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Meet the foreign buyers who bolster Canada’s economy

The term “foreign buyer” is often used pejoratively in Canada—it’s become synonymous with speculators who have nary a vested interest in the country apart from using empty homes as appreciation vehicles, to the detriment of the domestic population—and it couldn’t be more misguided.

Turns out, many of these new Canadians bolster the national economy in ways few people can, and it is not without personal risks, either. Richard Leuce, an immigration consultant and owner of Richard’s Business Immigration Corp., specializes in high-net-worth individuals from South Africa, most of whom yearn to replicate their success in a safer environment.

“South Africa is a beautiful, beautiful country—I fell in love with it the minute I landed there—but it’s not very safe, and a lot of times South Africans, who are ready to invest hundreds of thousands of dollars, are looking for safety,” Leuce told CREW. “My clients’ intents are to become Canadian citizens. Their first language is either English or Afrikaans, and if that’s the case then English is their second language. They seek to become permanent residents as soon as possible; they’re not just coming to buy properties and leave them vacant.”

Leuce primarily works through the Ontario Provincial Nominee Program (PNP), which requires his clients to create business plans, pass interviews with Canadian immigration officials, and take an exploratory trip to the region of the province where they want to set up shop. But Leuce says it isn’t as simple as it sounds.

“After all of the relevant information is submitted, the province scores the applicants and, if successful, follows up with a performance agreement, which stipulates that the nominee has up to two years to meet all requirements, including investing at least $600,000 and creating high-paying jobs,” he said. “They’re not hiring family members; they have to hire Canadian citizens. They invest money and boost the economy here. They did it in South Africa and they want to do the same thing in Canada. They’re active contributors to the economy.”

Among the many innovative ideas from abroad that Leuce has helped turn into Canadian companies is a plastic recycling firm that hopes to assist Canada achieve its zero plastic waste by 2030 goal. Not all ideas have to be bankrolled by the applicant.

“In a lot of developing economies, you have people with these great, innovative ideas, but who may not have the money,” said Leuce. “For these individuals, the Start-Up Visa program is an excellent avenue. The entrepreneur with the idea enters into a partnership with a Canadian angel investor or venture capital firm already in Canada to bring the idea to fruition using the latter’s money.”

The Canadian government announced in November that it would welcome 1.2 million new immigrants into the country through 2023, 60% of whom Immigration, Refugees and Citizenship Canada (IRCC) described as belonging to the “economic class,” which includes skilled workers, investors and entrepreneurs. But the second wave of the COVID-19 pandemic may prove a spanner in the works, warns Leuce, because processing times have already ballooned and the country’s ambitious goal to settle record numbers of immigrants in each of the next three years might not be attainable.

“The second wave will slow everything down. The door is not closed, but there will be a slowdown and it will take a while until the backlog is cleared. I’m curious to see if, in the spring budget, [IRCC] gets additional funding to hire more officers, or gets the money to pay existing officers overtime, because if the agency doesn’t get an increase in its budget, there’s no way things will move along. The spring budget will be the biggest indicator.”

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Where are Canada’s most taxed residential and commercial properties?

Yesterday, Altus Group released its seventeenth annual Canadian Property Tax Rate Benchmark Report, a study of the commercial and residential property tax rates in eleven of Canada’s major population centres. The report found that for the third year in a row, eight of the eleven cities studied have commercial tax rates that are at least double that applied to residential properties.

For 2020, the five cities with the highest estimated commercial property taxes per $1,000 of assessed property value are:

  • Montreal – $36.99 per $1,000
  • Quebec City – $35.03 per $1,000
  • Halifax – $34.41 per $1,000
  • Ottawa – $26.64 per $1,000
  • Winnipeg – $23.17 per $1,000

The cities with the three lowest commercial tax rates per $1,000 of assessment were Vancouver ($6.73), Saskatoon ($15.65), and Regina ($17.31).

Vancouver’s rate was the most dynamic compared to 2019, shrinking 27.9 percent year-over-year. According to Terry Bishop, Altus Group’s president of property tax in Canada, the change in the commercial tax rate in Vancouver reflects a key realization on the part of city managers.

“I think they probably knew that they were leaning a little too much on the commercial sector,” Bishop says. “With the economic fallout of COVID coming along, I think they saw an opportunity to provide some relief to businesses. They’re the only city across the country that did anything significant on the property tax abatement side.”

While not on the same scale as Vancouver, Calgary lowered its commercial tax rate by 11.9 percent in 2020. But in Cow Town’s case, the decrease was more the result of the desperate situation faced by many of the city’s businesses, who had been asked to pay higher property taxes in each of the previous three years.

“It was getting to the point where businesses couldn’t afford the taxes that they were paying,” Bishop says. “The city had to bite the bullet and increase residential rates and reduce commercial rates.”

Of the other four markets that saw their commercial tax rates fall, only two, Toronto and Winnipeg, experienced declines of greater than four percent. The biggest year-over-year rise in commercial rate occurred in Saskatoon, where it grew a modest 2.6 percent.

Residential tax rates were largely unchanged, with the national average of residential property taxes per $1,000 of assessment for 2020 coming in at $8.98, a penny less than a year before.

The highest residential property taxes this year can be found in Halifax, where they are $11.96 per $1,000 of assessment, Winnipeg ($11.94), and Ottawa ($10.85). They are lowest in Vancouver ($2.92), Toronto ($5.99) and Calgary ($7.52).

As with commercial properties, Vancouver and Calgary also saw significant movement in their residential rates. Vancouver’s increased 14.2 percent year-over-year, while Calgary’s rose by 13 percent.

The ratio
Taking the commercial and residential data one step further, Altus Group calculated a commercial-residential tax ratio for each city. Bishop says the ratios may be the most important data point the study has to offer, as they speak to the disproportionate share of the property tax burden commercial owners are asked to carry.

“I think it’s more important to watch the trend in the ratios from a fairness and equity point of view than the actual tax rate,” he says.

Because property taxes account for a large portion of the rent paid by most businesses, and because they represent one of the most onerous operating costs for business owners that own their own properties, Altus Group fears that small businesses required to pay an outsized proportion of a community’s property taxes will face serious competitive challenges. If they can’t survive in their current marketplace, they may be enticed to move to a new location where the tax burden is significantly lower.

“It’s important that municipalities are aware of that and don’t lean on them too hard,” Bishop says.

This year, the highest ratios were found in Montreal (4.1), Toronto (3.6), and Quebec City (3.5). The cities with the lowest ratios were Saskatoon (1.7), Regina (1.7), and Winnipeg (1.9).

For the first time, Altus Group also studied the separate impacts municipal and provincial governments play in determining each market’s commercial-residential ratio. In Calgary, Edmonton, Montreal, Quebec City and Halifax, it was found that the higher-than-average ratios are being driven by municipal taxes, while the high ratios in Toronto and Ottawa are largely the result of provincial education levies.

Bishop admits that reducing property taxes is a tough sell for provinces and municipalities scrambling to make up the tax revenue lost as a result of COVID-19-triggered business closures. But asking businesses to keep paying their current tax rates when so many are on the verge of collapse isn’t the rosiest of alternatives.

“To expect to recover the same amount of taxes from those businesses when their revenues are down significantly,” he says, “is a tall order.”

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Urbanation releases Q3-2020 market update — new condo sales reach record high

The right time to buy things is usually when other’s aren’t, which is why I’ve felt that this year was a great time to buy a centrally located condo. Cities aren’t going anywhere. This isn’t their first pandemic. Downtown demand will return as soon as urban life returns and the majority of people are back in their offices next year.

I’ve also been predicting that the run-up in single-family home prices that we have seen this past year here in Toronto will eventually lead to a surge in demand for condos (and perhaps even for larger suites). It’s a question of relative affordability. And so it was interesting to see Shaun Hildebrand of Urbanation predicting the same thing for 2021 in this recent Toronto Star article.

