Calgary housing market – where opportunities remain

Fergal McAlinden
other

The city’s market has cooled in recent weeks, although prices remain robust

 With Canada’s housing market in the throes of a sharp decline in sales and activity, one city that’s proven especially resilient in recent weeks has been Calgary.

Alberta’s most populous urban sprawl actually saw total sales climb from July 14-20 compared with the same week last year, according to statistics from the Calgary Real Estate Board (CREB), posting an increase of over 9% (496 sales in 2021, compared to 542 in 2022).

The city’s year-to-date sales are nearly 23% higher than this point last year, while CREB noted in its latest monthly report on housing that it’s “unlikely” a full reversal of price gains in the year to date will take place anytime soon.

Activity heated up in the city roughly between November 2021 and February this year, Calgary-based broker at Mortgages for Less, Josh Tagg (pictured top), told Canadian Mortgage Professional. That period saw multiple offers on properties, with many would-be buyers having to go in without conditions attached to their bids.

Read next: How are brokers advising their clients on rate hikes?

It was a trend that mirrored the frenzy that became the norm in red-hot markets like Toronto and Vancouver, but Tagg said it “quickly calmed down” when the Bank of Canada began its rate-hiking trajectory in March.

It’s resulted in fewer transactions on a month-to-month basis, with many buyers deciding that they’d prefer to wait out those rate increases and bide their time until they either start inching lower or stop rising, although that sentiment is likely to be “short-lived,” according to Tagg.

That’s because the impact of higher rates is offset somewhat, he said, by the fact that the housing market is cooler with fewer bids and lower risk of having to overpay.

“While some people are going to be priced out of the market due to the rate increases, I think there will be enough people that will recognize [those] increases are temporary,” he said.

“But price increases last longer. If they have a low rate but they spent $30,000 more on a house [over list price], that’s not actually saving – it’s a little bit of a higher rate for a shorter period of time. [Meanwhile] not having to outbid somebody in a bidding war actually comes out more favourable than paying $30,000, $40,000, $50,000 extra on the house.”

The woes of first-time homebuyers, who often saw themselves outbid and priced out of property during the pandemic housing market boom, are well documented. That landscape could be shifting, though, as the market cools – even though interest rates are creeping upwards.

“A first-time buyer that’s well positioned is still going to have lots of opportunity out there,” Tagg said. “The entry market and the condos and townhouses – that never really went up nearly as much as the detached market anyway. And so first-time buyers still have opportunity, as long as they have a bit of a cushion in their income to get through any future rate increases that are happening.”

The Bank of Canada’s recent rate jump means that most borrowers are now having to qualify at a level above 5.25% because that figure is lower than their contract rate plus 2%. That might push some buyers to their maximum approval amount – and although that cohort is likely to move to the sidelines as a result, there will still be plenty of Calgary buyers who won’t be dissuaded from entering the market, Tagg said.

Read next: What’s next for Canada’s housing market?

“Those that were not going to spend the maximum they would qualify for anyway, or have higher income levels and can still get themselves a home they’re happy with well under the upper limit of what they could qualify for – those are the ones that I think we’re going to see continuing to buy homes over the next little while,” he said. “And not until we start to see rates trending in a downward direction are we going to get those that are pushing the upper limits of what they would qualify to buy.”

Ultimately, Tagg stressed that the real estate and mortgage markets would remain robust despite that rising-rate environment, with variable rates still representing an excellent opportunity even though they’re moving upwards along with the Bank of Canada’s benchmark rate.

“The sky isn’t falling. The interest rates are only going to go up a little bit more, by about 1%,” he said. “It is definitely better to take that variable rate than the fixed in almost all cases, because then you get to ride it back down once maybe 18 months from now when interest rates start to go down.”

The cost of extra interest is lower in most cases than the added price of the homes when the market’s hotter, he reiterated, noting that a cooler market could be a welcome development for many across the province.

