Newfoundland housing market – what's happening?

It’s a market whose pace over the past two years could be described as steady rather than spectacular – and that could be setting Newfoundland and Labrador in good stead as it avoids some of the significant home price depreciation witnessed in other parts of the country in 2022.

Canada’s easternmost province has been spared the sizeable drops in property values that hotter markets like Ontario and British Columbia have experienced since February, with a recent TD report indicating that average home prices actually rose marginally on a monthly basis in June, by 0.9%, compared with a 4.3% national decline.

While home sales elsewhere have also plummeted, Newfoundland and Labrador has posted an increase in the first six months of the year compared with the same period in 2021 - overall sales rising by 3.2% during that time.

Meanwhile, the province remains one of Canada’s most affordable markets to purchase a home: even despite a 9.1% year-over-year increase to the MLS HPI composite benchmark price for homes in St. John’s, that figure stood at $316,300 in June, a fraction of the eyewatering prices in other leading cities.

The market also appears well positioned to ride out the impact of increasing interest rates that are causing headaches for borrowers and would-be buyers in other areas. Robert Jennings (pictured top), broker at the St. John’s-based East Coast Mortgage Brokers, told Canadian Mortgage Professional that the province held a key advantage over other regions because of its strong affordability.

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“It’s a much smaller market, our own local economy, and we’re not as rate-sensitive over here,” he said. “People are still buying owner-occupied homes. It’s not a $750,000 mortgage, it’s a $250,000 mortgage, and still affordable at 4% or 5% [interest rates].

“We never got the increases that the rest of Canada got. We never got 20% [price jumps] in 2021 or 2020. We were just slow and steady, not too hot, not too cold.”

That’s kept the mortgage and housing markets robust throughout the year to date, Jennings said, with the final two quarters of 2022 expected to see activity continue to tick along.

Upward momentum should continue in the early part of next year, particularly with new home construction ramping up – and that’s also resulting in an uptick in out-of-province investors, he said.

The relatively calm market of recent years means there are fewer borrowers on the margins in Newfoundland, according to Jennings, indicating that not as many homeowners will feel the pinch of rising rates as in other parts of the country.

Those rate hikes are more of an inconvenience than a serious threat to many borrowers, he added, meaning that the cautious approach homebuyers in the province have taken during the pandemic had proven a wise decision.

“Being conservative pays off in times like these,” he said. “We’re still severely underpriced compared to the national average, so I don’t think rate hikes are scaring everybody.

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“We’ve got to deal with rate hikes – a lot of mortgages are still coming up for renewal, so people have to deal with [those] regardless, but I’d rather have a $300,000 mortgage come up for renewal than an $800,000 mortgage come up for renewal.”

While activity remains strong, much of it appears to be propped up by St. John’s: the capital saw its year-over-year residential sales activity rise by 5.2% in June, helping paper over a significant 12.9% decline elsewhere in the province.

That said, active residential listings across Newfoundland and Labrador had fallen sharply in June compared with the same month last year, slipping by over 33% to 3,133 units. That marks the first time active listings have been so low in more than a decade, according to the Newfoundland and Labrador Association of Realtors.

Home price growth could continue across the province for the remainder of the year as a result, Jennings said – an outcome that would set the region in stark contrast to other markets across the country in the second half of 2022.

“I would estimate probably another 8-10% [price growth],” he said. “And considering that a lot [of other markets] will probably finish at zero or a negative year over year compared to last year, I’d be really glad to be in this market, for sure.”