Hildebrand thinks the soaring prices of single-family homes will also push more buyers back to the condo market.

As of November, the average price gap between condos and detached houses was $596,000. The gap between a condo and a semi-detached or townhome was about $217,000. Both of those were at their second-highest levels since the market peaked in late 2016-early 2017, he said.

“This could really start to swing demand towards condos in the second half of the year,” said Hildebrand.

Realosophy data shows condo sales were already up year over year prior to the holidays —

23 per cent the first week of December,

31 per cent the second week and

72 per cent the week of Dec. 14.

That means 727 condos sold that week, compared to 418 in the same week last year.

Urbanation just released its Q3-2020 market update for the Greater Toronto Area and the data is very encouraging for the new condo market. Here are some of the highlights:

  • There were 6,730 new condominium unit sales in Q3. This represents a 30% year-over-year increase.
  • More of this growth happened in the suburbs (905) with 3,834 units sales vs. 2,536 unit sales in the City of Toronto (416).
  • Of the 6,694 units that launched for sale in Q3, about 3/4 of them sold. This is the highest absorption rate since Q4-2017.
  • The average selling price for a new condo launched in Q3 was $1,044 psf (GTA average). This is up 3.5% compared to last year.
  • New launches in the suburbs sold for an average of $915 psf. New launches in the City of Toronto sold for an average of $1,275 psf.

I reckon that many of the people purchasing right now are looking through and to the other side of this current macro environment. They recognize that things will get better and that the Toronto region will continue to thrive. That’s certainly how I’m thinking about it.

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Thinking exponentially and the rule of 72

in finance – investing, we need to think *exponentially*, not *linearly*.

Money compounds. Growth doesn’t happen at a constant pace; it *accelerates* over time.

Most of us are not programmed to intuitively “get” compounding — over the long run.

It’s about the importance of thinking exponentially, as opposed to linearly, when it comes to finance and investing.

In it, the author provides a quick rule of thumb to help reframe our mind when it comes to compounding. It’s called the “rule of 72” and it works like this.

To calculate the approximate number of years to double your money, simply take 72 and divide it by the annualized rate of return (%).

For example, if you had an annualized rate of return of 10%, this rule of thumb would tell you that you’re going to need 7.2 years to double your money.

If the annualized rate of return were to increase to 18%, it would now only take you 4 years to double your money. Of course, this rule of thumb is an approximation. It only really works within a certain band of returns.

If the annualized rate of return were 100%, this formula would spit out 0.72 years, whereas an annualized rate of return of 100% actually means that you’re doubling your money in the span of one year.

It’s a rule of thumb. The reality is that compound returns are incredibly powerful over the long-run, not only for finance and investing, but for life in general. Worthwhile things take time. If you’ve got the patience and discipline, the long-run curve ends up looking pretty sweet.

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5 Housing Market Trends to Watch for In Canada in 2021

It goes without saying that 2020 was an unprecedented year, and that the ripple effect on the housing market was swift and notable. Across the country, home buyers, sellers, and renters re-evaluated their housing priorities as they navigated the COVID-19 pandemic, and many local housing markets saw several months of record-breaking sales following a spring of record-breaking declines.

As we look forward to 2021, here are 5 housing market trends that everyone has their eye on going into the new year.

1. 18-Hour Cities Across Canada Will Continue to Drive Housing Demand
A common mantra you hear in real estate is: location is everything. One of the major implications of the pandemic was that it pushed home buyers to reconsider the scope of how location factored into their home purchase.

With remote-working options becoming commonplace across the country – and some companies making them permanent – a growing group of home buyers in dense, major cities like Toronto began prioritizing square footage and green space, where they may have previously put a premium on workplace proximity.

Not only did this result in skyrocketing demand for single-family homes in general, it also spurred many buyers to expand the boundaries of their home search far beyond city-limits. Many looked to 18-hour cities, often defined as “mid-size cities with attractive amenities, higher-than-average population growth, and a lower cost of living and cost of doing business than the biggest urban areas” to find better value.

For example, in Ottawa, home prices rose 19% year-over-year in November, and competition remained fierce among prospective buyers. “With huge buying demand being fueled by out-of-town buyers transitioning to the Ottawa market, we can expect prices to be driven up in the new year,” said Jonathan Amodeo, Broker in Ottawa.

Generally speaking, with increased flexibility to live and work anywhere, we can expect home buyers to continue to look further for affordable, spacious, single-family housing, which in turn is expected to drive demand within these cities and consequently put upward pressure on home prices as has been the trend in 2020.

2. ‘Typical’ Seasonal Real Estate Cycles Will Return And Buyers WIll Face Strong Competition
As most of the country came to a stand-still in March following stay-at-home orders, the economic and healthcare repercussions of the pandemic also brought the spring housing market to a halt; with record-breaking declines in prices and sales.

In response, the real estate sector as a whole pivoted to a virtual-first model, and as conditions improved, real estate boards and associations across the country implemented stringent safety protocols to prioritize the safety of the community at-large. As healthcare conditions eased over the summertime, pent-up demand, and limited inventory resulted in what many described as a “delayed spring market” effect, which in turn led to the record breaking sales experienced throughout the rest of the year.

Based on today’s expectations of an approved COVID-19 vaccine being rolled out in the coming weeks and months, plus an entire real estate industry that now has experience safely working within the framework of COVID-19 as we know it, buyers and sellers can expect for more traditional real estate cycles to reemerge in 2021 – with the market being at its busiest in the spring and the fall.

In fact, a recent report found that housing competition strongly favoured sellers in every single one of 25 major Canadian housing markets; with some of the most competitive conditions existing outside of Canada’s largest housing markets of Toronto and Vancouver – in Canada’s mid-sized cities. We can expect this trend to continue, as more Canadians who are seeking out more square footage and green space are willing to look further for housing.

3. Condo-Dense Markets Could See An Uptick in Rental Demand
Widespread closures across workplaces, universities, and the Canadian border to tourism and immigration alike resulted in rental vacancies rising to 2.8% in condo-dense markets like Toronto this past October (from just 0.7% the year prior), and at the highest levels for the first time in over a decade. Low demand spurred an increase in new listings and a consequent drop in rental prices, particularly across the city centre, and in areas popular for short-term rentals.

If the border opens up, and life begins to trend closer to what it was like pre-pandemic as a result of the vaccine, we can expect demand for rentals to grow again in city centres, particularly in the latter half of the year. For now, “if a renter is looking to get into a beautiful, trendy downtown condo at a prime location, now is a great time to lock it in,” said Andrew Kim, an agent in Toronto.

4. Mortgage Rates Will Remain Affordable
In response to the pandemic, the Bank of Canada kept the overnight lending rate at it’s “effective lower bound” of 0.25% for much of the year, with plans to maintain this rate until “economic slack” from the pandemic is absorbed, which is likely to be until at least 2023. Mortgage rates in turn, remain at an all-time low, with fixed mortgage rates hovering near the 1% mark.

Based on the Bank’s guidance, we can expect the overnight lending rate to remain steady for much of 2021 as the economy reacts to short term spikes in COVID-19 cases, and recovers over the long term as the vaccine is rolled out.

As far as mortgage rates go, there is potential for a slight increase in fixed rates as the bond market recovers in response to vaccine news and rollout. This in turn could impact the rate at which real estate prices rise toward the latter half of the year.

5. The Housing Market in the Prairies Could Get A Boost
The Prairies have been hard-hit by the coupling effect of the pandemic plus the ongoing impact of fluctuations in the energy market on jobs and consumer debt and spending. That being said, housing competition remains fierce in the region, with all major areas in the region experiencing strong seller’s market conditions this fall, e.g. Winnipeg (SNLR of 88%), Saskatoon (SNLR of 82%), Calgary (SNLR of 87%) and Edmonton (SNLR of 76%). Generally speaking, when the SNLR or sales-to-new-listings ratio is over 60%, competition conditions favour sellers over buyers because demand outpaces available supply.

