St. John’s and Charlottetown, Canada’s east coast has recovered rapidly since the peak of the pandemic recess earlier this year. Be it historically low interest rates or households feeling financially more secure because of government benefits, the region’s real estate sector could see additional growth over the next 12 months. Given declining inventory levels and increased demand from homebuyers outside the area, fundamentals are solid and could justify renewed sales and higher prices in Moncton and across the Maritimes.