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Montreal real estate: House prices likely to climb through 2020, CMHC says

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The boom in condos and multi-family rental buildings will also continue. In other words our housing hot streak shows no sign of cooling.


Montreal's housing prices have been steadily increasing and will continue through 2020, the CMHC's latest report indicates.


Montreal Gazette files

For years, Vancouver and Toronto were the stars of the Canadian real estate market. Prices were skyrocketing, and buyers were in a fever to outbid each other. Meanwhile, Montreal just kept trucking along, prices increasing modestly if unambitiously.

Now, it seems, it’s our time to shine.

Montreal’s housing market started picking up toward the end of 2015 and has been gaining momentum ever since. According to the most recent forecast from the Canadian Mortgage and Housing Corporation (CMHC), released Wednesday, the market here is far from peaking.

In Vancouver and Toronto, CMHC expects both housing starts and sales to slow over the next few years. In contrast, Montreal’s strong employment growth is expected to stimulate demand through 2020, leading to an ever-lower inventory of single family homes for sale.

According to the report, prices in Montreal are likely to keep rising, and rental rates as well. The boom in condo construction and multi-family rental buildings will also continue. In other words: Montreal’s housing hot streak shows no sign of cooling.

Although prices are climbing, Montreal is still considered a relatively affordable market. Unlike Vancouver and Toronto, the rise in home prices in Montreal has remained in line with economic fundamentals. In its market outlook report, CMHC said overvaluation is not a concern yet.

According to Brad Henderson, president and CEO of Sotheby’s International Realty Canada, there’s a lot of room left for prices to grow in Montreal. The median price of a single-family home in the Montreal area may have risen six per cent year over year, but it still remains at a relatively affordable $335,000.

“It’s a global city, a world-class city, that is continuing to come into its own. When people look at the price of real estate in Toronto and Vancouver and other cities around the world, people realize what a bargain it is in Montreal,” Henderson said.

Demand for Montreal real estate is continuing to grow, while supply is dropping. The Quebec Federation of Real Estate Boards reports that Montreal has now seen 17 consecutive quarterly increases in residential sales. Meanwhile, the number of listings has been dropping for 12 consecutive quarters.

More demand + less supply = higher prices. And indications are the trend isn’t likely to reverse anytime soon.

And indeed it is already slim pickings for buyers in certain parts of Montreal. In October, another CMHC report found in certain sectors of the Island of Montreal, including in the southern part of the West Island, the South West, Rosemont, Villeray, Notre-Dame-de-Grâce, Montreal West and Nun’s Island, there were four or fewer sellers for each buyer.

Although condo construction is ramping up, supply is still not meeting the demand in the hottest sectors of the city, like Montreal’s downtown. According to data from Altus Group, a record-setting 3,000 new condo units went on the market in the greater Montreal area last quarter, but almost half are already sold.

The CMHC outlook predicts the average price growth between now and 2020 will beat the annual average of the last few years, even if an anticipated rise in mortgage rates cools demand.

Overall, it’s looking like a good time to be a homeowner in Montreal. And unlike Vancouver or Toronto, it is still possible for Montrealers who rent to buy a home of their own if they wish.

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Real Estate Markets Cooling Across The Country, And It's Not Just The Winter Effect

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In the wake of a booming home price run-up, economists explain the recent real estate market shift caused by homebuyer fatigue and affordability challenges.Getty

In December 2008, almost a decade ago exactly, Case-Shiller posted a record 18% price drop in home values across the country as the subprime mortgage crisis reached fever pitch.

After a slow and painful recession period, economic prosperity pushed the market out of recovery mode and into a full-fledged real estate boom characterized by double-digit price growth, rock-bottom inventory and surging buyer demand over the past few years. It’s been the lowest of lows, followed by a glorified golden age for the country’s trillion-dollar residential real estate business.

In the wake of these tales of two extremes, it’s hard to remember what a more neutral market even looks like. But a new normal, one that’s neither ice cold nor fiery red, does appear to be taking shape.

“There is a definite shift,” said Lawrence Yun, chief economist of the National Association of Realtors and fellow Forbes contributor. “I would characterize the current state as normalizing and not truly a buyer’s market. It was clearly a seller’s market in spring, but now things appear to be more balanced.”

The trend isn’t a seasonal holiday lull, either. My first tip-off that winds of change were brewing came from an interview with a New York City real estate agent back in June. Over the phone he told me that home prices were down in his area 5-10% from six months ago. I had to listen back through the recording and make sure I’d understood it right. But he’d made no mistake.