With average home prices under the $500,000 mark across the Prairie region’s largest cities, if the world starts turning again and the economy and immigration into the region begins to recover in response to the vaccine, we can expect that the housing market in the Prairies may start to bounce back later in the year.

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Average Ontario Home Prices Could Rise More Than 16% in 2021

Last week, the Canadian Real Estate Association (CREA) released its latest resale housing market forecast, which revealed that — despite turbulent spring months — homebuyers are on track to set a record for activity in 2020, with some 544,413 homes projected to change hands by December 31, an 11.1% increase from 2019 levels.

Subsequently, the national average price in 2020 is on track to rise by 13.1% on an annual basis to just over $568,000 — reflecting the current balance of supply and demand, which heavily favours sellers in many local markets.

In Ontario, CREA forecasts that 228,665 homes will change hands by the end of the year, up 9.2% from 2019 levels,. While the average price should rise 17% to $708,377, up from $604,883 in 2019.

CREA’s forecast noted that mortgage interest rates have declined to record lows in 2020, including the Bank of Canada’s benchmark five-year rate, which is used by major banks to qualify applicants under the federal mortgage stress test, which has lead to more buyers being able to qualify for mortgages this year.

With the Bank of Canada committing to keep interest rates low into 2023 and with mortgage interest rates expected to remain near current levels through the new year, CREA forecasts 2021 will still be a strong year for sales.

“On a monthly basis, sales are forecast to ease back to more typical levels throughout 2021,” CREA wrote in the report. However, presuming there’s a more normal spring market in 2021, the year as a whole is expected to see more home sales than 2020.”

On a national level, CREA is predicting 584,000 home sales for 2021, up 7.25% year-over-year. All provinces except Ontario are forecast to see increased sales activity in 2021, as low-interest rates and improving economic fundamentals allow people to get into the markets where homes are available for sale.

For 2021, CREA has predicted that there will be 221,220 home transactions in Ontario, a decline of 3.3% from 2020 levels. However, average home prices are expected to climb 16.3% to land at $823,656.

“Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province,” CREA said in its report.

“The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties.”

 

This forecast comes as Ontario’s housing market was down on a year-over-year basis in November, however, this reflected a supply issue rather than a demand issue — particularly in the ground-home segment. This has led to the average home price in the province remaining up year-over-year.

The largest year-over-year gains in November — between 25- 30% — were recorded in Quinte & District, Tillsonburg District, Woodstock-Ingersoll and a number of Ontario cottage country areas.

Year-over-year price increases in the 20-25% range were seen in Barrie, Bancroft and Area, Brantford, Huron Perth, London & St. Thomas, North Bay, Simcoe & District, Southern Georgian Bay, and Ottawa. This was followed by year-over-year price gains in the range of 15-20% in Hamilton, Niagara, Guelph, Cambridge, Grey-Bruce Owen Sound, Kitchener-Waterloo, Northumberland Hills, and Peterborough and the Kawarthas.

Moreover, prices were up in the 10-15% range compared to last November in Oakville-Milton and Mississauga. Across the GTA, the average selling price for all home types was up by 13.3% to $955,615.

With just ten days left in 2020, CREA is far from alone with its predictions around average home prices increasing in the new year. James Laird, co-founder of Ratehub.ca, expects detached home prices will increase between 4 to 7% in 2021, with the strongest growth in the suburbs around major urban centres.

“With Canadians working from home, the demand will continue to be strong for more space. Larger homes outside of the city centre will see the strongest demand,” said Laird.

What’s more, Royal LePage, predicts that the median price of a standard two-storey home in the GTA will rise 7.5% next year, reaching an average price point of $1,185,800. In a significantly less dramatic increase, the median price of a condominium is forecast to increase 0.5% to $600,800.

Meanwhile, the aggregate price of a GTA home (all home types) is expected to increase by 5.75% year-over-year, ultimately reaching $990,300.

Looking ahead, only time will tell how the housing market will truly perform, but for now, let’s hope 2021 holds as much good news as suggested by the forecasted increase in home prices in the region.

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Major condo price correction is unlikely despite collapsing demand: BMO

While there’s no doubt that downtown condos were left in the dust when suburban single-family home sales and prices took off during Canada’s economic recovery, the chances that urban high-rises will see a significant price drop over the next year is unlikely.

In his response to November housing market data published this month by the Canadian Real Estate Association, BMO Senior Economist Robert Kavcic acknowledged that urban markets “are highly out of favour right now” with homebuyers.

But even as the price gap between condos and single-detached homes is likely to widen in the new year, condo markets in major cities, including Toronto, Montreal and Vancouver, should eventually find their footing, Kavcic wrote in a research note published last week.

“Will we see a deep correction? Probably not. The ‘death of the city’ thesis is probably excessive,” he wrote.

That said, the economist believes there will be some condo “overhang” — in other words, excess supply — to work through before the hard hit downtown markets in Canada’s largest cities can regain their strength. Strong rent price appreciation and a robust short-term rental market that fed investor enthusiasm for urban condo in these cities is also unlikely to return any time soon, despite the positive developments on the vaccine front.

After a barn-burning year for rural and vacation property demand, Kavcic sees these markets remaining “extremely tight” into early 2021, meaning price growth will continue for the time being.

What remains to be seen is how demand will change 2021’s second half on the realistic assumption that vaccine distribution will permit many aspects of city life to resume. Kavcic said that activity may plateau in those farther flung markets that have seen their appeal rise during the pandemic.

Price declines are also in the cards later in the year and into 2022, though the economist believes these markets will retain some of the pandemic-driven boost in property values.

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Quarterly Forecasts

December 15, 2020 – The national average price is forecast to rise by 9.1% in 2021 to $620,400. Average price trends across Canada in 2021 are generally expected to resemble those in 2020. Shortages of supply, particularly in Ontario and Quebec, are expected to result in strong price growth, while Alberta and Saskatchewan are anticipated to see average prices pick up following several years of depreciation.

Ottawa, ON December 15, 2020 – The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate boards and associations.

Current trends and the outlook for housing market fundamentals suggest activity will remain relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions.

Economic activity continues to improve slowly following the initial stages of the pandemic. Over the past several years, record levels of international immigration, low interest rates and an increasing share of millennials entering their home buying years have helped make the housing market a significant source of strength for the Canadian economy. The recent government support programs for individuals and businesses have also helped the overall economy through the most severe parts of the pandemic to date.

Mortgage interest rates have declined to record lows in 2020, including the Bank of Canada’s benchmark five-year rate used by Canada’s largest banks to qualify applicants under the B-20 mortgage stress test. With the Bank of Canada committing to keep interest rates low into 2023, mortgage interest rates are expected to remain near current levels through 2021.

Recent national sales trends have improved more than anticipated over the second half of 2020. New listings in most of the country have also recovered. However, while sales activity rebounded to record-high levels, new listings only recovered to about their five-year average in most markets. The relative strength of demand for homes compared with supply has meant sales activity has been eroding active inventory, which was already scarce in many markets pre-pandemic. That said, this has been a trend since 2015.

The increase in demand has impacted every part of the country, including the Prairies and Newfoundland and Labrador. While these regions aren’t experiencing the same intensity of upward price pressures as the rest of the country, compared with previous years, demand is strengthening and prices have indeed started to increase.

Despite the historic setback to the spring market caused by the pandemic, CREA projects national sales to hit a record of 544,413 units in 2020, representing an 11.1% increase from 2019 levels. The strength of the Canadian housing market was broad-based, with every province except Alberta registering a year-over-year increase in sales. British Columbia and Quebec stand out as large contributors to the overall gain.