“I think that’s the silver lining in all of this: that removing some of the competition has pulled some of the out-of-province buyers out,” he said, “and it’s allowing things to kind of reset and get back to more normal for those who are in Alberta.”

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Daphne Bramham: With Canada failing to meet its immigration promises, B.C. needs more control

Daphne Bramham
The Vancouver Sun

With the system in shambles, provinces like B.C. want more control over who comes and more money to settle newcomers, including Ukrainians.

 Afghan refugees head for buses after arriving at Toronto Pearson International Airport. Photo by M.Cpl. Genevieve Lapointe /Canadian Forces Combat Camera

Across B.C., “Help Wanted” signs are ubiquitous. Labour shortages have forced businesses to drastically cut their hours, hospitals and emergency rooms to close, as well as planned and unscheduled cancellations of B.C. Ferries sailings.

Despite grumbled anecdotes about people not wanting to work, B.C. has one of Canada’s highest workforce participation rates.

Bear in mind that last year, B.C. also had the highest number of new arrivals recorded in 60 years — 100,797 people. International migration was the second-highest recorded, while cross-country migration was the highest in nearly 30 years.

Even with that, and despite a seemingly intractable, affordable-housing crisis, the fact is B.C. needs more people to fill essential jobs.

And that is exactly why the provincial government wants Ottawa to give it more control over who comes here, and is asking for more money to help settle all the newcomers.

Last year, only 6,750 people came under the provincial nominee program that allows provinces to select applicants whose skills and training match labour needs. Next year, it wants 8,000 nominees, and 10,000 three years from now.

It made the request ahead of Thursday’s meeting of federal and provincial immigration ministers.

Nathan Cullen is B.C.’s municipal affairs minister and has responsibility for immigration. He describes the program as “more precise” than other immigration programs, noting that B.C.’s priority last year was health-care and long-term care workers.

“(The nominee program) is not a blunt instrument, which is what a federal immigration program is by its nature,” he told Postmedia before leaving for the federal-provincial meeting in New Brunswick.

“We’ve just heard from Ontario and they’ve been making similar requests of the feds to gain a little bit more control over what happens.”

As a former MP, Cullen isn’t certain how much of its “cherished authority” Ottawa is willing to give up. But he hopes to convince Federal Minister Sean Fraser that expanding the nominee program, which has a much faster turnaround time than myriad other immigration streams, will help clear the backlog of applications that is nearing two million files.

The benefit isn’t just a bureaucratic one. With skills matched to jobs, it should also mean that highly skilled newcomers don’t end up driving taxis instead of doing the jobs they are trained for.

Of course, there is a huge caveat that Cullen readily acknowledges. Canada is glacially slow in recognizing internationally obtained credentials — especially for physicians and surgeons. Here, he said it can take up to three times as long as in other G20 countries — “And if you’re slow in this kind of world, it means you just don’t get the person at all.”

The minister plans to raise that at Thursday’s meeting, along with concerns about what might best be described as Canada’s “do-it-yourself” immigration offer to Ukrainians.

Within days of the Russian invasion, Prime Minister Justin Trudeau offered safe haven and a pathway to citizenship to all Ukrainians who could find their own way here.

“We’re not ready for them, and we need the feds to be,” Cullen said. “(Federal politicians) have had time. There’s no more excuses like, ‘It’s all happening so fast.’ That’s done. They’ve had the time and the program has not been set up properly yet.”

With the usual processes waived, Ukrainians are arriving and often there is no one to meet them. Nobody knows when they are coming, where they are landing, or even how many of the six million who have fled might end up here as Russia intensifies its attacks.

Earlier this year, B.C. shored up settlement societies with nearly $15 million because the number of immigrants and refugees arriving is beyond the capacity that Ottawa has funded them for. And last month, the province set up a hardship fund for Ukrainians offering up to $1,770 a month for a family of four.

Ukrainian-Canadians have also stepped in to fill the gaps since the only federal help Ukrainians get is a two-week housing allowance.

