No "doom and gloom" in store for Canadian real estate – Royal LePage’s Soper

by Ephraim Vecina29 Jul 2020

Sustained market strength, subject to supply constraints, will be the predominant dynamic in the Canadian housing sector for the rest of the year, according to Royal LePage CEO Phil Soper and Sotheby’s Canada CEO Don Kottick.

In a joint interview with The Financial Post, the two executives highlighted the major role that housing inventory will play in the period immediately after the COVID-19 pandemic eases.

Soper said that home prices largely rely on the balance between supply and buyer activity.

“There are a lot of people who are looking to put roofs over their heads,” Soper said. “We just don’t see the number of homes for sale, the supply side of this, climbing to the point where home prices will collapse.”

Royal LePage’s latest predictions have placed annual growth by year-end at 2.5%.

https://www.canadianrealestatemagazine.ca/news/no-doom-and-gloom-in-store-for-canadian-real-estate--royal-lepages-soper-331927.aspx

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Fixed-rate mortgages are now almost as cheap as variable-rate, and that's "very unusual.

Rates for the most popular type of mortgage in Canada have sunken to the lowest level in about two years, and they could be heading further south before 2019’s end, suggests RateHub.ca co-founder James Laird.

https://www.huffingtonpost.ca/entry/mortgage-rates-canada_ca_5cfe54c7e4b04e90f1cc93fd

The Impact of Higher Interest Rates

Contrary to what most people seem to believe, it’s not automatic that higher mortgage rates are negative for housing activity. There are lots of historical examples where sales and prices rose along with interest rates.  For example, between 1978 and 1980 mortgage rates were headed towards 18% yet sales activity and house prices continued to climb.  The reason? As long as people perceive that the price increase will be bigger than the cost of borrowing they will continue to borrow. As soon as the price perception changes then the buying dries up

https://www.verico.ca/economicupdate_michaelcampbell_nov2018/#MichaelCampbell_Report 

Modest Home Price Growth Forecasted for 2019

Home prices across the country are expected to rise in 2019, but only at a moderate pace compared with recent years, according to two of Canada’s largest residential real estate brokerages.

Royal LePage is anticipating the national median home price will increase by 1.2 per cent in 2019, with prices in Toronto and the surrounding areas expected to rise 1.3 per cent to $854,552.

Home prices in Greater Vancouver are forecast to go up by just 0.6 per cent to $1.29 million, while home prices in Montreal and the nearby region are expected to see the largest rise out of Canada’s biggest cities, with home prices anticipated to jump three per cent to $421,306 in 2019.

https://vancouversun.com/pmn/business-pmn/modest-home-price-growth-forecasted-for-2019-re-max-and-royal-lepage/wcm/d0ac09dc-3d81-4954-95f9-77d307ef915e

Foreign money has played a central role in Metro Vancouver’s housing crisis. This is the view of the vast majority of Metro Vancouverites. In poll after poll, year after year, a strong majority of Metro Vancouverites have deemed “foreign buyers or investors” to be either the most important factor, or among the most important factors in the crisis.

https://www.straight.com/news/1162801/josh-gordon-vancouverites-dont-need-re-education-about-foreign-ownership-and-housing

It may be legal to smoke, grow, and possess marijuana come Oct. 17, but that doesn't mean Canadians looking to purchase real estate are suddenly going to be chill about it.

According to a new report on cannabis and real estate from real estate site Zoocasa, 52 per cent of Canadians say they'd be less likely to consider specific houses for sale if they knew a legal amount of cannabis was grown in it.

https://www.huffingtonpost.ca/2018/10/15/canadians-cannabis-property-values_a_23561679/?utm_hp_ref=ca-homepage

A recent report by RBC Economic Research warned that housing affordability continues to worsen in Canada. The ownership costs for a home bought in the second quarter of 2018 now consume 53.9 per cent of a typical household’s income.