Sure enough, in September, a wave of 465,000 new listings came on the scene throughout the nation’s 45 largest metros, an 8% increase that marked the largest annual inventory growth spurt since 2013. At the same time residential construction data shows builders are adding a bit more inventory to the mix, with housing starts up 3.7% year over year.

Home values continue to rise at a healthy clip, though Case-Shiller reports chilling year-over-year price gains. Denver, Seattle, New York, San Francisco—well-known for their coveted, pricey housing and white-hot markets—are all softening in this last gasp of 2018.

Rest easy, no one’s warning of a housing bust 2.0 danger zone. The current price run-up wasn’t artificially bolstered by mortgage fraud, but rather economic fundamentals including a growing jobs market, and that thing we all learned in Economics 101: supply and demand. In fact, economists forecast that sellers will keep their foothold for another couple of years at least, though with weakened negotiating power.

Javier Vivas, director of economic research at Realtor.com., explains:

Many markets are tilting back into equilibrium, but by historical standards, many continue to favor sellers and those trends will continue in 2019. High-cost, overpriced markets and those coming off of significant inventory shortages should see conditions shift more quickly, and feel more buyer-favorable than they have in recent years.

As homebuyer fatigue and affordability challenges have gathered enough momentum to shake up the seller’s gridlock in select markets, here are five trends real estate experts say you can expect to see play out in the housing market throughout the end of the year and into 2019.

1. Mortgage rates will continue to rise and hit 5.5% in 2019. 

The Federal Reserve has implemented four federal funds rate hikes over the course of 2018, and experts say a fourth hike is to come in December. Mortgage rates do not necessarily move in line with Federal Reserve policy, but short-term rate changes do put pressure on long-term rates like the 10-year Treasury note and mortgages.

Over the past year the monthly average 30-year fixed mortgage rate has increased by nearly a full percentage point, from 3.92% to about 4.9%.

With each step up, buyers lose a little purchasing power, but the barrier may be more psychological than financial. When I bought a house in the spring, my rate increased from 4.25% to 4.375% between pre-approval and lock-in, and it felt like a big deal.

Yet despite what seems like swift upward movement, mortgage rates remain historically low (remember the 10% averages of the early 1990s?). The difference between a 4.875% rate and the imminent 5% mark is only $20 per month on the average mortgage.

“Some people are just used to the exceptionally low rates,” said Yun. “It is an increase, but I would say by historical standards we remain at a very manageable level.”

Yun predicts the Fed will “certainly” raise the short-term interest rate three to four more times in 2019, pushing mortgages up to 5.5%.

2. Homebuyers will have more negotiating power, and sellers will need to make more compromises. 

Realtor Kelli Griggs, who services the tri-county area of Sacramento, El Dorado and Placer as well as the San Francisco Bay Area, describes a time at the height of the seller’s market when there were no opportunities for buyers to even make repair requests.

Griggs recalls when sellers would have a 65-page long list of things wrong with their home, or $23,000 worth of foundational issues, and then market it as an “as-is” sale with no trouble.

That’s changing.

“Buyers are pushing back, and they’re saying, ‘Enough,'” says Griggs, owner of Navigate Realty. “They’re saying, ‘We’re done, we’re tired, we’re fatigued, we want to buy a home in good condition.'”

Lawrence echoes: “Buyers are getting some relief. Before they had to pretty much pay for everything—the home inspection, the closing costs, but now with the market shifting, buyers are in a much better position to ask sellers to cover some of the costs and maybe even request repairs before closing.”

Expect bidding wars to become less competitive, and price reductions to become more common.

3. As price gains slow, home values will still appreciate at a 2-3% clip.

In recent years, sellers have enjoyed booming annual price gains in the 5-8% range across the nation, with the hottest markets like San Jose, California and Seattle seeing 11-12% yearly increases.

“Those days are over,” said Yun.

The market’s not currently at risk of any extreme or sudden price drops, and homeowners will generally continue to enjoy moderate price appreciation for the foreseeable future, but at a much slower pace.

Yun says to expect yearly price growth to settle around 2-3%, “with some neighborhoods actually seeing price declines, especially on the upper end of the market.”

4. Markets will cool faster or slower depending on local conditions and tax burdens.  

Real estate is local, so anytime there’s a market shift, it will manifest differently region by region, state by state and even within metros and individual neighborhoods.

States with higher property taxes such as New York, New Jersey, Connecticut and Illinois were hit harder by the 2017 tax reform package that capped the mortgage interest deduction at $750,000 (down from $1 million) and placed limits on state and local deductions, and the effects of that are starting to materialize.