Still, with no contact point with any agency or government, vulnerable women, children and unaccompanied minors are open to exploitation. It’s something that keeps Cullen awake at night.

Already, his officials had to rescue one family who had found rental accommodation on social media. When they arrived, the landlord confiscated their passports and tried to restrict their movements. Fortunately, they had a contact in the Ukrainian community who got in touch with the ministry.

Meanwhile, immigrants are enduring months-long waits in overcrowded hotel rooms in dangerous neighbourhoods because there is nowhere else to go until settlement societies or concerned citizens manage to scrounge something better. Sometimes, it’s from developers waiting for demolition permits.

Cullen insists that recent increases in housing starts and measures his government has taken to get unused housing into the rental pool is starting to make a difference. But he said it is still going to take more time to even out.

Immigrants also need health care and schools for their children. Those, too, are provincial costs.

So far, the federal government has failed to match its immigration promises and targets with the money necessary to properly fulfill them.

Small wonder that the provinces want more control and more money.

“We have to match the story we want to tell about ourselves as being a generous, open country … with the resources and the determination that’s required,” Cullen said.

And right now? That’s not happening.

 

© 2022 Vancouver Sun

What brokers need to know about rent-to-own options

Fergal McAlinden
other

A ‘people first and property second’ approach is essential, says expert

 Among the options that mortgage brokers recommend to clients who can’t qualify through a bank, it’s fair to say that rent-to-own offerings rarely feature at the top of the list.

That niche arrangement, which usually caters to borrowers who aren’t currently able to afford the money down that’s required for a mortgage or have blemished credit, lets would-be buyers make payments on the home they’re renting that go toward both rental costs and a future down payment on that property.

It’s aimed at navigating borrowers through a timeframe, usually between two and four years, that will allow them to repair credit and put together the funds required to eventually purchase. Unlike a standard rental agreement, monthly payments are made up of a bundle that includes carrying costs (property taxes, insurance, and mortgage) as well as a down payment instalment.

Part of the reason that many prospective buyers have traditionally been reluctant to consider entering into a rent-to-own agreement is that in the past, they were often viewed as skewed to the landlord’s needs, according to Rachel Oliver (pictured top), a leading authority on the subject.

That meant the owner of the property might charge a premium to the rent-to-own tenant – without having a clear or realistic understanding of what it will take for that individual to ultimately afford the down payment at end of term.

“At the end of the day, rent-to-own is all about achieving a goal of qualifying for a mortgage on a particular property,” she told Canadian Mortgage Professional. “And if you don’t approach the process with that end goal in mind, things fall apart very quickly.

Read next: Canadians’ debt concerns surge amid rising rates

“So that’s the point when people were kind of doing a one-on-one arrangement. There were a lot of topsy-turvy kind of agreements, things written on the back of a paper napkin, he-says-she-says scenarios, and really poor success rates.”  

Still, Oliver emphasized that rent-to-own arrangements can represent a good option for Canadians when working with a company whose interests firmly align with their own – and that works with a clear and consistent process. She serves as managing partner at Clover Properties, which offers rent-to-own options under what Oliver described as a “people first and property second” mantra.

That’s tailored toward Canadians who have been turned away by a lender but don’t want to return to renting while they work out their credit situation and how to come up with the funds required for a down payment on another property.

“Let’s face it, life happens and it’s very difficult to manage all of those moving parts on your own,” Oliver said. “You need some guidance, you need some help, and our program creates a framework, structure and accountability process [so] that once [clients] move into that rent-to-own home, they’ll get that during the rent-to-own term.”

Those programs also designate a budget based on the stress test in Canada, she added, to ensure that borrowers meet the lending criteria in the marketplace, before they find a suitable property before receiving projections on what their monthly commitment and down payment instalments will look like.

Read next: New HELOC regulation – what do brokers need to know?

If the client agrees to the numbers, a private investor steps in to purchase the home. “They have a 20% down payment and they want to help the [renting] family,” Oliver said. “Really, this process is families helping families with our team in the middle, making sure that nobody oversteps boundaries, and everyone is getting an arrangement that is going to be equitable.”

