By Roxana Baiceanu
Not a day goes by without a new piece of news popping up about the real estate market in Canada. As we’ve been watching home prices hitting record after record in most metropolises across Canada, most of us have probably been asking ourselves where all this is going and how the changes are impacting home buyers and real estate professionals alike. Are Canadians accustomed to the idea that they need to dig deeper into their pockets in order to buy a home – and what kind of homes are they now looking for?
To find the answer to these questions, we analyzed three months’ worth of home buying search behavior on Point2 Homes Canada. This translates into a whopping six million browsing sessions, which we believe are more than enough to build a profile of the Canadian home buyer.
Here are our key findings, at a glance:
- Nationwide, online home browsing is predominantly done by women (60 per cent of home buyers searching on Point2 Homes are women).
- Among age groups, millennials are the lead segment in most cities, followed by Generation Y.
- The most popular home price segment is between $300,000 and $400,000, which is way below the national home price average of just over $500,000.
- There seems to be a striking discrepancy between market reality and search preferences in certain cities across Canada. The biggest surprise came from Toronto, where home buyers on Point2 Homes were looking for homes priced up to $400,000 when the average price there is $750,000. In Vancouver we also found a huge discrepancy between the most popular search – homes up to $750,000 – and the average price of $1,055,000.
- When it comes to space, there’s a very strong preference for large homes (three and four+ bedrooms); less than a quarter of home seekers were looking for homes with less than three bedrooms.
- Regional differences are quite common: for example, in Alberta four out of 10 people are interested in four+ bedroom homes. At the other end of the spectrum stands Nova Scotia, where only two in 10 people are searching in this segment.
Although from province to province home buyers’ searches by price differ, one thing is obvious: the biggest percentage of home seekers (25 per cent) are interested in homes that cost between $300,000 and $400,000, which is significantly below the national average of just over $500,000. If you think, okay, then people are ready to downsize … well, think again. Nationwide, almost half of the searches (46 per cent) targeted homes that have at least three bedrooms, while 31 per cent are looking for even larger properties (four+ bedrooms).
For the full results of our survey: The Profile of the Canadian Home Buyer
Mortgage Rate Forecast
The Canadian five-year qualifying mortgage rate briefly moved higher in the third quarter, rising by ten basis points to 4.74 per cent before swiftly falling back to its historical low of 4.64 per cent. There are currently two primary sources of upward pressure on mortgage rates in the near term. The most immediate remains the stance of US monetary policy. The US Federal Reserve remains determined to raise its overnight rate this year, possibly as soon as its next meeting in September. While the Fed’s last rate increase had little impact on Canadian rates, the market may see a second tightening as a true shift in the Fed’s view toward future tightening. In addition to pressure from potentially higher US rates, Canadian bank regulators have proposed stricter capital requirements to shift the burden of housing market risk away from taxpayers and onto financial institutions. That could in turn mean higher funding costs for banks and credit unions, which could be passed through to mortgage rates. Overall, given those upward pressures, we anticipate that mortgage rates will rise from their current lows with the five-year qualifying rate reaching 5 per cent by the end of next year.
July 4, 2016
REALTORS PITCH VANCOUVER TO DRAW CAPITAL FROM BREXIT
Realtors in Toronto and Vancouver are pitching Canadian cities as relatively safe property havens now that London, for years one of the world’s leading targets of foreign capital, suddenly looks a lot riskier. Blame it on Brexit.
“Brexit’s good for us, not for them,” said Anita Springate-Renaud, owner of Engel & Völkers’ brokerage in Toronto, who expects to field calls from clients seeking to redirect their investments. “We are a safe bet.”
If Springate-Renaud is right, there may be heightened demand from moneyed clients for homes and condos as well as office towers in two of Canada’s hottest real estate markets, which already have seen prices soar from an influx of foreign money. There’s a record $443 billion in global capital allocated to commercial property that wealthy investors haven’t deployed, according to figures from Cushman & Wakefield Inc.