Yun explains: “Now that homeowners cannot fully deduct those taxes as well as some of the mortgage interest on those expensive homes, that’s led to pause in buyer enthusiasm as well as some of the sellers saying, ‘Maybe I need to sell because of the increased tax burden.'” 

In addition, cities that experienced an extreme price run-up in a short span of time, like Seattle, San Jose and even Austin, Texas, will be more prone to a market correction, as opposed to some Southern cities such as Atlanta, Nashville and Orlando, which have appreciated at a more tempered pace.

“Those markets that are seeing some downturn and correction—it’s because they have gone up so high in the last 6 years,” says Jack McCabe, owner of McCabe Research & Consulting, a real estate and economic advisory and consulting firm. 

5. Upper-tier markets will soften while demand for entry-level housing remains high.

Expect to see a continued disparity between lower-end and moderately priced homes compared to the luxury sector. While the higher-end of the market is noticeably softening, Yun says that as job creation adds a new pool of potential first-time buyers, there’s still strong demand for entry-level housing.

Nevertheless, we’re seeing a slowdown in existing-home sales—completed transactions across the single family, townhome, condo and co-op market declined 3.4% in September over August, and were down 4.1% year over year. 

Part of this is because affordability continues to be a challenge with home price growth outpacing wage increases. McCabe explains: “We’ve reached a level of unaffordability in certain markets and prices have shot up far above what household incomes have gained in the same time period.”

However, the deceleration in sales may only be temporary.

“While rising costs to buy and a lack of affordable options for the mainstream buyer will limit overall sales in the short term, the demand outlook is bright and powered by a large, growing demographic, with the highest number of millennials entering their home buying years in the next 5 years,” said Vivas.

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Three Ways Blockchain Technology Will Revolutionize Real Estate in 2019

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Blockchain is poised to redefine how we make transactions in the same way that the internet has redefined how we communicate and share information.

It was originally created a decade ago to support the cryptocurrency bitcoin, but has grown to be so much more. Blockchain has lead to the creation (and loss) of millions of fortunes, the launch of hundreds of new companies, billions of dollars in investor funding and, most commonly for the non-technical, a lot of confusion around its true benefits.

In its most basic form, blockchain makes it possible for the first time ever for people and companies to make major transactions without going through an intermediary. Intermediaries like credit card service companies, stock exchanges, banks and governments can make transactions expensive, slow and illiquid and may open opportunities for fraud or crime.

Access to deals, the amount of time it takes to close, property title mistakes, high fees and fraud bog down the real estate industry. It is the largest asset class in the world and has had minimal innovation in the way of increased efficiency during transactions. Blockchain poses major opportunities for innovation in real estate. Here are three innovations that will change how real estate is done for the better in 2019.

Tokenization

Historically, owning the most lucrative hard assets required investors to already be wealthy and have the luxury of being able to wait years to liquidate. That changes with tokenization.

Tokenization democratizes ownership of assets by using cryptocurrency to split assets into tokens that are stored on the blockchain. Someone who wants to invest in a trophy real estate project now has the luxury of being able to resell their share on the open market through secondary trading. Also, people in different geographies and tax brackets now have access to attractive investment opportunities that they previously would not. Landlords now have the ability to sell off just a portion of their property to the crowd. In 2019, I believe we will see a major migration of real estate ownership moving to the blockchain. 

One of the pioneers in the space is Templum Markets, the first federally regulated marketplace for the primary issuance and secondary trading of security tokens. It recently closed what is thought to be the first digital security tokenization of a trophy real estate asset: Investors had the opportunity to invest as little as $10,000 in the St. Regis Hotel in Aspen. Unlike with most major real estate investments, owners are not locked in until the building is sold. They will be able to sell their portion on the secondary market.

Smart Contracts

The current state of property agreements have a lot of moving parts and middlemen. A transaction using a smart contract is completed entirely between the buyer and the seller (or renter and landlord) and has no human interaction.

Transactions can be done in far less time with far less chance of fraud. The seller includes all of the details of the property and the buyer puts all of their necessary information on a 100% encrypted and secure block. Computer protocols check the legitimacy of the transaction and no agreement can be completed until all of the terms are met.

Propy is one of the most well-known incumbents in the space. It has built technology for buyers, sellers, brokers, title agents and notaries to come together through a suite of smart contracts on blockchain to facilitate transactions.

