Archive for July, 2015

Rate cut could add fire to Vancouver and Toronto housing markets

Monday, July 13th, 2015

Sales — and prices — have hit new records in both Toronto and Vancouver this year. A further interest rate cut by the Bank of Canada could further fuel flames in the country’s two biggest real estate markets which are once again showing signs of overheating, housing watchers say.

“It’s another log on the fire for the Toronto and Vancouver housing markets,” says economist Sal Guatieri, vice president of BMO Economic Research, who expects to see a cut next week in an attempt to kickstart lagging growth.

“It’s not the amount that matters — the reduction in borrowing costs will be quite minimal — it’s the message it sends to homeowners and potential buyers that rates are going lower rather than higher and will almost certainly stay low for quite some time. That just encourages more people into the market.”

Both of Canada’s priciest cities are already swamped with far more buyers than properties for sale.

Sales — and prices — have hit new records in both Toronto and Vancouver this year. The frenzy has been driven by low interest rates, an ongoing shortage of listings and a growing sense of panic, especially among first-time buyers, that if they don’t get in now, they will be locked out of the market forever, particularly the low-rise house market.

“We are becoming concerned again about the possibility of a housing bubble in Toronto and Vancouver because prices are rising so much faster than incomes and because interest rates are continuing to fall rather than go up,” says Guatieri.

“We were much more comfortable a year or two ago when both markets seemed to have cooled off a bit and prices were rising more moderately.”

Both Toronto and Vancouver set new sales records for the month of June.

Almost 12,000 houses and condos changed hands last month across the GTA, up 18.4 per cent from a year earlier. The average sale price of a detached house was $816,583 – and over $1 million in the City of Toronto – up 14.3 per cent year over year.

Greater Vancouver’s 4,375 sales were up 28.4 per cent for the same period. The average detached house was $1.45 million – and a staggering $2.39 million for a stand-alone house in the core City of Vancouver – up 20.2 per cent from June of last year.

Condo sales skyrocketed in both regions, up 22.4 across the GTA and 35.6 per cent across Greater Vancouver, year over year.

All that demand helped push up condo prices 6.3 per cent in the GTA, to an average of $390,894, and up 5.6 per cent in Greater Vancouver to $479,450.

Last January’s surprise Bank of Canada rate cut to .75 per cent has been a contributing factor to those escalating sales and prices, says Penelope Graham, editor and spokesperson with mortgage comparison site RateSupermarket.ca.

A cut to .5 per cent, as is expected, would see the five-year fixed rate dip below the current low of 2.39 per cent and further boost the illusion of affordability, she said.

“There are more people now entering the market with just five per cent down, because that’s all they can afford. There is a real sense of urgency in the bigger markets to get in now, before it’s too late, and get in with what you have,” says Graham.

“That’s potentially putting people in a really vulnerable position in terms of their debt levels.”

Toronto realtor David Fleming says he’s seeing a surge in demand even for condos — especially under $400,000 — and younger buyers than ever, backed by low interest rates and help from their real-estate rich baby boomer parents who want only the best for their children.

“I’ve seen a serious culture change. Young buyers used to be 26 or 27 years old. They’d graduated university, worked for a few years and lived at home then rented and bought. Now buyers are cutting out those middle steps.”

He’s seeing first-time buyers as young as 22 determined to own rather than rent. And he’s hearing from people who stepped to the sidelines three or four years ago, thinking the much-talked-about bubble was about to burst.

Instead, they’ve watched prices climb further out of reach: Back in June of 2012, the average sale price of houses and condos combined across the GTA was $508,622. This June, the average sale price was $639,184.

Where the average sale price of a condo in the sought-after City of Toronto was $364,597 in June of 2012, last month’s average was $418,599.

That was up seven per cent just over June of last year as bidding wars and bully bids — long the hallmark of the highly competitive low-rise house market — have pushed up prices for well-located, unique or larger condos seen as sound investments and house alternatives for the longer term.

“That’s a testament to the froth in the house market,” says BMO economist Guatieri.

“So many people are now priced out, they have no other alternative than to get into the condo market, and that’s pushing up prices, even though there is ample supply.”