Rent-to-own customers know exactly what price they’re to eventually buy the property for up front, Oliver said, with all conditions pre-negotiated prior to the term beginning. There’s also no penalty to exit early and purchase ahead of schedule – unless the investor has, for instance, a variable-rate mortgage with a differential penalty, which is then transferred on to the rent-to-owner.

Of course, there are plenty of risks associated with rent-to-own products; RateHub emphasizes the importance of a solid agreement with legal protection and clear understanding of contract stipulations among both parties.

Working with a credible company in the space is essential, too, said Oliver, who encouraged mortgage brokers to research those options in more detail and “take the time to understand how rent-to-own can help certain clients – especially in a market where so many people can’t even afford a private mortgage.”

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B.C. slaps three-day cooling off period on real estate sales, starts Jan. 1

Gordon Hoekstra
The Vancouver Sun

The homebuyer protection period, the first of its kind in Canada, goes into effect on Jan. 1, 2023.

The B.C. government announced Thursday a new cooling off period on real estate sales, a measure meant to protect homebuyers pressured in high-risk sales. Photo by Azin Ghaffari/Postmedia files

The B.C. government announced Thursday a new cooling-off period on real estate sales, a measure meant to protect homebuyers feeling pressured in high-risk sales.

 

The homebuyer protection period, the first of its kind in Canada, goes into effect on Jan. 1.

It was immediately condemned by the B.C. Real Estate Association, which represents 24,000 real estate agents.

The cooling-off period will give a buyer three business days following an accepted offer to conduct due diligence such as inspections, seeking legal advice and confirming financing.

The cooling-off period is one of seven recommendations the B.C. Financial Services Authority made in May to protect consumers in B.C.’s real estate market.

“Too many people have been faced with giving up an inspection in order to buy a home,” B.C. Finance Minister Selina Robinson said Thursday. “This is a major step toward providing homebuyers with the peace of mind they deserve while protecting the interests of people selling their homes — for today’s market and in the future.”

 

The homebuyer protection period includes a cancellation fee of 0.25 per cent of the purchase price, or $250 for every $100,000, for those who choose to back out of a deal. For example, if the purchaser cancels on a $1-million home, they would be required to pay $2,500 to the seller.

Trevor Koot, the real estate association’s CEO, said the sector was extremely disappointed in the minister’s decision to implement the homebuyer protection period in isolation from other measures

“This goes against the advice of the province’s real estate regulator, which — in May — recommended several consumer protection measures to be implemented as a package, not à la carte,” he said.

Koot said the government’s decision undermined the independence and expertise of the province’s real estate regulator and should concern British Columbians. He said the B.C. government needs to give the B.C. Financial Services Authority the power to conduct its own research and make its own decisions with respect to regulation.

 

The province says it is continuing to study the advice from the authority, which oversees credit unions, mortgage brokers, and insurance companies in addition to real estate.

In November, the province announced plans for a seven-day cooling-off period, but the B.C. Real Estate Association pushed back. It said it preferred another recommendation from the financial services authority — a pre-offer period that would require a listing be on the market for a minimum of five days before any offer was accepted.

The real estate association has said, ultimately, the only way to increase affordability is to increase supply.

Tsur Somerville, senior fellow at the UBC centre for urban economics and real estate said, “The homebuyer protection period is something that is long coming and much needed as a modernization package for how homes are purchased in British Columbia and for the stability, accountability and transparency of the entire market.”

 

Andrey Pavlov, a professor of finance at Simon Fraser University’s Beedie School of Business, said the cooling period is a misguided policy because it does nothing to remove the obstacles to increase housing supply, such as overcoming the very lengthy city approval process for development and a cumbersome building code.

He noted the cooling period could discourage sellers, which would further restrict the already highly insufficient supply of housing.