The RBC report claims that housing affordability has not been this bad in Canada since the early nineties. In large metropolitan areas that saw a rapid acceleration in housing prices, such as Vancouver and Toronto, housing carrying costs could claim upwards of 75 per cent of a typical household’s income.

https://vancouversun.com/real-estate/the-new-housing-affordability-crisis-will-be-driven-by-higher-mortgage-rates-not-higher-home-prices/wcm/0482078c-debb-4b93-b69f-ac607f77a258

The new North American trade deal struck on Sunday may open the door for the Bank of Canada to pick up the pace of interest rates hikes, according to economists at some of the country’s biggest banks.

With the introduction of the United States-Mexico-Canada Agreement, an October rate hike by the central bank now appears to be a lock, analysts say, with more expected to follow in 2019.

https://vancouversun.com/investing/nafta-update-will-test-polozs-caution-on-canadian-rate-hikes/wcm/5bee7fd8-dc5e-4c6e-82f8-996bd43e7f3b 

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Got a million dollars to plow into real estate? Vancouver’s a great place to park it, thanks to a property-tax rate that’s the lowest in both Canada and the U.S.

The owner of a C$1 million ($770,000) home in the Pacific Coast city will pay just C$2,468 a year in property tax, compared with C$6,355 in Toronto or more than C$10,000 in Ottawa, according to a new study by real estate website Zoocasa that looked at rates in 25 major Canadian markets.

https://www.bloomberg.com/news/articles/2018-08-02/vancouver-s-homes-may-be-costly-to-buy-but-they-re-cheap-to-own

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The world's biggest central bank is expected to raise rates this week — and then keep raising them.

Markets are so certain that U.S. Federal Reserve chair Jerome Powell will raise rates this week that a failure to hike would likely have worse consequences for American markets than the impact of higher borrowing costs

https://www.cbc.ca/news/business/fed-rates-housing-1.4831333

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• 56 per cent of boomers consider their local housing market unaffordable for retirement
• 9 per cent of boomer parents do not expect their kids to move out until after the age of 35; this number is almost three times higher in British Columbia
• 32 per cent of boomers looking to buy in the next five years most likely to purchase a condo

https://www.royallepage.ca/en/realestate/news_fr/more-than-1-4-million-boomers-across-canada-expect-to-buy-a-home-in-the-next-five-years/

June 14, 2018, Vancouver, BC – New rules approved by the Superintendent of Real Estate (OSRE) to enhance consumer protection in the real estate industry come into effect June 15, 2018. The rules will be enforced by the Real Estate Council of BC and they will ensure that consumers have better information to make informed decisions, and that real estate professionals act with undivided loyalty to serve their clients’ best interests. Among other things, these rules will:

https://www.recbc.ca/wp-content/uploads/News_Release_June_14.pdf 

Three months into B.C.’s experience with tighter mortgage-qualification rules, layered in with provincial real-estate tax changes, property markets are starting to shift.

However, parsing out the whether the provincial measures — the speculation tax on second homes, school surtax on expensive homes and raising the property transfer tax — are having a big, small or any impact on the housing market is an open question.

http://theprovince.com/business/real-estate/b-c-property-markets-starting-to-shift-after-tighter-mortgage-rules-tax-changes/wcm/5bdf1b26-6455-40a6-8c8a-597e5e1bfa9c 

British Columbia’s new speculation tax on out-of-province buyers will likely convince a wave of owners to sell their vacation properties, pushing down home prices, said a forecast from Royal LePage.

By the end of September, the real estate company is expecting the average price of a recreational home in B.C. to reach $531,333, a 2.8 per cent drop from last year’s average of $546,444.

Under B.C.’s speculation regulations, owners outside the province will be taxed 0.5 per cent this year, but next year will see the rate climb to 2 per cent for foreign investors and 1 per cent for Canadian citizens and permanent residents not living in B.C. but owning properties in the province.

http://vancouversun.com/pmn/news-pmn/canada-news-pmn/b-c-housing-tax-to-cause-vacation-property-price-dip-royal-lepage-forecast/wcm/19e835ea-80ab-48d1-8525-0e596516cf25