The national average price in 2020 is on track to rise by 13.1% on an annual basis to just over $568,000. This reflects the current balance of supply and demand, which heavily favours sellers in many local markets.

On a monthly basis, sales are forecast to ease back to more typical levels throughout 2021; however, presuming there’s a more normal spring market in 2021, the year as a whole is expected to see more home sales than 2020. National home sales are forecast to rise by 7.2% to around 584,000 units next year. All provinces except Ontario are forecast to see increased sales activity in 2021, as low interest rates and improving economic fundamentals allow people to get into the markets where homes are available for sale.

Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province. This shortage is expected to limit sales activity in 2021. The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties.

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Home prices post highest November increase in 22 years: Teranet

A Canadian home price tracker known to be one of the best measures of price appreciation just experienced a record-breaking November increase.

The Teranet-National Bank House Price Index rose 0.9 percent last month over October’s reading, the strongest gain for the month of November in the 22 years that the index has been compiled.

National Bank Senior Economist Marc Pinsonneault said it was the second month in a row that the index had broken a record for a monthly increase at the national level. Hamilton, Halifax, Montreal, Ottawa-Gatineau, Victoria and Vancouver all posted monthly increases of over one percent. Toronto missed the one percent mark, but still recorded a “highly respectable” 0.8 percent rise, according to the economist.

From an annual perspective, the national index rose nine percent over November 2019, the highest 12-month increase since early 2018. Ottawa-Gatineau, Halifax, Hamilton and Montreal led the way by this measure, all recording annual increases above or near 15 percent.

The Teranet-National Bank index is known to lag behind other widely used home price tracking tools, including the monthly average home sale prices published by the Canadian Real Estate Association (CREA) and local boards.

This is because the index is compiled using a repeat sales methodology that works by tracking the price change between the two most recent sales of the same property. The index uses prices entered into public land registries in the Canadian markets it tracks. These often are slower to respond to market changes because sale price data is not added to land registries as quickly as it’s entered into the MLS systems used by real estate boards.

“The strong rise of prices is consistent with the revival of home sales volume over the last several months reported by the Canadian Real Estate Association. For a third straight month, the number of sale pairs entering into the 11 metropolitan indexes was higher than a year earlier,” wrote Pinsonneault.

In new commentary on the Teranet-National Bank November price figures, Capital Economics’ Stephen Brown said Canadian home price inflation is forecast to rise above 10 percent annually in the first few months of 2021. It will slow following that, but is expected to continue to rise throughout the year.

“A few forecasters reiterated at the start of December that they still expect declines in house prices in 2021, seemingly because they believe the effects of high unemployment will finally be felt,” wrote Brown in commentary published this morning.

“It seems very hard to justify those downbeat views from the recent data, however, with the sales-to-new listing ratio little changed in November and still consistent with very strong house price inflation,” he continued.

The sales-to-new listing ratio is a key indicator of whether the market is in buyer’s or seller’s territory. With CREA’s latest national reading showing the ratio still in record high territory — meaning the market is undersupplied and sellers are calling the shots — continued price increases seem inevitable.

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Canadian home sales close to breaking all-time record in 2020

While home sales across the country declined slightly in November from the previous month, they were up a healthy 32 percent over the same time last year.

In other words, it’s the type of stellar performance that’s become standard during 2020’s post-spring lockdown period.

But the strong home sales figures published today by the Canadian Real Estate Association (CREA) represent more than just a continuation of the market’s remarkable performance in the second half of the year.

Canadian home sales are a hair’s breadth away from breaking an all-time record for transactions in a single year.

“Many Canadian housing markets continue to see historically strong levels of activity, so much so that a new annual sales record this year is looking more likely every day,” said CREA Chair Costa Poulopoulos, in a media release.

According to CREA, there have been 511,449 home sales between January and November this year. That’s up 10.5 percent from the same 11-month period in 2019 and already the second-highest January to November sales tally on record.

This year’s total is behind 2016, the current record-holder, by only 0.3 percent. So yes, you read that right, in this bizarre and anxiety-inducing year, Canada’s housing market may very well see its best-ever performance for home sales.

In fact, CREA’s Senior Economist Shaun Cathcart thinks it’s more likely than not to be a record-breaker.

“If I had to sum up the Canadian housing story in 2020, I would say it’s gone from weakness because of COVID to strength despite COVID,” said Cathcart. “It will be a photo finish, but it’s looking like 2020 will be a record year for home sales in Canada despite historically low supply.”

On the pricing side, CREA’s Home Price Index rose 11.6 percent over the previous year. Meantime, the national average home price was up nearly 14 percent to $603,000, though the association said that this is heavily influenced by the country’s most expensive markets, Toronto and Vancouver.

The propulsive price growth is linked to the record-low supply — measured in months of inventory — that Cathcart mentioned. CREA said there were 2.4 months of inventory at the national level by the end of last month, meaning it would take 2.4 months to sell all the homes listed on the market at the current rate of sales. In Ontario, supply is exceptionally tight, with 21 markets across the province posting less than one month of inventory at the end of November.

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3 Toronto suburbs saw condo prices rise over 10% in November

While downtown condos saw price declines last month, a few suburban condo markets in the Toronto region still recorded healthy price growth.

Oakville, Oshawa and Burlington all posted resale condo price gains above 10 percent in November, while Brampton and Vaughan recorded increases just shy of the double digits.

Condo sales activity was about on par with transaction levels recorded in November 2019 for the three top-performing suburban cities, but demand was strong enough to keep prices rising.

To compile this data, the Livabl team looked at average sale prices for condo apartments sold last month in the 30 cities and towns outside of the City of Toronto that TRREB tracks. Of the areas that recorded 10 or more transactions during both November 2020 and 2019, three experienced price increases over 10 percent compared to the previous year.

Oakville topped the list with its average condo price rising to $661,555, up nearly 16 percent from a year ago. Oshawa posted a nearly 15 percent gain, with an average sale price of $307,400 in November. Rounding out the top three was Burlington, with prices increasing to $554,494, an annual gain of 12 percent.

The two cities that came close to achieving double-digit gains — Brampton and Vaughan — each recorded increases of nearly nine percent, with prices rising to $462,461 and $646,801, respectively.

Of course, the pace of price growth in these suburban condo markets seems relatively sluggish compared to detached homes across the Toronto region. Detached home prices rose over 20 percent in 19 Toronto suburban cities and towns last month.

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The 35 Most and Least Competitive Real Estate Markets in Ontario

another year has come and nearly gone, and one thing that we’ve learned this year is the resilience of Ontario’s real estate markets, as they’ve managed to stay hot despite the latest pandemic restrictions rolled out by the provincial government to slow the spread of COVID-19.

In fact, last month, there was a notable annual “uptick” in home sales across the province, with many regions reporting a record-breaking month for sales.

According to TRREB’s October housing market report, resale activity in the GTA showed no signs of slowing down, after having another record-setting month, during which, a total of 10,563 sales were made — a 25.1% jump from the 8,445 sales recorded in the previous October. The record-level sales were paired with record listings, with 17,802 recorded across the region compared to 13,053 in October of last year.

With just weeks left in 2020, we took a closer look at housing competition across 35 Ontario real estate markets by reviewing sales and new listings data for each region for the month of October.

To determine which markets were the most competitive (sellers’ markets) and least competitive (buyer’s markets), we calculated the sales-t0-new-listings ratio (SNLR) for 35 cities throughout the province. To reach this, the number of sales in a city is divided by the number of new listings.