Within hours of the stunning Brexit outcome, Brian Kriter, an executive managing director of valuation and advisory at Cushman & Wakefield, was on a 6:30 a.m. call from his home in Toronto to discuss the potential ramifications of the referendum with colleagues in London and New York.
Gadfly: Please Check Your Safe Havens at the Door, Brexiters
In the days since, Kriter has met with one Asian commercial real estate lender who decided to freeze plans for a multimillion-dollar financing deal in London and is considering channeling that money to North America instead. Cushman & Wakefield is organizing a client day in July, potentially in New York, to discuss the early implications of Brexit’s fallout.
“You have this phenomenal amount of capital that’s looking to be placed in commercial real estate, and it’s very fluid,” Kriter said. “Foreign investors view Canada as an island of certainty.”
In the last decade, central London saw the biggest increase in residential property prices of any major city as the favored destination for global capital seeking a stable sanctuary. Nearly three out of every four newly built homes in 2013 were bought by foreign buyers, half of them from Asia, according to Knight Frank LLP. Similarly on the commercial side, 70 percent of central London purchases were by foreigners in 2015.
BCREA ECONOMICS NOW
US Federal Reserve Interest Rate Announcement - January 27, 2016
On the heels of the first rate increase in 8 years, the US Federal Reserve's Open Market Committee (the Fed) opted to leave its target overnight rate unchanged at a range of 0.25 to 0.50 per cent. In the statement accompanying the Fed's decision, it was noted that with gradual adjustments to the stance of monetary policy, economic activity will continue to expand at a moderate pace and labour market indicators will continue to strengthen. The Fed expects that inflation will remain low in the near term, but slowly rise to 2 per cent over the medium term as the impact of low energy prices fades.
While early speculation was that the Fed would raise rates at least four times this year, a slowdown in the economy to end 2015 along with still tame inflation and volatility in financial markets will likely put monetary policymakers on a much more cautious footing. We expect that the Fed will raise rates a maximum of one more time in 2016 which should translate to very little upward pressure on Canadian bond yields and mortgage rates.
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The British Columbia Real Estate Association (BCREA) is the professional association for more than 18,500 REALTORS® in BC, focusing on provincial issues that impact real estate. Working with the province’s 11 real estate boards, BCREA provides continuing professional education, advocacy, economic research and standard forms to help REALTORS® provide value for their clients.
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BC Home Sales Start 2015 in Positive Territory
Vancouver, BC – February 13, 2015. The British Columbia Real Estate Association (BCREA) reports that a total of 4,377 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in January, up 3.1 per cent from the same month last year. Total sales dollar volume was $2.6 billion, an increase of 8.3 per cent compared to a year ago. The average MLS® residential price in the province rose to $593,155, up 5.0 per cent from the same month last year.
“Last month was the strongest January for BC home sales in five years,” said Cameron Muir, BCREA Chief Economist. “However, consumer demand did edge down from December on a seasonally adjusted basis."
Low mortgage interest rates, strong population growth and improving labour market conditions are underpinning housing demand in the province. However, weakening economic conditions in Alberta are limiting home sales in the Okanagan, Kootenay and BC Northern market areas.
MLS® residential sales in British Columbia are forecast to rise 2.4 per cent to 86,050 units this year and a further 3.9 per cent to 89,400 units in 2016. The ten-year average is 82,100 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.
BC Real Estate Association
A major Canadian bank has lowered its five-year fixed mortgage rate – and others are expected to follow suit – but some agents believe that won’t have much of an impact on how the housing market performs in 2015.
Housing Demand Forecast to Rise Through 2015
“I don’t believe a quarter-point will make a significant difference,” says Justin Kua, a real estate agent in Toronto. “First-timer buyers are already expecting low rates. It’s just giving people a little more confidence in being able to take on a mortgage.”
Over the weekend, the Royal Bank of Canada dropped its five-year fixed rate mortgage to just 2.84 per cent. No other banks have jumped on the rate dropping trend, but Kua says they likely will soon enough.