Pavlov said he believe the timing is also counterproductive as the housing market is experiencing a slowdown, if not in prices, in sales, due to high and increasing interest rates.

The Financial Services Authority also recommended sellers be required to provide property disclosure forms and key strata documents up front as part of the listing process.

 

And their advice included a requirement for buyers to disclose offers made on other properties, to discourage buyers from submitting several concurrent offers and to allow sellers to make an informed decision if there is the possibility a buyer may walk away from a sale for reasons other than those related to the immediate sale.

Other suggestions include requiring sellers to disclose how many and the value of offers have been received in cases of bidding wars where potential buyers are being asked to revise their offers, as well as standardizing certain clauses in home purchase contracts, such as financing, home inspection and legal advice.

With Postmedia files.

[email protected]

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© 2022 Vancouver Sun

Luxury markets start to normalize following surge

Micah Guiao
other

The period of its “historically anomalous performance” is over

 The major metropolitan luxury real estate markets broke consecutive records throughout 2021, but have since started to normalize midway through 2022, according to Sotheby’s International Realty Canada.

Demand for luxury properties intensified in 2021 with both domestic and non-resident activity reaching unprecedented levels. In an earlier report, Sotheby’s found home sales valued at more than $4 million to have surged by 224%, while ultra-luxury sales valued at more than $10 million have shot up by 238% from 2020 levels.

The real estate franchisor called it a “historically anomalous performance” – one that 2022 has proven was not meant to last.

Read next: What has prompted the luxury housing market’s surge?

By the first half of 2022, residential sales priced $1 million and above sank 10% in the GTA. The causes behind its slowing performance are linked to the rise of everything – inflation, mortgage rates and international geo-economic headwinds.

However, the Sotheby’s report said it was “near-term hesitancy” at worst, considering that the demand for housing and consumer confidence in top-tier real estate remain strong.

“Even as the market gradually came into balance, Greater Toronto Area residential real estate sales over $4 million were up 7% year-over-year from previous records set in the first half of 2021,” the report said. “Sixteen (16) properties sold over $10 million on MLS, one unit more than the record number of ultra-luxury properties sold above this price point in the first half of 2021.”

Read more: Luxury market sees record-breaking 2021 performance across the board

On the other hand, the market for luxury condominiums continued unharmed as affordability challenges continue to push homebuyers toward high-density housing.

“$4 million-plus condominium and attached home sales posted annual gains of 13% and 100% in the first half of 2022, surpassing previous record activity in the first six months of 2021, while single family home sales over $4 million were up a modest 6%,” the report read.

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Province backs off goal to build 114,000 new homes

Peter Mitham
Western Investor

Units added to the secondary rental market now part of the tally

The province says it won’t build the 114,000 affordable new housing units it intends to create by 2028.Sandor Gyarmati/Delta Optimist

According to the province, more affordable housing is a key goal of this week’s announcement that the four-year-old speculation and vacancy tax will expand to six new jurisdictions next year.

The tax, levied on the value of unoccupied or underutilized residences, will now apply to properties in Lions Bay and Squamish as well as the Vancouver Island communities of North Cowichan, Duncan, Ladysmith and Lake Cowichan. This brings to 14 the number of regional districts and municipalities where the tax applies, jurisdictions home to 73.5 per cent of the province’s residents.

The vacancy tax is one of the tools that B.C. Finance Minister Selina Robinson said the province was wielding in order to achieve the BC NDP’s long-standing ambitions to create 114,000 new affordable homes in the province by 2028.

“There is a drastic shortage of affordable housing in the province,” Robinson’s predecessor as finance minister, Carole James, said in formally announcing the goal in the 2018 provincial budget. “We are going to build the homes people need.”

But according to Robinson, not all those homes will actually be built.

While the province pledged $6.5 billion towards the creation of 114,000 housing units in 2018, Robinson told Western Investor this week that the province intends to build just a third of the total.

“The expectation is about 39,000 [units] is what we’re going to be delivering with that [$6.5 billion],” she said.