A high percentage of over 60% indicates that many homes were sold compared to homes newly listed (sellers’ market), while a lower percentage under 40% shows fewer homes were sold compared to homes newly listed (buyer’s market).

within the Greater Toronto Area (GTA), 14 out of 19 cities are currently sellers’ markets, the remaining five are balanced. Outside of the GTA, all 16 cities were in the sellers’ market territory, while no cities in the report were listed as buyer’s markets.

Here in the GTA, 14 of 19 real estate markets strongly favour sellers, with Orangeville (SNLR of 105%), Whitby (SNLR of 89%), Burlington (SNLR of 88%), Milton (SNLR of 87%), and Caledon (SNLR of 85%) leading the ranking with high SNLR percentages over 60%, which indicates that more homes were sold compared to homes newly listed.

However, the remaining five markets in the GTA reviewed remain in a balanced market territory. With 3,514 sales and 7,823 new listings in October, the City of Toronto is among the five housing markets exhibiting balanced market conditions with an SNLR of 45%.

this shows that housing competition has cooled since October 2019, when the SNLR was 66% and favoured sellers. That being said, it’s important to keep in mind that these figures are influenced by condo market activity where sales have declined amidst the pandemic while new listings increased by more than double (109%) year-over-year.

What’s more, three of the five markets exhibiting balanced conditions are in York Region: Richmond Hill (SNLR of 54%), Vaughan (SNLR of 59%) and Markham (SNLR of 58%). The remaining market exhibiting balanced conditions is Mississauga, with 943 sales and 1,665 new listings and an SNLR of 57% in October.

“Currently, buyers are most interested in freehold properties with backyards, and it is common to see multiple offers on such listings given limited inventory,” says Claudio Castro, an agent in the York Region.

“Homes listed in the $1 million range are the most competitive, seeing that buyers are able to secure a 4 bedroom, detached property within the $1,100,000 – $1,400,000 range in York Region,” Castro notes that as long as COVID-19 remains a factor, this trend is expected to continue into the new year.

As you look outside of the GTA,  says that buyers will face “stiff competition” in all of the 16 markets included in the analysis, particularly in four cities, where the SNLR is at or over 100% — indicating that demand was much higher than new listings and buyers began to pick up inventory listed before October.

These markets were: Sudbury (SNLR of 100%), Niagara Falls (SNLR of 105%), Thunder Bay (SNLR of 108%), and St. Catherines (SNLR of 112%). With the exception of Sudbury, buyers faced even stiffer competition this year than they did in 2019.

 

 

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Buyer demand for new townhomes surged across Canada in 2020: Altus

New townhomes recorded robust sales numbers in several markets across Canada this year, as consumers looked for affordable lower density options amid the pandemic.

Real estate data firm Altus Group published a report this month highlighting strong new townhome sales in Vancouver, where transactions doubled compared to last year’s levels, and the Toronto region, where new townhomes saw the biggest improvement in sales of any property type versus 2019.

Even in Alberta’s weak residential real estate markets, townhome sales were only down slightly in Calgary and Edmonton, the report said.

Altus Group looked at new townhome sales in the first three quarters of 2020 and compared year-to-date activity in the property segment to the past four years. In Vancouver, sales have already surpassed 2019 and 2018 totals just in the first nine months of the year. In Toronto, activity in the first three quarters has already exceeded sales in the previous three years — only 2016 saw better results.

In its report, the firm said that the surge seen in 2020 lines up with growing buyer interest in townhomes that’s been building for several years.

“With housing affordability challenges in the major markets increasingly pricing single-detached housing out of the reach of many buyers, townhouses provide a family sized option with many of the desirable features, such as garages, private front door and amenity spaces, at a much lower price point,” Altus Group said in the report.

It went on to note that new townhomes in suburban regions outside major cities are typically less expensive than two-bedroom condos in more central areas.

Looking ahead, buyer demand for townhomes is expected to keep growing. Altus Group predicted that pandemic-driven factors like low interest rates and flexible remote work arrangements allowing buyers to live farther from their employers would influence demand. The firm also noted that Millennials searching for affordable and family-friendly housing options would continue to support demand.

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Why have Toronto condos become so expensive?

Average condo prices in the City of Toronto are up about 150%. But…

Land costs are up 160%.

Soft costs are up 118%.

Construction and related costs are up 91%.

Financing costs are up 93%.

Government fees, charges, and taxes are up 413%.

And development charges (a subset of the above) are up 3,244%!

At the same time, the profit margin over costs is down about 45%.

(As a point of comparison, CPI only increased by about 26.5% during this same time period.)

The point here is that condos are so expensive largely because of cost-plus pricing. Government fee increases are also outpacing every other cost bucket.

If you’re developing new housing in Toronto, you have no choice but to accept these rising costs. You have to pay development charges and you have to pay them when you’re told, even if that means swallowing some new massive increase.

So by necessity, end prices get continually pushed as a way to try and absorb these costs. You figure out what your costs are going to be and then you price accordingly. But of course, you also have to ask yourself: Can people actually afford this kind of pricing and can this neighborhood support it?

Sometimes the answer is yes, which is why development continues. But sometimes the answer is no. In this case, the next step is simple: you don’t build.

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Toronto housing had “amazingly strong” November despite pandemic restrictions: RBC

The Toronto housing market had a lot working against it this November.

The City of Toronto and neighbouring Peel region moved into the “lockdown” zone of the province’s tiered restriction framework, with non-essential businesses closed from November 23rd onward. Prior to that, both regions already were in the highly restrictive “red” zone.

On top of all this, despite the steady stream of strong data on the home sales and pricing front, many commentators appeared certain that the housing market would falter following the summer rebound, as high unemployment and lower incomes would eventually snuff out the momentum.

Instead, the market’s performance has been almost uniformly positive. RBC Senior Economist Robert Hogue was one of the commentators who wrote in the summer that the housing rebound would slow by the fall months, with home prices likely to begin declining later in the year. The remarkable home sales and pricing data from November led Hogue to quip “so much for the cooling” this fall in a research note published last week.

“The overall [housing] picture remained amazingly strong despite the re-imposition of tighter social distancing restrictions in the City of Toronto and Peel region in November,” Hogue wrote, noting that changing housing needs and low interest rates “kept the market boiling.”

The economist had previously written that downtown condos are currently the “weak spot” in Canada’s housing picture and that remained true for Toronto last month. Condo prices are now beginning to soften as listings have soared 194 percent, widening the chasm between supply and demand.

But it’s the strength of single-family home sales, especially in the suburban 905 areas of the region, that continue to keep the overall market boiling hot. Detached home sales in the 905 were up 33 percent over a year ago while active listings fell 40 percent.

“Very tight demand-supply conditions apply increasing heat on detached home prices across the entire GTA,” Hogue wrote.

In other words, it’s the complete opposite supply and demand dynamic playing out compared to the sluggish downtown condo market.

Looking ahead, Hogue believes condo prices will continue to decline in the near term while single-family home prices are expected to keep rising “briskly.”

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The Toronto Housing Market is on Fire, Except Where it’s Not

The Toronto housing market is closing 2020 in a way that feels well-suited to the year: some highs, some lows, and not a whole lot of clarity on what’s to come.

According to the newest report from RBC, the entire country saw strength in its housing market throughout November, except for in one area — downtown condos in large urban areas.

It’s easy to imagine, then, that the City of Toronto’s data presents as a combination of “on fire” and “flailing.”

Despite the return to lockdown-status in Toronto and Peel region, the month saw GTA resales rise 24.3% year-over-year, with the MLS Home Price Index (HPI) up 10.6% during the same period.

The 416-region specifically is described as “both hot and lukewarm,” with sales of single-family homes up 24% year-over-year, while condos sales were “flat.”

But the real difference, RBC says, is inventories. Active detached-home listings are sitting some 13% below year-ago levels. Meanwhile, condo listings have skyrocketed 194%. As the report concludes, it’s “no wonder downtown Toronto condo prices are beginning to soften.”

