With a budget in the range of $300,000, Bunt sought a starter home that wouldn’t require a lot of work. This led Bunt to viewing more than 10 houses before deciding on her home.
“This was my first time buying a house, so I’ve actually never seen what the real estate market looks like when COVID-19’s not around,” said Bunt.
The first-time buyer said pandemic-related health guidelines forced sellers to provide tight time blocks for showing their homes to potential buyers.
“If you were even five minutes late to your showing you would lose it,” said Bunt.
“When I was buying, there was like 30 people coming to see a house in one day and by the end of day there were already offers coming in on the house, so you literally had an hour to decide if you wanted to buy the house or not.”
On top of time constraints, Bunt says current trends with offers made bidding on a home a very serious matter.
“(Offers) have to be non-conditional on anything, so you have to have your financing ready to go, you have to make sure you’ve done some sort of home inspection because if you make it contingent on a home inspection, they’ll take another offer,” said Bunt, adding that of the more than 10 houses she viewed, she only made an offer on two.
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The home Bunt eventually settled on came into her hands after she outbid six other potential buyers all making offers on the same day.
“(My real estate agent) had a background in construction, so we felt comfortable forgoing the home inspection… We went kind of as high as we could go because we really didn’t want to lose this house,” said Bunt.
Even with the end in sight, Bunt still ran into issues that almost shut the door on her first home purchase.
“When it actually came down to the buying, I had a big issue with my mortgage lender and things got pushed to the end of the day,” said Bunt.
“We literally had 10 minutes to spare when I got my offer.”
Bunt’s story is far from unique compared to what’s been seen in the London-area real estate market.
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Jeremy Odland is a sales representative with the Odland and Blair Real Estate Group, which operates under Royal LePage Triland Realty.
Odland says September marked one of the busiest months he’s seen and painted a dire picture for first-time buyers.
“We actually took offers for a property that is ideal for first-time buyers (on Monday) listed at $375,000. We ended up with 21 offers and it sold for $90,000 over asking,” said Odland. “Unfortunately, that leaves 20 first-time buyers who are now very disappointed and still out there looking for that perfect home.”
With first-time buyers forced to sift through so many houses, Odland worries it may lead to buyers settling on a less-than-favourable purchase.
“It’s kind of causing a little bit of panic for some buyers… The most that I’ve had one particular client lose out on was 17 offers before they finally got a home.”
A common tactic for those failing to secure a home in London is to make a purchase in surrounding towns and cities, where prices tend to be lower, but Odland says that strategy may not always work.
“When Toronto has a crazy market, it drives Toronto-buyers out of Toronto… Now that London is so hot, we’re seeing that same trickle-down effect here,” said Odland.
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“It used to be Ilderton or Kilworth was kind of where you could get a bang for your buck, but now they’re really as expensive as London, so people are kind of going further and further.”
3:54 Real Estate: how to compete in the housing market
Real Estate: how to compete in the housing market
On top of a competitive market, buyers also need to be more prepared than ever when it comes to seeking a mortgage.
That’s according to Michael Mullis, a local accredited mortgage professional with more than 10 years of experience in the industry.
“You can’t just take the mortgage company’s word for it any more it seems, you really need to educate yourself and know what is going to get you the mortgage and possibly what may hold you back from getting the mortgage,” said Mullis. “The less conditions, the better.”
Mullis warns buyers should also be aware that pre-approved mortgages are not a guarantee, adding that he had two clients as recently as Tuesday report having pre-approved mortgages denied last minute.
“Basically, look at this way: ‘Here’s what I want to do, is there anything that could stop me?’ Don’t paint a pretty picture, if anything, go through things that could go wrong.”
5:47 Homebuyers 101: Mortgage Pre-Approval
Homebuyers 101: Mortgage Pre-Approval
September brought in record numbers for the London and St. Thomas Association of Realtors (LSTAR).
With 960 homes exchanging hands, the month saw sales jump 25 per cent from the same time last year. It also marked the busiest September since LSTAR began tracking data in 1978.
LSTAR president Blair Campbell says the busy market stems from transactions that had to be put off early in the pandemic.
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“We’ve had the buyers that probably would’ve transacted during the April and May period just move the timing,” said Campbell. “Really, it’s just a shift in when that volume is taking place.”
The average price for homes in the region also shot up to nearly $522,000, which is nearly double the price seen at the same time five years ago.
Campbell says this is partly influenced by the pandemic, with stay-at-home orders emphasizing the importance of a home.
“We have a number of buyers that are looking for more space than what they currently have,” said Campbell.
Rural areas are also seeing a spike in prices, with Elgin County’s average sale price sitting just under $500,000 while Middlesex County’s average stands just over $575,000.
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“That’s a little bit of a pandemic-effect as well, where people are looking for less populous areas… either smaller towns or country properties where they’ve got more space, their neighbours are a little more spaced out,” said Campbell. “If you’re working from home, the commute’s no longer an issue.”
The world’s largest central bank is seeing the warning signals for Canadian real estate get brighter. US Federal Reserve (US Fed) updated their exuberance indicators for Q2 2020. Their measures for Canada show recent acceleration over the past two quarters. There was a brief period in the data where it appears Canada almost came back to reality. In the first quarter of this year though, buyer’s became more exuberant.
Exuberance Is Not A Fundamental
First, let’s quickly run through the concept of exuberance. Exuberance is the state of being excited. When used in economics, it means emotion and excitement is the driving mechanism. If a buyer is said to exuberant, they are buying not based on any fundamental reason – but rather their emotional reasoning. In other words, they’re paying more based strictly on the fact they think they should be paying more. Not because any fundamental basis is driving the valuation higher.