The remainder will be delivered through initiatives such as the speculation and vacancy tax, which she repeatedly described as “one tool in the toolbox” to address the need for housing and affordability.

Rather than funding new construction, the tax effectively coerces people with more than one home to rent out second properties, under pain of a 0.5 percent tax on the assessed value of their homes if they’re Canadian nationals or two per cent if they’re foreign nationals.

She said the tax has so far prompted property owners to return a total of 20,000 condos to the Metro Vancouver rental market since 2018. (The claim is based on Canada Mortgage and Housing Corp. estimates of the secondary rental market. To give credit where credit is due, some of those units may in fact have returned to the rental stock as a result of the City of Vancouver’s empty homes tax.)

But repurposing existing units isn’t enough. Recent reports by CMHC, Scotiabank and the real estate industry have flagged a sheer lack of housing relative to population as a persistent and deepening problem. The stock is essentially too small to house everyone adequately, and more needs to be built.

A report CMHC issued June 23 estimated that 570,000 new homes of all types are required in B.C. by 2030 to meet the broad range of housing demand that exists and restore any semblance of affordability to the market.

Robinson said the province has funded 34,000 new affordable homes to date. The remaining 60,000-odd units towards the province’s 114,000 goal will be built in partnership with municipalities, which will lead the creation of housing at sites – for example – adjacent to rapid transit lines.

“You’re seeing now significant action being taken … as we invest in SkyTrain out to Langley and out to Arbutus,” she said.

But the province’s performance has left observers unimpressed.

An analysis earlier this year by Marc Lee of the Canadian Centre for Policy Alternatives noted that just 11,000 units had been completed while a further 12,500 were deemed to be in progress.

“Overall, the BC government’s performance is still far too modest to make a real dent in housing affordability,” Lee concluded. “Given the crisis of affordable housing, we urge the BC government to take on more of the heavy lifting.”

Anne McMullin, president and CEO of the Urban Development Institute in Vancouver, said many of the projects funded by the province are caught up in the same municipal approval processes that have stymied developers.

She supports calls by the BC Urban Mayors Caucus for the province to set housing targets based on the municipal housing needs reports the province has required municipalities to prepare since 2019.

“[We’re] hoping to see some legislation in the fall from the province to address that,” she said.

 

© 2022 Western Investor

Edmonton 85 acres with industrial potential sells for $13.5 million

Western Investor Staff
Western Investor

The parcel is Crown land but seen as ripe for future industrial development due to its location next to large Apex Business Park.

 Maxwell Polaris Commercial, Edmonton, for Western Investor

 

Property type: Crown land

Location: 14490 164 Street, Edmonton, Alberta

Size of land: 3,702,600 square feet

Land size in acres: 85 acres

Zoning: Agricultural

Potential: Industrial development

List price: $15.72 million

Sale price: $13.52 million

Vendor: Government of Alberta

Date of sale: July 5, 2022

Brokerage: Maxwell Polaris Commercial, Edmonton.

Broker: Ian Fletcher

 

© 2022 Western Investor

Canada’s inflation rate surges even higher

Fergal McAlinden
other

Latest figures mark the largest yearly increase since 1983

The inflation rate in Canada rose once again in June, climbing 8.1% over the same month last year in its biggest yearly increase for almost 40 years.
Inflation figures released by Statistics Canada on Wednesday indicated that the measure had posted its most noteworthy year-over-year gain since January 1983, with the national statistics agency saying gas price increases were the main factor behind the growth.
Gas prices skyrocketed by over 54% compared with June 2021, StatCan said, meaning that the inflation rate would actually be significantly lower – about 6.5% – if gasoline was excluded.
The news came as little surprise following Bank of Canada governor Tiff Macklem’s remarks on Thursday that inflation would hit “a little over” 8% in the next announcement.
Indeed, many economists had believed the rate could come in even higher, with a group recently polled by Bloomberg expecting a year-over-year increase of 8.4%.
Read next: Bank of Canada announces huge rate hike
Last week, Canada’s central bank increased its benchmark rate by a full percentage point in a surprise move, saying in remarks accompanying the news that inflation was “higher and more persistent” than it had envisaged as recently as April.
“While global factors such as the war in Ukraine and ongoing supply disruptions have been the biggest drivers, domestic price pressures from excess demand are becoming more prominent,” the Bank said.
It indicated that it expected inflation to start decreasing later in 2023, returning to a level of around 3% by the end of next year and meeting the Bank’s target of 2% by the end of 2024.