Indeed, TRREB’s November market report, released Thursday, captured the small drop in the average condominium apartment selling price for the ‘416’ area code. Since the onset of the pandemic in March, April is the only other month to have seen a decline in year-over-year condo prices (-4.0%) in the 416 (though October only managed a gain of less than 1%).

At the same time, the month saw market conditions tightened in many single-family market segments, resulting in double-digit year-over-year increases in selling prices for detached houses, semi-detached houses, and townhouses.

The story of the city’s condo market is opposite to that of the detached home market; read: plentiful supply.

“The downturn in rental markets has prompted many condo investors to sell over the past several months,” reads RBC’s report — a statement that, through autumn, has become increasingly clear to those keeping an eye on the downtown real estate scene.

TRREB’s data from the Q3-2020 condominium market and rental market reports revealed the number of condo apartments listed for rent at some point during Q3-2020 was up a massive 113.9% year-over-year. The influx was reportedly a result of many investors and Airbnb owners turning to the longterm rental market in an effort to cover ongoing costs.

And, according to John Pasalis, President at Realosophy Realty, the condo market being in such a state means something to sleep on for would-be investors. As resale prices have been on the decline, albeit “only by a little bit,” rents have decreased by nearly 20% in some cases.

“Certainly, if you’re a savvy investor, you might find some value. There’s no rule necessarily, but it doesn’t seem right to be paying peak prices — 2020 prices — for rents that are at 2018 levels,” he said.

“If you want to be somewhat conservative, you’re either going to wait for further softening in prices — if you think that’s going to happen — or you at least wait for the rental market to start recovering a little bit, because if you’re buying now, as an investor, not only is your rent significantly lower, but your vacancy is higher. It might take you two to three months to rent out your unit.

It makes sense, then, that as those who are interested in investing have been cautioned to watch and wait, those who are already in the downtown condo game have been inclined to attempt to offload their properties. It’s hard to make anything back from a vacant space, after all.

While anyone looking to get in on the condo scene right now — whether renting or buying — has a (relative) pick of the lot, those more interested in single-family homes have increased competition, and prices, to deal with.

TRREB’s latest data showed that market conditions tightened in many single-family market segments in November, resulting in double-digit year-over-year increases in average selling prices for detached houses, semi-detached houses and townhouses.

“Homebuyers continued to take advantage of very low borrowing costs in November, especially those looking to buy some form of single-family home,” said Lisa Patel, TRREB President. “Competition between buyers for ground-oriented homes has been extremely strong in many neighbourhoods throughout the GTA, which has continued to support double-digit annual rates of price growth.”

To use a local metaphor, stabilization then (or a return to some form of normalcy), is like the CN Tower on one of Toronto’s smoggiest summer days — you know it’s there, but it’s difficult to see, and you can’t gauge exactly how far away from it you’re standing.

With regards to the condo experience, any rehabilitation depends on downtown’s healing, according to Pasalis.

“Rents are not going to recover until the downtown core recovers. [At that time,] people are going back to offices, there’s a reason to be living downtown because you walk to the office, the office is nearby, the restaurants are nearby. So, until there’s some return to a normal downtown lifestyle, downtown rents aren’t likely to recover anytime soon,” he said.

And until downtown regains its appeal, it’s hard to imagine what would slow the ever-growing interest in single-family homes, what with their increased space, privacy, and (location-dependent) bang for their buck.

With so many unknowns hanging in the air, conservative advice would be to make no sudden movements… at least not without giving those moves some serious thought. Because, while the timeline for recovery remains uncertain, one thing is clear: downtown is not dead, it’s resting. And come next summer — or even the summer after — you don’t want to be left reminiscing about the waterfront, the Queen West strip or Riverdale Farm as you grapple with suburban regrets.

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COVID-19 vaccine deployment will shape Canada’s housing market in 2021

With a steady stream of positive developments announced in the last month, it’s beginning to look like widespread deployment of one or multiple COVID-19 vaccines will pave the way back to normalcy for Canada’s housing market next year.

Health Canada is expected to approve the use of the Pfizer vaccine in a matter of days. Today, Prime Minister Justin Trudeau announced that Canada will receive 249,000 doses of the Pfizer vaccine before the end of the year. Three other potential vaccine candidates are also under consideration for approval, with millions of doses potentially available for priority recipients by early 2021.

While the arrival of a vaccine isn’t likely to create big shifts in the country’s housing market right away, Matthew Boukall, Vice President of Product Management and Data Solutions at Altus Group, says that its roll out could immediately impact how homebuyers make decisions about where they plan on moving.

“Those that are on the fence about where they want to live, whether they’re considering living in urban areas or moving out to the suburbs, the vaccine will provide some certainty around where they’re going to be working and how much of their day will be spent commuting to a downtown office or working from home,” explained Boukall.

Big cities like Vancouver and Toronto have felt the strongest impacts of the pandemic on their housing markets. Decreased demand for rentals, stalled immigration and a major increase in the number of buyers looking to purchase in the suburbs has left condo sales trailing behind the single-family home market through most of 2020.

November’s market data from the Toronto Regional Real Estate Board marked a continuation of the divergence between the single-family and condo segments in the urban ‘416’ and suburban ‘905’ regions — detached ‘905’ homes saw a 20 percent price gain, while ‘416’ condo prices dipped by 3 percent annually.

Boukall says a vaccine would clear the way for allowing both international and local students to return to post-secondary campuses and reinvigorate rental demand. It could also jump-start the city’s struggling tourism industry and create more demand for platforms like Airbnb that rely heavily on downtown condos for their short-term rental supply.

The urban exodus trend, which has seen a large number of city dwellers migrate to the suburbs during the pandemic, could slow down as vaccine roll out begins.

“The trend will continue, but it will slow down dramatically,” said Benjamin Tal, Deputy Chief Economist of CIBC World Markets, noting that there had already been an uptick observed in urbanites moving to the suburbs before the pandemic started.

“I think, at some point, the city will be a very inviting place. It will be more affordable and, still, people will love to live in the city especially if you can go back to the office,” he added.

Tal said that he anticipates some weakness in the condo market in the coming months. However, even if a vaccine hasn’t been widely deployed, we can expect pent-up demand and price adjustments to lead a robust spring market.

“I think the narrative about people not wanting to live in condos will probably start to die off as we get closer and closer to a vaccine, when people realize that the market is actually an opportunity to enter,” explained Tal.

While some market commentary has possible housing supply challenges in store for 2021, Tal doesn’t believe that the market will be undersupplied in the first half of the year.

Boukall noted that Toronto will see a large number of new housing units delivered next year. This, combined with an increase in listings on the market, will create more supply, he said. Buyers and tenants who were previously priced out of the city are expected to return now that affordability has improved, absorbing excess urban condo inventory.

Tal added that there’s evidence that the end of the condo market adjustment has already started.

“We see demand for rentals and rent inflation stabilizing. This means people are starting to take advantage of a soft market and enter the market,” he said.

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Is it a good time to buy a house in Canada?

This year, no one culd predict what would lie ahead for the housing market during the novel Coronavirus pandemic that spread across the globe like wildfire. For many, Canadians lost their jobs and were trying to live off government-assisted programs while trying to juggle their bills, but for others, they were presented with a great opportunity to dip their toes in the real estate market for the first time or upgrade to a house outside of the expensive city due to being able to work from home. Interest rates have also continued to stay at a historic-low in order to help stabilize the Canadian economy while COVID-19 rages on.

But while some buyers were able to get into a home, many others were left losing bidding wars and give up on their dream home. Some even had to sell their homes in order to stay afloat. So, the question remains: is it a good time to buy a house in Canada? What real estate trends are emerging and why should you take advantage of them?

We’ll break down everything you should know.