Exuberance doesn’t mean markets can’t or won’t go higher. Markets driven by an emotional state are more vulnerable to correction though. If buyers aren’t using fundamentals, then a sudden change in emotion means they need to discover the actual price floor. That’s sometimes a ways down.
Canadian Real Estate Becomes More Exuberant
Canada is seeing exuberance accelerate over the past few quarters. The indicator reached 1.89 in Q2 2020, up from 1.56 during the same quarter last year. The market has seen two consecutive quarters of acceleration.
Canadian Real Estate Buyer Exuberance
An index of exuberance Canadian real estate buyers are demonstrating, in relation to pricing fundamentals.
Source: Federal Reserve Bank of Dallas, Better Dwelling.
Canadian real estate has been consistently in this level for years, but not as many as some people want you to think. It first breached the critical threshold in Q1 2015, and hasn’t fallen below that level since. There’s been a few periods where it almost has, which have been followed by policy moves to prop up the market. Technically the market has only been exuberant for half a decade. Although that may feel like forever, it’s not really that long.
The Federal Reserve warns this indicator doesn’t tell us when we’ll see a correction, just the likelihood of one. After 5 quarters above the critical threshold, the Reserve believes markets will require a correction. The longer this trend persists, the further detached the market is from fundamentals. This means a larger correction will be required, whether in terms of falling prices or inflation that kills the real value.
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Changing The Landscape For Real Estate Brokers And Salespeople In Ontario: Personal Real Estate Corporations
22 October 2020
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On October 1, 2020, the Government of Ontario announced the
first phase of regulatory changes affecting the Real Estate and
Business Brokers Act (“REBBA“)
which will soon be renamed as the Trust in Real Estate Services
Act, 2020 (“TRESA“). These changes
address a number of important issues in Ontario’s real estate
industry. Most notably, the changes allow real estate professionals
to structure their business using a Personal Real Estate
Corporation (a “PREC“).
Personal Real Estate Corporations
As a result of the amendments, real estate brokers and
salespeople regulated by TRESA are now permitted to conduct their
business and pay themselves through a PREC. For many years, a wide
array of regulated professionals have provided services through
personal corporations and enjoyed tax planning and other benefits
associated with personal corporations. Real estate brokers and
salespeople are now among those permitted to use a corporation as a
means to structure their business. Of course, there are a number of
benefits to incorporation and real estate brokers and salespeople
should analyze these with their advisers. However, when considering
the suitability of a PREC, real estate brokers and salespeople
should be aware of the restrictions that apply to this type of
corporation. We summarize the most notable restrictions imposed on
PRECs as follows:
No federal corporations: PRECs must be
incorporated under Ontario’s Business Corporations
Controlling the Board of Directors: The
corporation may only have one director and that director must be
the controlling shareholder (a broker or salesperson);
Officer of the Corporation: The corporation
may only have one officer and that officer must be the controlling
shareholder (a broker or salesperson);
No non-registered voting shareholders: All of
the voting shares of the corporation must be owned (legally and
beneficially) by a broker or salesperson;
Non-voting Shareholders to be Family Members:
Non-voting shares of the corporation may only be owned by the
controlling shareholder, by one of its family members, or by
trustees in trust for one or more children of the controlling
shareholder who are minors as beneficiaries;
Inability to Limit Sole Director’s Powers:
There is no agreement or other arrangement that restricts or
transfers in whole or in part the powers of the sole director to
manage or supervise the management of the business and affairs of
For real estate brokers and professionals considering the
benefits of incorporating a PREC, understanding the regulatory
environment in which it will operate is crucial.
(Bloomberg) — Real estate investors are trying to figure out how to block a proposal by Denmark to close a legal loophole through which they’ve enjoyed virtually unlimited tax deferrals on value gains.
The plan, which still needs to go through parliament, represents the latest step by Denmark to rein in commercial property companies. The Social Democrat government has criticized the industry, arguing it’s padded its pockets while leaving average residents struggling to pay rent.
“Foreign investors have been able to push back tax payments for eternities and that is of course completely unacceptable,” said Christian Raabjerg Madsen, a member of the parliamentary finance committee for the ruling Social Democrats, and the party’s finance speaker.
Denmark’s government wants to use the extra tax revenue to cover the cost of early retirement for low-wage workers. It’s part of a broader plan whereby money is being moved from the finance industry and over to the country’s blue-collar demographic.
Michael Norremark, a partner at the law firm of Kromann Reumert, whose clients include some of the firms affected by the proposal, says it “effectively is targeted at foreign investors.”
Earlier this year, parliament passed legislation that freezes rent hikes for five years after renovations. The measure was aimed at property speculators and followed explicit government criticism of Blackstone Group Inc.
Blackstone has said in the past that it complied with the law. The firm declined to comment on Denmark’s latest proposal.
A lot of deals in Denmark are structured so that, technically speaking, it’s not the property that is sold but the holding company behind it, Norremark said. As companies are transferred, taxes on property gains get deferred “for quite a long time,” he said.
The plan to close the tax loophole would also affect local real estate firms, according to the Danish Property Federation. Its pitch for a compromise, under which taxes would be paid at the point of sale, was rejected. The group is now lobbying to raise the threshold at which the tax will apply.
“The burdens of the new tax are disproportionately heavier for smaller firms,” Anders Jeppesen, a consultant at the trade group, said.
Denmark’s commercial real-estate market has weathered the Covid crisis better than its Scandinavian peers. Deal volumes in the first half of the year fell much less than elsewhere in the region, according to data compiled by Catella Group, a property investment specialist. Volumes were down 2% in Denmark, compared with as much as 22% in Norway.
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