Amid a pandemic, high unemployment, and low household spending, Nova Scotia saw home prices increase by 39.5% from April 2020 to April 2021. Contrary to what you might expect, RBC Economics says that houses became more affordable in 2020, helping to push up prices as buyers rushed in to purchase homes. This affordability isn’t based on home prices alone, as home prices skyrocketed across most of the country. What made homes more affordable was the level of income that households had. RBC found that government income support programs, such as CERB, helped to increase household disposable income by 11%. $23 billion in lost wages and salaries during the pandemic was replaced by $56 billion in government aid programs.
What particularly helped to strengthen demand was the impact of interest rates. Nova Scotia mortgage rates hit a record low in 2020, making a mortgage more affordable and enticing. Coupling higher disposable income and low mortgage rates with consumers spending less, Nova Scotians saw their savings increase throughout 2020. Existing homeowners were also able to participate in mortgage payment deferrals offered by many mortgage lenders. This helped to further boost savings.
All of these savings built up, and as Canadians started to look for bigger houses away from major urban areas, a large wave of new home purchases helped to push prices up as competition for homes grew. Competition for homes in Nova Scotia also came from out-of-province homebuyers. The state of Canada’s housing market made Nova Scotia an increasingly enticing location to purchase a home. Average home prices in Toronto and Vancouver both skyrocketed to well above $1 million, which makes Nova Scotia’s average home price of $372,000 in April 2021 peanuts in comparison. While houses in Nova Scotia might seem unaffordable to residents, it might be very affordable to those coming from more expensive areas.
The cost of owning a home in Halifax, which includes mortgage payments, property taxes, and utilities, was 28.6% of the median household income. Compared to close to 75% of a household’s income going towards home ownership costs in Vancouver or 65% in Toronto, Halifax seems like a bargain in comparison. Nova Scotia had broken a record for the number of homes sold in April 2021, while the number of listings also doubled from April 2020. Rural areas of the province saw greater price growth, with Yarmouth and the South Shore leading the province with 79% and 63.4% increases in home prices compared to last year. Halifax saw the lowest price growth, at just 38.9% year-over-year. The higher number of sales in Halifax brought the provincial average down to 39.5% annual increase in the average price of a home in Nova Scotia.
It’s possible for high home prices to spur new home construction, which may help cool down prices as more inventory is bought online. It’s also possible for Nova Scotia’s heated housing market to accelerate further, as single-detached homes become more popular and an exodus out of condos continues. No matter the case, rising home prices in Nova Scotia were brought on by a mixture of relative affordability compared to the rest of the country, government income support programs, lifestyle changes, and record-low mortgage rates. A close look will need to be done when support programs wrap up and interest rates rise.
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