Are millennials the reason for the booming real estate market activity?
Last year, it was predicted that millennials would become the main reason for homes flying off the market before the COVID-19 pandemic urged people to stay at home and only go out when necessary to essential stores. In fact, millennial home ownership rates in Canada were higher than in other countries according to a report by RBC. As of March 2019, 40 per cent of homes in Canada were owned by buyers 35 years of age or younger whereas, in the United States, that percentage sat at 34.5. The cities with the youngest homeowners in Canada were Calgary, Toronto and Vancouver, even despite the high home prices. But did this trend continue into 2020 despite the global pandemic?

Well, maybe not. Scotiabank’s survey suggested that 38 per cent of Canadians believed that now is as good of a time as any to buy a new home, but only 18 per cent of Canadians between the ages of 18 and 34 agreed that the pandemic accelerated their plans to delve into the home ownership journey. This left one-third of those surveyed waiting for prices to drop before buying a home.

How has the Coronavirus affected the housing market in Canada?
Despite the novel Coronavirus putting everything on hold, there were still real estate records being broken in cities all across the country, particularly in the Greater Toronto Area, Greater Vancouver, and Montreal to name a few. As mentioned above, while many feared losing their jobs and steady income to support their family and keep their houses running, many others found the global pandemic a great opportunity to buy their first home or upgrade to homes located outside of the city they no longer needed to travel to for work because of the lower home prices, affordable mortgage rates, and being able to get much more for their money.

Here are some impressive records that were recorded this year due to the Coronavirus that threw us all for an unexpected loop.

Montreal
Many Montrealers are saying goodbye to city living and buying homes in cottage country. In both July and August of this year, Montreal saw a surge in home sales and broke records for two months in a row in a seller’s market. This means there has been way more demand for homes than what is even on the market. In a report from the Quebec Professional Association of Real Estate Brokers (QPAREB), residential sales increased by 39 per cent in August compared to the same time last year with a total of 4,878 sales (with single-family homes taking the lead with 2,601 sales). This was the highest number recorded in August in the last 20 years. Single-family home prices also increased by 24 per cent (with a median price of $427,500), but what was surprising was seeing $1 million-dollar homes on the market double compared to August 2019.

Greater Toronto Area (GTA)
The housing market in Toronto has reached new heights too after the global pandemic took its toll on office workers and real estate investors. As stated in a November report by the Toronto Regional Real Estate Board (TRREB), home sales in the GTA were up more than they ever have been for four consecutive months. In October alone, TRREB members reported 10,563 home sales compared to 8,445 in October 2019. The average price for all types of homes combined reached $968,318, an increase of 13.7 per cent from the same time last year. The demand for single-family housing in the GTA has drastically increased, so bidding wars are being taken to a whole new level. Supply is low and first-time buyers are getting outbid.

The condo market in Toronto has seen records being broken too. As the Toronto residential housing market has been doing really well, condos haven’t necessarily seen the same light, particularly in the downtown core. Sellers are even seeing their condo listings sit for months compared to just a few days this time last year. The reason? The demand for renting has drastically gone down because students haven’t physically been returning to school, immigration has come to a halt, and travel is a no-go for those offering an Airbnb. In fact, condo sales saw a year-over-year decrease of 8.5 per cent.

Greater Vancouver
The Real Estate Board of Greater Vancouver (REBGV) reported that in September of this year, 3,643 residential homes sold compared to 2,333 in September 2019. The benchmark price for all properties is currently $1,045,100; a six per cent increase since October 2019. In Fraser Valley, sales were the second-highest they’ve been in July for 10 years with an increase of 25.5 per cent despite the single-family home and townhome supply being low.

But the condo market?

Well, unlike the GTA, the Greater Vancouver area saw a 36.9 per cent increase in condo sales this year in September. Prices have remained high year-over-year because of the demand for buying condos in the busy, downtown hubs. The current median price of a condo in Vancouver is $683,500. However, those who own investment properties in Greater Vancouver have definitely noticed a drop in rent prices due to the lack of students, immigrants, and tenants losing their jobs or being laid off. In fact, in August, rent had dropped by 9.4 per cent compared to August 2019, according to Rentals.ca.

Top six things you should know before buying a house in these record-breaking housing market times

This may seem obvious, but buying a home is one of the biggest purchases you’ll ever make in your life. It may also be one of the most stressful times of your life, especially if you’re a first-time buyer and new to the world of real estate. But that shouldn’t scare you away. Buying a home is exciting, exhilarating, and something to be incredibly proud of. That being said, there are still some things you should make yourself aware of before buying.

1. Mortgage rates are at an all-time low

The main factor driving Canadians to accelerate their plans to buy a house? The historic-low interest rates.

Obviously, 2020 has been an uncertain time for all of us and the unemployment rates have drastically increased. In order to stimulate the economy and make it easy for people to borrow money, low-interest rates became the new normal and they may continue to stay this low for the next three years according to the Bank of Canada. There are a few reasons why people want to take advantage of this:

  • This could mean substantial savings for monthly mortgage payments
  • Those refinancing their mortgage will notice a huge difference
  • May be easier for people to recover their debts
  • Buyers can make larger purchases
  • Banks are able to lend to even more borrowers

However, if you have a fixed-rate mortgage, you won’t be affected by the rate change. With an adjustable-rate mortgage, your interest rate and mortgage payments can change.

2. You need to become familiar with local real estate trends

If you’re interested in buying a house or an investment property, your best bet is getting familiar with local housing trends and, of course, relying on professional help from a real estate agent who knows the market better than anyone. Not only can they tell you what you’ll expect to pay in certain neighbourhoods, but they can keep you up to date on all information and facts you need to know so you’re as comfortable as possible with your purchase with it be for personal use or investment purposes. If you’re looking for an investment property, it’s also a good idea to rely on a real estate agent who knows what the rental market is like in the area, what you can expect to charge for rent, and what type of renters you should attract. Becoming familiar with the local housing market will also help you set your expectations seeing as bidding wars are becoming quite the fuss. Which brings us to our next point.

3. Prepare for a bidding war (even if it doesn’t end up happening)

Bidding wars and getting worse for buyers amid the global pandemic, leaving buyers feeling devastated they didn’t land their dream home. Why is this becoming such a popular (and hated) trend? Because of the inventory problem. There are more buyers looking for homes than there actually are on the market, leaving buyers’ agents having to pull every trick they know from their hats.

Bidding wars can be frustrating for everyone involved. Ultimately, when it comes to winning a bidding war, knowing how much you can actually afford to spend is crucial because you may need to increase your original offer. You may also want to consider having fewer conditions on your offer to stand out from the others.

4. Ensure that your income is steady before rushing into the housing market

As mentioned above, many Canadians across the country have lost their jobs due to COVID-19, or they’ve had to endure a pay-cut. If you’re someone who has been handed down this financial burden, it may not be the best time for you to buy a home for personal or investment purposes. Plus, when you apply for a mortgage loan, banks will favour those who can prove they have a steady source of income so they can make their monthly mortgage payments on time. You’ll also need funds for a down payment and closing costs, otherwise, if you need to borrow a down payment on top of a mortgage, it will need to come from a different lender than that of your mortgage loan in Canada.

5. Shop around for the right mortgage for you

Shopping around for a mortgage online is more easily accessible than ever before since pretty much everything is moving to the digital world due to the Coronavirus affecting in-person transactions. But finding the right mortgage for your specific needs can be tough to do on your own which is why many buyers lean on a mortgage broker for help. A mortgage broker’s role is a bit different than your agents. Rather than connecting you with the right house, a mortgage broker connects you with the right mortgage term and lender. They’re not just connected to one lender, but various lenders who offer different rates that are better suited for you.

