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Cooling real estate market gives some leverage back to homebuyers – The Globe and Mail

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Home sales declined by more than 5 per cent nationally between February and March, running against the usual seasonal pattern.Evan Buhler/The Canadian Press

On paper, Canada’s housing market is still firmly in sellers’ territory. But in some areas of the country, slowing home-price growth and soaring mortgage rates are tilting the power balance toward buyers faster than the statistics would suggest. That means everything from scrambling to line up a mortgage, to fewer bidding wars, to transactions that – once again – include the right to a home inspection.

When you look at the numbers, the market has simply pulled back from an unprecedented frenzy, says Ben Rabidoux is founder of North Cove Advisors, a market research firm.

“It’s like you’re driving at 150 kilometres per hour on the highway for a period of time and then you slow down to 100 km/h,” he said.

As soaring interest rates shrink homebuyers’ budgets, torrid conditions at the start of the year quickly gave way to an unusually slow spring housing market. Nationally, home sales declined by more than 5 per cent between February and March, running against the usual seasonal pattern.

The reversal came as the Bank of Canada hiked rates by a quarter of a percentage point at the start of March, followed by another half-of-a-percentage-point increase in mid-April. The central bank is widely expected to boost its trend-setting rate by another half of a percentage point at the beginning of June.

In March, though, Canada’s housing market still had only 1.8 months of inventory, meaning it would have taken less than two months to sell all listed properties at the prevailing rate of sales activity. While that was up from an unprecedented 1.6 months in the previous three months, it usually takes at least six months of inventory for conditions to resemble a buyers’ market.

Fewer home bids easing competition for some Canadian buyers, but prices still high: brokers

But in some particularly overheated areas, like the Greater Toronto Area, even the moderate market slowdown seen so far has already caught out some sellers. These are often homeowners who bought a new property near the peak of the market and now can’t sell their old home for as much as they expected, said Daniel Foch, a broker and real estate analyst at Foch Family Real Estate.

Another source of stress for some who are closing purchase deals now: Appraisals commissioned by lenders are coming in far below the contract price buyers committed to earlier this year, according to Mr. Foch.

Low appraisal values usually mean buyers won’t be able to borrow as much as they need from the bank they had lined up for the mortgage. The options, then, are to pony up a larger down payment, borrow from friends and family or line up a private mortgage to bridge the gap, Mr. Foch said. As the market cools, though, it’s getting harder to find lenders for such deals, he cautioned. Buyers who walk away from a purchase agreement typically forfeit their deposit and may face a lawsuit, he added.

In April, Toronto saw its home price index, the industry’s preferred gauge of home values, dip by 1.6 per cent compared with March, the first monthly decline since October, 2020. By comparison, the index had climbed a record 3.5 per cent between January and February alone. Nationally, the home price index has continued to climb so far this year, although the pace of monthly growth slowed to 1 per cent in March. The Canadian Real Estate Association hasn’t published April data yet.

In Toronto, outlier bids helped propel home prices upward during the pandemic housing boom, Mr. Rabidoux said. Buyers could put in firm offers above market price and count on home valuations catching up by the time an appraisal would be done several weeks later, he added. At the same time, that property’s closing price would become a benchmark for similar listings in the same area.

But now that the market has turned, those aggressive bids are accelerating the price adjustment downward, according to Mr. Rabidoux. That’s because low appraisal values can force sales at significantly lower prices, which will also weigh on the valuation of nearby comparable properties, he said.

“You’re gonna get this this period of turbulence this spring as we work through these distressed sales and you’re not really going to get a sense of the real direction of the market until later in the summer,” Mr. Rabidoux said, speaking about Toronto.

In much of the rest of the country, the real estate market is experiencing a softer landing so far, several real estate agents told The Globe and Mail.

In Halifax, for example, realtor Andrew Perkins said multiple offers on a property remain quite common, although there’s been a marked change of pace from four months ago, when a coveted home might attract more than 60 buyers. These days, he said, a hot property may get eight to 10 offers.

