Category Archives: National Real Estate
Homeowners poised to cash in on decade-long housing boom
Decade-long housing boom fuelling a buy-up bonanza, ReMax says
Susan Pigg – Toronto Star
More homeowners are poised to cash out and move up this year backed by gains averaging some 93% during a 10-year housing boom that, in losing some of its steam, has opened new doors for would-be buyers, according to a new report from realty company ReMax.
Move-up buyers took advantage of the softening market last year as a chance to buy a bigger home in 14 of 16 major markets surveyed by ReMax, the exceptions being Victoria and Vancouver, where sales slumped significantly.
Move-up houses in the $500,000 to $700,000 range accounted for about 20% of sales across the GTA last year, up 8% from the previous year, says the ReMax Move-Up Buyers Report 2013 released Thursday.
Comment: But that is an arbitrary name given to an arbitrary price range. I have a lot of first time buyers in the $450-550,000 range these days. A $500k property is becoming a first home. And the shift in value allocation could simply be a result of rising prices. For all we know, without access to the data, 10% of that 12% increase could be in the $500-510,000 range.
That buy-up spree is likely to continue this year as interest rates remain low and many first-time buyers take a breather in the face of tougher mortgage lending rules, the report notes.
While departing Bank of Canada governor Mark Carney, and others, have warned of the hazards of treating houses like ATM machines – for living the good life or funding retirement – the report paints a fascinating picture of who won the biggest jackpot in the Canadian housing market lottery between 2002 and 2012.
Surprising as this may seem, you would have seen an almost tripling of the value of your house (from $100,751 to $301,145) – more than 11% per year from 2002 to last year – if it was in Regina rather than Riverdale.
Comment: Yet no one cries the blues about Regina housing prices, no one calls for the crash of that market.
Second and third place in the housing gains department were Saskatoon and Winnipeg, with annual increases averaging 10.25 and 10.03 respectively over the decade, ReMax says.
Comment: Funny… not Vancouver or Toronto? Yet they are the focus of 99% of real estate writing.
Across the GTA the average house appreciated from $275,231 in 2002 to $497,298 last year, an almost 80% increase over the decade, amounting to average annual gains of about 6%.
Comment: Which, everyone needs to note, is not a huge amount. How does 6% per year turn into a bubble? The last bubble we had, in the late 1980s, had appreciation rates over 100% a year for a short time. That is a bubble. Only 6% a year is just a nice steady rate of return. Heck, if your mutual fund only got you 10% you would be mad!
Those price escalations eased somewhat from 2007 to 2012 (from an average $376,236 to $497,298, amounting to a still-hefty 32% gain) and show “no signs of being in bubble territory – and most definitely not in the often cited markets of Vancouver and Toronto,” said Gurinder Sandhu, executive vice president and regional director of ReMax Ontario-Atlantic Canada in a statement on the report.
Comment: Amen!
“While gains in Regina, Saskatoon and St. John’s have been exceptional, house prices are playing catch up, given a stronger economic status and following decades of steady, but modest, growth.”
Saint John recorded the lowest price gains during the decade-long boom, the report shows, with the average house price increasing by about 62%, or less than 5% a year, from an average of $103,544 in 2002 to $168,048 last year.
The report found those first-time buyers now in the market are moving up faster than in the past, an average four to seven years from their initial purchase.
“Inventory levels remain a challenge within Toronto proper – with fewer than 300 single-detached homes currently listed for sale in the $500,000 to $700,000 price range from Victoria Park to Islington, north to Steeles Ave.,” the report notes.
Comment: As I said, those are not necessarily move-up homes, they are starter homes.
Listings are expected to climb as the March to May spring buying season nears.
At the same time, the number homes for sale in the 905 regions has increased, “allowing purchasers the luxury of time and choice.”
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Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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Canadian luxury real estate set for a boost from the newly rich
Richard Blackwell – The Globe and Mail
Dramatically growing numbers of mobile, wealthy individuals around the world promise to push up demand for luxury real estate, making high-end properties in Canada’s biggest cities increasingly valuable.
In 10 years, there will be 50% more people on the planet with more than $30-million (U.S.) in net assets – or about 286,000 – according to a new report from British-based real estate consultancy Knight Frank. Emerging markets in Asia and Latin America will see the most dramatic growth, with China’s wealthy population expected to more than double by 2022.
In Canada, the numbers in that category will rise by about 35% over the decade to roughly 6,640, the study says. The largest concentration in Canada will be in Toronto, which currently ranks 20th among global cities for the number of high-net-worth individuals.
One of the consequences of the growing number of wealthy people is that there will be an increasing demand for high-end real estate, even though the supply of luxury properties will remain virtually static, the report suggests. That means the most popular cities for the wealthy – New York and London are at the top of the list – will see increasing upward pressure on prices.
For Canada’s key luxury markets, particularly Vancouver, that will mean a long-term jump in prices for high-end real estate, despite recent softness.
The Vancouver region’s premium real estate market took a breather last year, although sales of properties valued at $3-million or higher remained well above levels of a decade ago.
