Being the second fastest growing metropolitan area in Canada, London headed into 2020 with double-digit growth in the volume of mortgage registrations, increasing by 14% in January, 6% in February, 21% in March, and 12% in April. The COVID-19 pandemic quickly made its mark on London’s real estate market as mortgage registrations fell 12% in May, 10% in June, and a staggering 26% drop in July.

When looking at property type, condos saw the largest drop on average, with 22% fewer mortgage registrations for condos in May of 2020, and overall sales registrations for May was the lowest recorded in 15 years. However, London’s housing market has largely recovered since the first half of the year.

The average price of a home in London soared above $500,000 for the first time in August, while sales activity dramatically rose heading into the fall. The number of residential sales in September broke a new record, with a 25% year-over-year increase in sales and a 28% year-over-year increase in average home prices, the busiest September since 1978.

Middlesex County led the region with the highest average home sale price at $575,414, compared to London’s $527,414, Elgin County’s $498,098 and St. Thomas’s $433,504. The largest year-over-year price gains were seen in London with a 30.1% increase in prices, followed by St. Thomas at 26.7%, Middlesex County at 18.1%, and Elgin County at 17.6%.

This massive growth continued into October and November, as home sales in London increased 33% year-over-year with a 28% year-over-year increase in home prices, while inventory fell to the lowest level seen in 10 years.

Low levels of inventory has turned London’s housing market into a seller’s market, which hints at the possibility of further price growth heading into 2021. More and more homebuyers are looking at moving to smaller cities instead of densely populated centres like Vancouver or Toronto’s hot housing market. While London still remains an affordable option, with it being the second-most affordable market in Canada in 2019, the surge in housing prices has dropped London’s ranking to being the fifth-most affordable market.

Pent-up demand grown over the spring has resulted in a large influx of sales going into the fall, but other factors such as low mortgage rates have also spurred housing demand. With the Bank of Canada expecting low rates through to 2023, housing activity might be able to be sustained at current levels.

With average house prices now above $500,000, and potential homebuyers needing a household income of at least $100,000 to be eligible for a mortgage, it is becoming increasingly difficult for new home buyers to afford a house. Only 28% of households in London had a household income of more than $100,000 in 2016.

That hasn’t deterred new buyers, as low inventory levels don’t seem to be going away anytime soon. The median days of a home being on the market was just 8 days, significantly less than the 28 days seen in 2015.

Renters have also seen price increases, as rental prices increased year-over-year. Looking at other sectors, London’s office market vacancy rate decreased to 15.1% in October. Meanwhile, the availability of industrial properties fell to just 1.8%.

Looking at Ontario as a whole, average home prices have increased 17.1% in 2020, and is forecasted to increase another 16.3% in 2021. Sales activity increased 9.2% in 2020, but is expected to decrease in 2021 by 3.3%.

High population growth, low mortgage interest rates, dwindling supply of homes, and a general migration towards smaller population centres makes London’s real estate market set for a strong performance in 2021.