Real estate purchasing can be a very emotional decision for people. I believe that middlemen such as brokers and attorneys earn their commissions for people making potentially the largest financial decision of their lives. While smart contracts are currently being built to replace middlemen, I believe this technology will ultimately be utilized to make advisers in this space more efficient.

Property Title

Title insurance has grown to be a $15 billion revenue per year industry by ensuring buyers that their property is clear of old liens and debts. Every municipality has their own way of storing property data. Some cities and towns have put records online while others still use printed paper. If all property title was decentralized on the blockchain, an immense amount of time and money would be saved and, potentially, it could eliminate the need for title insurance altogether. It could also be possible to add information about construction, damages and improvements to the title, almost like Carfax for homes. This will help make it so that people truly know what they are buying.

Unfortunately, while having all title on the blockchain would be great for property buyers, inputting this amount of data from every municipality is an extremely laborious and expensive undertaking. There are a few exciting technology companies in the space, like State Title and Jetclosing, but it is unclear if they are up for the task. It will be interesting to see whether governments, corporations or a combination of both cough up the dollars to enhance the data quality for where we live, work and play.

The coming year will be an inflection point for blockchain usage in real estate. Private investment has been flowing in real estate technology, cryptocurrency wealth is massive, real estate professionals are being increasingly aware of blockchain and the underlying technology is improving. When it comes to the potential growth and adoption of blockchain technology, we are in the first inning. Similar to using the internet, blockchain usage may soon be so common that you forget you’re even using it.

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Vancouver real estate agent suspended for faking 'sick grandmother' doctor's note

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It's the old "my grandmother died" excuse. And it's normally a slam dunk when it comes to handing in late homework.

Except when an instructor asks for proof.

In a sequence of events worthy of a sitcom, the Real Estate Council of B.C. has given 120 days suspension to a Vancouver real estate agent who penned a note for an intern trying to explain his way out of a missed deadline.

According to a disciplinary notice posted on the council's website, the intern — KB — was gaining experience as a prospective licensee by volunteering for licensed agent Jaideep Singh Puri.

But when he handed in the penultimate paper for his B.C. Real Estate Association course a day late in July 2016, KB told the administrator his "grandmother has not been doing well since Thursday evening & has since passed."

"This is an extraordinary circumstance and we want to be as lenient as possible, but we do need documentation in a situation such as this," the administrator wrote back.

"I trust you understand."

'We gotta think on our toes'

A chain of emails contained in the RECBC decision suggests that KB understood very well. He texted to Puri.

"I need a note somehow saying I was in the hospital." 

The drama played out via text and email over the next few days.

The Real Estate Council of B.C. has suspended Jaideep Singh Puri's licence for four months for helping a prospective agent forge a doctor's note. (JD Puri)

"We gotta think on our toes and get creative. Maybe a note just saying I was the one taking care of her meds prior," KB wrote. "And legally they can't ask anything because it's confidentiality."

Puri asked KB if he knew the name of his grandmother's doctor.

"No clue at all bro," KB wrote back. "Can't really tell the fam I need (something) either lol"

As the text exchanges continued, Puri attempted to reassure his intern.

"We will make it work," he wrote. "My (family member by marriage) said he could do letter np."

'Upon further investigation …'

According to the decision, Puri sent KB an email containing the text of the proposed doctor's note:

"This note is to confirm that KB was attending to his ill grandmother mid to late June 2016 who was a patient under my care … I understand this was a tough time for the family and KB's personal and professional life may have been affected in a negative way."

The email and text chain between Jaideep Singh Puri and his volunteer — KB — was detailed in the disciplinary order. (CBC)

Not all of the text made it into the final version, which was prepared by a relative of Puri's who "had the computer skills to prepare the forged note."

KB sent the note to the BCREA administrator at 11:17 a.m. on July 5, 2016.

A little more than nine hours later, the administrator wrote back. They had made a call.

"Upon further investigation and in consultation with the … medical clinic, it has come to our attention that the letter sent to the BCREA … from you was not written or signed by Dr. (S). We are treating this situation as a forgery."

Ordered to take ethics course

KB was suspended indefinitely from the real estate course and will have to go through a suitability hearing, if he ever tries to get a licence.

Puri has no prior disciplinary record and didn't derive any financial gain from the situation. In addition to the suspension, he also has to pay a fine of $5,000.

When the suspension ends, he won't be able to supervise prospective licensees for two years. And he is also required to take a course on ethics in business practice.

Part of his punishment includes a requirement to write a statement on what he has learned from the ethics course.

It's due within 30 days of the course completion.

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