The current weakness in Vancouver’s luxury market “is probably a temporary thing,” Andrew Hay, head of global residential property at Knight Frank, said in an interview from London.
The amount of money pouring into high-end real estate in any specific location shifts as wealthy people look for new places to put their funds, currency rates fluctuate, and governments put in place measures to cool overheated real estate markets, he said. “There is an increasing amount of money waiting to be spent, but it is better informed and changes direction quicker than ever before.”
While Vancouver is clearly on the radar screen for wealthy Chinese investors, they will assess other options such as Sydney, London or New York, depending on the situation at any particular time, he said.
Still, over the long term, Vancouver’s attractive attributes will draw even more international wealth and put upward pressure on prices of luxury properties, Mr. Hay said. Over all, he predicted, Canada will become increasingly popular as a destination for international wealth along with New Zealand and Australia. That’s because of “the rule of law, strong domestic balance sheets, political stability, and [the fact that] they are lovely places to live.”
Vancouver is definitely the most favoured Canadian location for the newly wealthy, he said, outstripping Toronto or Montreal.
Dan Scarrow, vice-president of corporate strategy at Macdonald Realty in Vancouver, said some of the high-end market in that city is being driven by immigrant investors, including many originally from China. “It’s not like there’s a group of investors who are sitting in China and are playing around with the Vancouver real estate market. That is not happening, but there are many Chinese buyers who are already here or will eventually become Canadian citizens,” he said.
Don Campbell, a senior analyst at Real Estate Investment Network in Vancouver, noted that the pattern of home price growth in Vancouver closely tracks the movements of Chinese GDP – an indication that Chinese investors have a considerable influence on the Vancouver market .
Mr. Campbell said the overall increase in the number of wealthy individuals in Canada will also be good for premium real estate markets outside the biggest cities. There is new wealth being created by the oil business and other industries, and many of the newly rich aren’t in Toronto or Vancouver. “You are starting to see the wealthy not being concentrated in the heart of old Toronto and [Vancouver's] West Van and British Properties,” he said, but also in Calgary, Edmonton, Saskatoon and even in Atlantic Canada. There is now demand for luxury accommodation in all those places, he said.
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Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
—————————————————————————————————–
Incoming search terms
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Fears of a Canadian housing bubble unfounded: BMO report
Just Vancouver, Toronto and Victoria remain at some risk of price correction, affordability study says
Susan Pigg – Toronto Star
Fears of a Canadian housing bubble are largely unfounded and, in fact, house prices remain affordable in three-quarters of the country, with the exception of Vancouver, Toronto and Victoria, says a new BMO report.
Overall, the Canadian housing market is about 10% overvalued – half what it was in 1989, when prices began a 13% decline, and a third of the height U.S. houses hit before crashing by some 34%, says the Canadian Housing Affordability study released Friday.
Despite significant price hikes the last 10 years, house prices remain affordable across most of the country, with mortgage payments on the average Canadian home eating up a “moderate” 28% of family income, and just 23% when the two costliest cities, Vancouver and Toronto, are factored out, says BMO senior economist Sal Guatieri.
Vancouver, Toronto and Victoria remain somewhat more susceptible to a downturn, largely because escalating prices have significantly reduced the pool of potential buyers who can afford them, a risk that’s minimal as long as interest rates remain low, notes Guatieri.
Comment: I am not sure of that. In Toronto, with the average property costing $505,000 or thereabouts, with 10% down and a 2.99% 5-year mortgage, the payments are just over $2,190 a month. This is about the same, or less, than renting a 2-bedroom condo. The income needed to qualify is $93,750, not that much truly, for a couple these days.
In Toronto, mortgage payments on the average single-family home eat up about 43% of median family income, which Guatieri estimates at about $72,000. That’s up from 40% of median income eight years ago.
Comment: Which I do not understand. If you take $72,000 that is $6,000/month. The mortgage of $2,191 above is only 36.5% of the median income. So… huh?
But that number climbs to more than 50% when you factor in other household costs, such as property taxes, insurance and utilities, he noted.
Comment: Could be. Insurance is around $100 month on a house, utilities are $200 easy. Add in taxes of $250 and your total monthly costs are now $2,741.54 – which is 45.7% of the $6,000 monthly income. A little less, but still a serious amount of money. Especially when you use after-tax income and not gross income.
Homes are considered “affordable” when less than 39% of family income is going to pay the mortgage and housing-related costs.
In Vancouver, mortgage payments on the average single-family consume a stunning 79% of median family income, and well over 80% when you factor in taxes, insurance and utilities.
Comment: So Toronto is twice as affordable as Vancouver – 36.5% compared to 79%.
Even condos in Vancouver are getting close to the affordability limit now, the report notes.
Toronto condos, on the other hand, remaining largely affordable, eating up just 23% of median income, and 31% when housing-related costs are added.
Comment: Which is why 25–28,000 are completed and absorbed every year, bought and paid for. Be they owned or rented, people need an inexpensive place to live.
—————————————————————————————————–
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
—————————————————————————————————–
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