Apart from the oil-impacted markets of Alberta, Saskatchewan, Newfoundland and Labrador, Canadian house prices are holding up well and consumer confidence appears to be strong, even in the midst of growing talk about a possible recession.

“None of my clients are talking about the Big R word,” says Toronto-based mortgage broker Jake Abramowicz.

“They’re confident that rates will stay low for a very long time now and that the market — both condos and houses — will not correct anytime soon.”

Source: Susan Pigg, Toronto Star

Price of a detached house in Greater Vancouver surpasses $1.1 million

Monday, July 6th, 2015

Last month was the highest selling June for residential property sales in Metro Vancouver. Lower Mainland house prices hit record highs in June, particularly in Metro Vancouver north of the Fraser River, as hot spring sales appear to be spilling over into summer.

The benchmark price (an average of typical homes sold) for detached houses topped $1.12 million, the Real Estate Board of Greater Vancouver reported Friday, as overall sales through the Multiple Listing Service hit a June record of 4,375 units. That figure was 28-per-cent higher than last June and also the second-highest number of sales for any month.

In the Fraser Valley, overall sales were up 45 per cent at 2,413 units for the month in “the strongest residential market we’ve experienced since 2005,” and the fourth busiest month ever for the region, said Jorda Maisey, president of the Fraser Valley Real Estate Board.

It is a seller’s market when a sales are more than 20 per cent of overall inventory over a sustained period. In Greater Vancouver that figure was 36 per cent for June, and in the Fraser Valley it was 30 per cent.

“Demand in our detached-home market continues to drive activity across Metro Vancouver,” said Darcy McLeod, president of the Real Estate Board of Vancouver.

Price gains “are no surprise, given the fact that single-detached homes in Metro Vancouver are becoming a smaller and smaller proportion of the housing stock,” said Cameron Muir, chief economist for the B.C. Real Estate Association. “You have a growing population, more households bidding on a finite number of homes for sale.”

Notwithstanding the debate raging in the city over how much offshore capital is influencing property markets, McLeod said the REBGV saw “more detached-home sales in the region than we’ve seen during the month of June in more than 10 years.”

And looking back over 10 years, even with a dip in property values during the 2009 recession, pricing data from the real estate boards show considerable gains.

In Greater Vancouver, gains in detached-home prices have been 107 per cent in total since 2005. In the Fraser Valley, the gains were 63 per cent.

The picture for houses, however, is skewed by the top-end of the market — high-end house sales in central locations of Vancouver — said Robyn Adamache, principal market analyst for Vancouver at Canada Mortgage and Housing Corp.

In central locations of Vancouver, prices “are really disconnected from local incomes,” Adamache said.

Meanwhile, condominiums have not experienced anything like the escalation in prices that houses have.

Over 10 years, Greater Vancouver condo prices by June of 2015 were up 61 per cent. In the Fraser Valley, June prices were 36 per cent higher than they were as 2005 began.

However, pricing looks more stagnant when you factor in the 2009 recession. Adamache said condo prices in Greater Vancouver since 2010 were up just six per cent from their previous peak in 2008, compared with the 40 per cent that detached-house prices have risen from their previous peak.

“The number of apartments in (Metro) Vancouver doubled from 2001 to 2011, while the number of single-detached homes has remained the same, and in fact declined by about 1,000 units (over the same period),” said Muir.

“Apartment prices, essentially, over the past five years, have not grown much more than the rate of inflation,” Muir said.

In the Fraser Valley, condominium prices as of May had not regained previous peak levels compared with detached houses, Adamache said.

Speculation has also been noted as a factor driving prices higher, with Vancouver Mayor Gregor Robertson and condo marketer Bob Rennie calling for a special tax to discourage house flippers, but there is little hard data to prove that this is happening.

In May, the Sun reported on a flurry of 23 purchases in West Vancouver that were quickly re-listed for substantially higher prices, but Muir said available data suggests something else.

He said a recent analysis conducted by Central 1 Credit Union showed few flippers in the market compared to other hot markets in recent decades.

That analysis showed that in early 2015, about 10 per cent of sales were of properties that last sold within two years, compared with 30 per cent between 2006 and 2008.

Muir said “if you’re flipping $2-million, $3-million homes, that’s a pretty risky endeavour.”

Source: Derrick Penner, Vancouver Sun


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