Still, there’s little doubt that the power balance between buyers and sellers is changing. Buyers, who are much quicker at adjusting their expectations in a slowing market, are less likely to get carried away in a bidding war and more willing to wait on the sidelines for a bargain, said Phil Soper, president of Royal LePage.

Sellers, by contrast, typically tend to cling to outdated price-growth expectations, he added. The result is that “a gulf” opens up between buyers and sellers, which means fewer homes will sell, he noted.

Buyers and sellers who are still hoping to close a deal this spring and summer may want to turn to a playbook the industry hasn’t used since 2017 and 2018, when activity slowed down after the introduction of several measures, including the federal mortgage stress test, aimed at cooling off runaway prices in Vancouver and Toronto.

Sellers may need to curb their price expectations but also avoid underpricing their property in an attempt to trigger a bidding war that may not happen, Mr. Foch said.

“A lot of agents are still trying to use that underpricing strategy to get a lot of showings and a lot of offers,” he said. But while multiple offers haven’t completely disappeared even in Toronto, “I think buyers were fatigued and fed up with that, as a listing strategy a long time ago,” he added.

The risk is that an underpriced property that didn’t attract a high enough offer will have to be relisted at a higher price, he said.

In today’s conditions, Mr. Foch suggested pricing at market value instead.

The days when homeowners could sell a property in a matter of days without so much as a fresh coat of paint are also on the way out, Mr. Soper sad.

“You should absolutely be prepared to make your property and your listing stand out in a market where you’ll have competition from other other listings,” he said.

Buyers, meanwhile, are now more likely to be able to insert some conditions in their purchasing offer. Home inspections, for example, are making a comeback even in Toronto, Mr. Foch said. Some buyers are even including a clause that gives them a period of time that they’ll be able to get a mortgage for the home they want to buy, although such financing conditions remain rare in the city, he added.

“Sell before you buy” is another piece of advice some homeowners may once again want to heed to, Mr. Foch said.

Prudent homeowners may want to choose a 16-week closing period, Mr. Soper said. Across the country, that should be enough time for a properly priced property to find a buyer and for the seller to find another property to purchase.

“The change in the market is providing the opportunity to buy when you find the right home,” he said. At the height of the pandemic housing frenzy, he recalled, some homeowners were “terrified” to list their home even though they needed to move because “they were worried they couldn’t find a home.”

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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Calgary retains commercial real estate team to revive new arena – CTV News Calgary

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The City of Calgary has recruited three people from the commercial real-estate sector in an effort to get a new event centre to replace the aging Scotiabank Saddledome.

CBRE executive vice-president John Fisher, director of strategic initiatives with NAIOP Calgary Guy Huntingford and Ayrshire Group executive chairman Phil Swift have been retained to engage both the city and the and Calgary Sports and Entertainment Corporation (CSEC) to reach a new deal.

At Wednesday’s meeting, the city’s planning and development manager Stuart Dalgleish told committee members the group has already begun their work.

“We are at a stage where our third party is having discussions with both the Calgary Sports and Entertainment Corporation and the City of Calgary, with a view to determining whether there is interest in discussions toward a new event centre, and a new deal towards the new event centre,” Dalgleish said.

Mayor Jyoti Gondek is optimistic the team will be able to break the impasse between the city and CSEC.

“Today’s news is good news, and we need to be patient with what comes following this,” she said.

Ward 1 Coun. Sonya Sharp, who chairs the event centre committee, says naming a third party to assist in negotiations is a big step to seeing a new arena rise from the ashes of the failed deal.

“I’m very satisfied. There’s been a lot of work been put into this to get to where we are today,” she said.  “Everybody wants an event centre built.”

However, sports economist Moshe Lander says it might not be such a great deal for most Calgary taxpayers.

“The issue about who should pay for it is something that goes on in every city, more or less, anytime there’s an arena or stadium discussion,” he said.

“In almost every single case, the public sector blinks first and ends up throwing money at a project that’s not going to recoup its costs.”

“Really, it’s just an issue at this point of how much money does the City of Calgary want to throw at this project, understanding that it’s not going to get it back? How much does it want to sell to the taxpayers that this is what you’re going to be on the hook for, even though the vast majority of residents in the city are not going to use that arena in any capacity?”