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Many willing to relocate to find an affordable – home but not too far: Re/Max study

Joseph Ruttle
The Vancouver Sun

Housing prices keep soaring in B.C. and other Canadian hot spots, but “the market is starting to cool and balance itself out,” says Re/Max

 Not surprisingly, cities like Toronto and Vancouver didn’t fare well in a new Re/Max housing affordability surveyed conducted by Leger. Photo by Getty Images

How far are you willing to move to find an affordable home to buy? A new Re/Max report conducted with Leger shows most people are OK with relocating to find a housing fit, but less than four in 10 would accept a different city, province or region.

 

About two-thirds (64 per cent) of Canadians say relocating is an acceptable sacrifice to find a home they can afford. Half say a distance of about 100 kilometres from where they currently live is the limit.

For those of us living along the pricey B.C. south coast, finding affordable housing might take a much longer journey than that.

Across the country, the city with the best 2022 housing affordability, based on residential selling price, is Brandon, Man., which replaces last year’s leader, Winnipeg. Next up in order are Regina; St. John’s, Nfld.; Moncton, N.B.; and Red Deer, Alta.

Red Deer also topped the list in a related category. It was Canada’s most affordable market based on the share of income spent on mortgage payments at about 26 per cent of average monthly income for an average-priced home. Best mortgage cities after that are Regina (27 per cent); Brandon (27.5 per cent); Thunder Bay, Ont. (30 per cent); St. John’s (31.5 per cent) and Moncton (33.5 per cent).

 

Other top sacrifices people are willing to make for affordability are changing their type of home (say, a condo instead of single-family), at 56 per cent; co-owning a home with family or friends (29 per cent); and renting part of a home for income (27 per cent).

A healthy housing market is characterized by price appreciation in the mid- to high single digits, and many markets across Canada are re-entering that comfort zone

Re/Max

While the main barriers to entering the house market remain high prices, the cost of living and salary shortfalls, rising interest rates are suddenly a major factor. Nearly a quarter of Leger survey respondents (24 per cent) cited high rates, up from just six per cent last year.

Higher interest rates have already had an effect in the short term, says Re/Max Canada president Christopher Alexander, who noted “the market is starting to cool and balance itself out, bringing some much-needed relief from the sky-high prices that we experienced during much of the pandemic.”

 

“The shifts we are seeing in the housing market, with prices starting to ease across the country in tandem with softening demand and sales, are an overdue adjustment,” said Re/Max executive vice-president Elton Ash. “A healthy housing market is characterized by price appreciation in the mid- to high single digits, and many markets across Canada are re-entering that comfort zone.”

The report relied on brokers and agents in 24 key Canadian markets analyzing market activity and housing affordability trends in the first half of 2022.

It found that the most affordable neighbourhoods in larger B.C. centres are Victoria’s Sooke, Saanich West and View Royal; and Rutland, Glenrosa and Kelowna North in Kelowna/Central Okanagan.

 

Brokers in high-priced Victoria and Vancouver reported an increasing trend of friends and family pooling their house-buying resources.

The report also showed many others aren’t even thinking about buying a home right now. Sixty-eight per cent of respondents said they can’t afford to buy one in their neighbourhood or region of choice in the next six months; 64 per cent said eroding house affordability has them less confident about buying; and 63 per cent said rising interest rates have put their buying plans on hold for the foreseeable future.

Thus it’s not a surprise that 70 per cent agree Canada needs a national housing strategy to solve the crisis, up 10 per cent from last year.