6. Determine if your goals are short-term or long-term

There are many good reasons why people want to get into the real estate market, but when to actually buy a house depending on your goals can vary. So, what are your real estate goals? Do you want to buy your dream home for your family? Do you want to buy a house for investment purposes?

Signs it may be a good time to buy a house for short-term investment purposes to maximize revenue can be:

  • You’re financially stable/comfortable enough to put a down payment on a second home (plus you have a good credit score)
  • You’re able to access a good interest rate and mortgage rate
  • If you don’t have enough for a down payment upfront, you have enough equity to tap into in your first home
  • You’ve done your research to determine when it’s a buyer’s market or a seller’s market – a buyer’s market will mean that there are more properties for sale than there are buyers’ interested, so bidding wars may not be as common, but lower prices will!
  • The investment property you’re interested in is in prime rental spots for positive cashflow

Signs it may be a good time to buy a home for long-term living purposes may be:

  • You have enough saved for a down payment and closing costs
  • You were able to sell your current home
  • Your credit score is good
  • The interest rates are low
  • You’re ready to commit for the long-run and are financially stable to do so
  • The housing market is in good condition and your home will actually appreciate
  • Again, you’ve done your research – the neighborhood is what you’re looking for, the price is right, and the housing market is stable

So … is it a good time for you to buy a house?

Well, ultimately, it depends on a few factors. Whether you’re a first-time buyer, downsizing, or an experienced real estate investor, some of the most important things you will want to consider are:

  • The current interest rates being offered by various lenders
  • What your mortgage rate will be
  • Where you’re looking to buy
  • The current home prices (and if you are in good financial standing with your bank)
  • The current state of the housing market
  • If it’s a buyer or seller’s market

Because of the Coronavirus, many sellers have been nervous to sell, but even while the pandemic has put everything on hold, it seems like many people have been eager to get into the market. This has made some Canadian cities see record-breaking sales, particularly from July to October 2020. Some cities haven’t seen such high sales in years, but even more impressive has been the interest rate prices which have actually hit historic lows.

So, if you are financially set and ready to move into your new dream home or look for your first home, now may be the right time, but just remember that you may come across bidding wars due to the demand for homes being greater than what is actually available.

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HSBC offers mortgage rate below one per cent

TORONTO — HSBC says it will offer rates below one per cent for some mortgages, which rate comparison website RateSpy.com says is a record low for Canada.

The bank is advertising a 0.99 per cent rate on its website for new five-year variable closed term mortgages, with the annual percentage rate, or APR, based on a $200,000 mortgage.

The deal applies to high-ratio residential mortgages, which means the homebuyer has a down payment of less than 20 per cent of the purchase price.

Rates.ca and RateSpy editor Robert McLister says that’s an important point, because the low down payment means the homebuyer will also have to pay for default insurance.

The rate is also variable based on changes in HSBC’s prime rate, which now sits at 1.46 per cent, so the rate could rise over the next few years as the economy mends and the Bank of Canada raises the borrowing rate.

Mortgage rates are currently low, after the Bank of Canada dropped its overnight rate amid the COVID-19 economic downturn.

 

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Canada’s economy ready to ‘take off like a rocket’: CIBC’s Tal

Canada’s pandemic-weary economy is poised to “take off like a rocket” in the latter part of 2021, according to CIBC World Markets deputy chief economist Benjamin Tal.

Delivering his much-anticipated annual economic update during the opening session of the virtual Real Estate Forum in Toronto, Tal had a message of hope for the more than 1,800 attendees. With a vaccine now on the horizon and two-thirds of Canada’s economy already chugging along in close to high gear, he said the country is poised for a strong recovery.

“Clearly we are seeing the light and this light is not a train, it is a real light,” he said, noting, however, that the next few months could still be quite difficult. “We have to go through the winter. The winter will be tough, we all know that.

“The second half of 2021 will be on fire, I believe. This is the time to position yourself to take advantage of this type of rally; economic activity we haven’t seen in a very very long time.

“Basically my point is short-term bad. Medium-term better.”

Tal built his argument on a combination of many factors.

Many factors point to strong recovery
In addition to the pending arrival of a vaccine, or vaccines, is the experience factor. Canadians have had eight months to learn how to live with the COVID-19 pandemic and that has allowed most of the economy to remain open so far during the second wave.

“We know how to deal with this environment more productively relative to March. Confidence, clearly, seeing the light means many of you will start taking (financial) risks, now compared to the summer of next year.”

He said while impacted areas of the economy such as retail, service and travel have been hit very hard, the damage is limited.

“The damage is very deep, but it’s also very narrow,” he noted. “Two-thirds of the economy is already in a full swing recovery.”

As well, because of the nature of the damage, when the pandemic is under control “it is much easier to open a new restaurant than it is to open a new manufacturing facility.”

Canadian government leads in spending
The Canadian government is also leading the world in its spending, compared to the GDP decline, to buoy the economy. While labour income is down about two per cent, government transfers have increased by 50 per cent, he said.

Tal estimated this and other factors have created a massive pool of money sitting in bank accounts waiting to be spent – about $90 billion in private households and $80 billion for businesses.

“Together, $170 billion,” he said. “Money that is there, and all those households are dying to spend this money . . . that is the biggest stimulus you can get.

“This economy will take off like a rocket in the second half of 2021. We have so much pent-up demand and we have the ability to finance it vis-a-vis excess cash that is sitting and doing nothing.”

Canada must be “player” in U.S. recovery
Tal also noted the results of the U.S. election will factor into Canada’s recovery.

He said Canada must position itself to share in the benefits of a massive stimulus expected to be injected into infrastructure projects by the incoming Democrats, which will be a key to its own economic recovery.

“(Incoming president Joe) Biden is talking about buy America. We have to convince him actually to buy North America.”

Although he said the Keystone pipeline could be in jeopardy, Biden is expected to take a harder line on fracking, which could mitigate any potential impacts to Alberta’s oil patch.

Biden is also likely to create a more united front to battle China on trade issues — a front likely to include Canada and Europe – rather than a solo battle. Tal said Canada is going to be forced to choose a side in what he calls a trade Cold War.

“When you are in a Cold War, you have to choose a side. We know where we are,” he said, noting the Liberal government’s attempts to foster more trade with China and other countries have either fallen flat or had limited success. “Our reliance on the U.S. will rise.”

One drawback of having the Democrats in power, however, is that the U.S. will once again open its borders (once the pandemic is under control) to immigration. That means Canada will need to compete for the brightest and best, he said.

Tal believes office sector will be fine
In terms of direct real estate and commercial real estate impacts, Tal said he expects a new normal that doesn’t look radically different from pre-pandemic days.

“I believe (the pandemic is) a condition,” he explained. “I believe 2008 was a condition, I believe 9/11 was a condition, but we adjusted to make it feel like an event.

“I believe we will be back in the office. Clearly we will be working more from home, and if it’s -20 outside and snowing maybe that day I will be working from home. But (what do) I think (of) the predictions that office space is dead? Wrong. Simply wrong. We will be back in the office.”

He said good retail will also survive and prosper, noting that as soon as lockdowns ended, people were eager to return to stores, restaurants and other such venues despite a host of pandemic-related restrictions and concerns.

Yes, e-commerce will grow, but he expects bricks-and-mortar retail to retain an important role.

“People said over the first six months of the crisis, (e-commerce) gained 10 years in market share, which is true. But in the last five months we lost five years. It is exaggerated.

“Quality will be the dividing line. High-quality, good experience will benefit and do extremely well.”

Observing these trends has led him to conclude that while much is changing, much will remain the same.

“Clearly the economy is being transformed but when the fog clears, everything will look very, very familiar,” he predicted.

“Governments are all trying to support the economy. We are all buying time. This crisis has an end game, this end game is a vaccine. It’s coming and between now and then, we are all buying time.”

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