CTV reached out to CSEC on Wednesday to ask if the owners still had any interest in reviving the deal. There was no response by publishing deadline.

The original agreement was signed in December 2019. In it, the city and CSEC agreed to split the cost of the $550 million project. When the price tag jumped to over $630 million, the Flames ownership group balked and cancelled the deal. It officially expired New Year’s Eve 2021.

Earlier this month, NHL commissioner Gary Bettman met with CSEC to discuss the arena, among other topics. At the time, he told reporters he remained hopeful a deal could be struck.

“I’m always optimistic,” said Bettman. “There’s nothing going on right this second to report that would indicate there is going to be a solution immediately, but my hope is that everybody can figure this out.”

Bettman also warned without a new arena or an updated Saddledome, Calgary would miss out on significant NHL events such as All-Star games.

The Saddledome is the second-oldest NHL arena behind only New York’s Madison Square Garden.

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Commercial Real Estate Report (Canada 2022) – RE/MAX Canada – RE/MAX News

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  • Commercial real estate report_blog header
Lydia McNutt

Public Relations & Content Manager | RE/MAX Canada

Lydia McNutt is an award-winning writer, editor and public relations professional, with a focus on all things real estate. At RE/MAX Canada, Lydia translates market data and trends into educational and entertaining content for homebuyers and sellers, while furthering the RE/MAX brand reach, nationally and globally. Explore timely news articles, market trend reports and thought-leadership on blog.remax.ca. Lydia has been published nationally on topics ranging from real estate to architecture, design and decor, finance, business, technology, entertainment and lifestyle topics. Email Lydia at lmcnutt@remax.ca


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Calgary recruits commercial real estate expertise to revive new arena – Sportsnet.ca

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CALGARY — The city of Calgary has recruited citizens from the commercial real-estate sector to help get a new event centre and home for the Calgary Flames back on track.

When an agreement between the city and Calgary Sports and Entertainment Corporation, which owns the Flames, collapsed late last year, city council voted in January to get a third party involved.

John Fisher, Guy Huntingford and Phil Swift are tasked with determining whether the Flames still want to build an arena with the city, or if the city will have to look for other potential partners to build an event centre.

Fisher is executive vice-president of CBRE, Huntingford is director of strategic initiatives with NAIOP Calgary, and Swift is executive chairman of the Ayrshire Group investment firm.

“This team brings considerable expertise from the commercial real-estate industry including experience in larger development,” the city’s planning and development manager Stuart Dalgleish said Wednesday in an event centre committee meeting.

“The third party has spent considerable time understanding the items and interests behind the terminated agreement and the current landscape. These items have become clarified.

“Based on a meeting with both the city and CSEC, the next step is for the third party to make recommendations on a possible path forward.”

Dalgleish said there is no definitive commitment or timeline for a new agreement.

The city and the Flames agreed on an arena deal over two years ago with the initial estimate of $550 million split between the two.

Shovels were scheduled to hit the ground in 2022 for a 19,000-seat arena and concert venue replacing the Saddledome, which has been the home of the Flames for 39 years.

The cost estimate for the project rose to $634 million, however.

Since the two sides agreed to an amended deal last July, the city added an additional $19 million in roadwork and climate mitigation to the project, and wanted the Flames to pay for $10 million of that.

CSEC president John Bean said in December that the Flames were withdrawing from the agreement because of an accumulation of issues and increased financial risk.

“While CSEC was prepared to move forward in the face of escalating construction costs, and assume the unknown future construction cost risk, CSEC was not prepared to fund the infrastructure and climate costs that were introduced by the city following our July agreement … and are not included in the current cost estimate of $634 million,” Bean said then.

So the Flames remain in the Saddledome, which is the second-oldest NHL arena behind New York’s Madison Square Garden.

CSEC also owns the Western Hockey League’s Hitmen, Canadian Football League’s Stampeders and National Lacrosse League’s Roughnecks.

The Flames recently announced they will move their American Hockey League affiliate from Stockton, Calif., to Calgary for the 2022-23 season.

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