The survey conducted by Leger for this housing affordability report was completed of 1,529 Canadians who are part of a Leger online panel between June 24 and 26, 2022. A probability sample of the same size would yield a margin of error of plus/minus 2.5 per cent, 19 times out of 20.

[email protected]

 

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© 2022 Vancouver Sun

What’s next for Canada’s housing market?

Fergal McAlinden
other

A recent rate jump marks a “hammer to housing” according to a BMO economist

 It’s clear that interest rate increases are having a strong impact on Canada’s housing and mortgage markets, with June marking a third straight monthly slowdown on the housing front.

Home prices registered their largest monthly decrease on record as home sales also inched downwards in June: the national benchmark price fell by 1.9% over May, while sales were down 5.6% over the same period and a huge 23.9% below activity in June 2021.

That news arrived just two days after the Bank of Canada made a landmark announcement, increasing its benchmark rate by 1% in a surprise move – its largest hike since 1998 – that signalled its continuing intention to combat inflation through aggressive action on rates.

The move is nothing less than a “hammer to housing,” according to Bank of Montreal (BMO) senior economist Robert Kavcic, who published a note indicating that he expected an “even deeper correction” in the country’s housing market as a result of the central bank’s rates strategy.

“The fact that the market had already cracked after the Bank of Canada’s initial move in rates only reinforced how sentiment-driven the market was, and how quickly that can change,” he said, noting that qualifying rates were now climbing in tandem with actual mortgage rates under stress test rules.

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RBC economist Robert Hogue, meanwhile, said home prices were dropping “faster and faster,” with Ontario and parts of British Columbia posting the most significant declines and price correction beginning to spread across the country.

The MLS Home Price Index was down in Winnipeg, Montreal and Quebec City between May and June, he said, which he believes will “mark a turning point” for the housing market in Canada. 

Kavcic highlighted the influence of psychology in Canada’s housing market, emphasizing the “abrupt turnaround” that now sees more Canadians expecting lower prices than higher ones in the near future.

As of the July 8 week, only 30% of Canadians expect higher prices, according to weekly survey data from Nanos – a dramatic decline from 70% at the height of the recent housing market boom.

“The proof is that even just an initial nudge in interest rates was enough to crack expectations and trigger a correction,” he said. “The latest move by the Bank of Canada will wash away any remaining froth.”

While the possibility of a housing market crash in Canada has been discussed in recent weeks amid those cooling conditions, that’s an unlikely prospect, according to Ratehub.ca co-CEO and president of CanWise mortgage lender, James Laird (pictured top).

He told Canadian Mortgage Professional that there would still be sufficient clamour for housing among specific cohorts to render a market collapse improbable.

“I don’t think demand for housing has changed at all,” he said. “I think first-time homebuyers, millennials, Gen Z [renters] who don’t own – they still want to.

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“Rental rates are going up quite significantly, so even if your mortgage payment is higher with the higher rate, if the mortgage payment’s going to be the same or lower than what you have to pay to rent the same property, people are still going to make the purchase decision if they can qualify.”

Indeed, Ontario’s provincial government recently announced that its rent increase guideline for 2023 would be 2.5%, its highest in a decade and a significant jump from the 1.2% cap this year.

That trend is set to be accompanied by an immigration surge in the coming years: in February, the federal government increased its target for new permanent residents to 432,000 in 2022, with 447,055 slated to arrive next year and 451,000 in 2024.

“With close to half a million new Canadians arriving each year, one of their first priorities is housing,” Laird pointed out.

He also noted that Canada’s housing market has prior form when it comes to bouncing back quickly from a slow year, having recovered swiftly following the global financial meltdown over a decade ago.

“Looking at real estate data from 2009, the year after the financial crisis really caused real estate to slow, and I think it was even more disconnected than it is now,” he said. “The year after that was a huge year. So, whenever it stabilizes, expect it to kind of rush back.”

 

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