When the number of residential house sales plummeted more than 50 per cent year over year last April and May, you could be forgiven for concluding this was going to be a very ugly year for thousands of Ottawa brokers.
Because price hikes slowed dramatically at the same time, you might also have seen a sliver of hope for first-time home buyers, assuming they hadn’t been punched in the gut by COVID-inspired economic lockdowns.
Remarkably, it turned out to be a very good year for brokers and a rather stressful one for anyone trying to find a house to buy at prices they once believed were reasonable. This according to the latest data published Thursday by the Ottawa Real Estate Board.
“The number of our year to date transactions are now on par with 2019,” board president Deb Burgoyne said. “If we had more supply, sales would be even higher.”
Indeed, realtors across greater Ottawa — which includes towns within commuting distance — sold nearly 13,800 properties during the 11 months ended Nov. 30. That was up about two per cent from the same period last year.
Perhaps the bigger surprise was the 19.6 per cent surge in the price paid for residential properties, which averaged $581,100 during this period. It was a similar pattern for condominiums, which changed hands at an average $361,700 year to date, up 19 per cent against the comparable stretch in 2019.
Multiple catalysts were at play, including historically low interest rates (making for relatively inexpensive mortgages), a shortage of listings and, not least, a rush by homeowners for more space in the era of COVID-19 — whether in the form of larger home offices or physical acreage in outlying areas.
The play for more space can be seen in the detailed sales data for greater Ottawa. Year to date realtors have sold about 2,100 residential properties in 15 nearby towns for an average of $450,300. While volumes are just a bit ahead of where they were last year, prices have surged nearly 25 per cent.
This compares with a 19 per cent price gain to nearly $640,000 for residential properties inside the City of Ottawa.
Of the eight towns recording the largest price gains year to date, four were in the west (Pakenham, Braeside-McNab, Mississippi Mills and Arnprior), while two each were east (Russell, Rockland) and south (Kemptville East and Beckwith Township). Residential properties in Pakenham jumped most in price (37 per cent to nearly $500,000). Average sale prices within this group ranged from nearly $400,000 for Arnprior properties to $596,000 for rural properties in Beckwith Township, which is between Carleton Place and Smiths Falls.
The hunt for greater space was also evident within the City of Ottawa, where four of the top five real estate districts ranked by price growth were semi-rural. These included: Bells Corners and area (average price year to date was $586,000 — up 38 per cent); Greely ($704,000 — a gain of 31 per cent); Manotick and area ($866,000 — up 27.5 per cent) and Carp and area ($743,000 — a jump of 25.5 per cent).
Indeed, all rural and semi-rural districts saw house price gains greater than those posted by brokers within the city, with the exception of Dunrobin, where 158 residences were sold for an average $539,000. That represented a relatively modest gain of less than 12 per cent compared to the first 11 months of 2019.
In most other years, of course, that would have been something for sellers to celebrate.
Copyright Postmedia Network Inc., 2020
This Week’s Top Stories: Canadian Real Estate Prices Increase Over 25x The Rate of US Home Prices, and BoC Sees “Gradual” Softening – Better Dwelling
Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Poor policy choices have led to a comically large gap between Canadian and US home prices. Canadian home prices generally move in line with US home prices, but disconnect in 2005. Instead of falling, prices accelerate in growth through to today. The result is prices have now grown over 25x faster than US home prices over the same period. Most surprising though, is half of these increases occurred in just the past 5 years.
Canada’s central bank sees real estate softening “gradually” in the coming years. They believe the recent surge is due a shift in buying preferences, due to low interest rates. Sudden demand for single-family homes is due to this temporary shift. As these purchases normalize, the organization expects sales driven by the preference swap to fade. Along with the slowing sales, they expect “price growth will soften.”
The number of Canadians collecting unemployment benefits surged to a record high. There were 1.24 million unadjusted claims in November, up 200.9% from a year before. The previous month represented the bulk of the increase, due to CERB ending. That means the bulk of these claims were a result of unemployment earlier this year. However, the fact that it’s still rising indicates there’s still more people getting hammered by this recession.
The Bank of Canada’s affordability index shows real estate is the most affordable in years. No one’s buying that narrative, so what gives? The index shows households require 31.5% of their disposable income for housing in Q3 2020. The past two quarters have been the lowest since 2015, raising some eyebrows. It has to do with how it’s calculated, and the CERB driven boost to disposable income. In other words, the indicator is broken during the pandemic.
The pandemic is encouraging people to stay put, but the BoC is encouraging people to buy. The combination is leading to very high demand, in a low inventory market. Small cities like Trois Rivieres, Sherbrooke, and Gatineau are seeing inventory sell almost at the rate it’s listed. Western Canada is still slower than the national average, but are still unusually busy for this time of year.
Ontario’s most popular real estate market isn’t a new hip urban area, it’s the country. Outside of census metropolitan areas (CMAs) saw a net intraprovincial increase of 10,392 people in 2020. The rural increases were unusual, until the surge of young people exiting Toronto over the past few years. Toronto’s net loss of population to other parts of the province works out to 50,375 people in 2020. This is the largest net loss in decades of data, and possibly goes back much further. Despite the pandemic contributing to the trend, it actually started a few years ago. Right around when home prices took off.
Vancouver Real Estate
The pandemic has Vancouver residents seeking more space in rural B.C., but the trend goes back further. There were 45,481 people that left the Greater Vancouver region in 2019 for other parts of Canada. Rural B.C. is the number one place for those migrating, which saw a net inflow of 5,751 of residents. The trend is believed to have accelerated due to the pandemic, which has led to a distinct surge in rural home sales. It didn’t start during the pandemic though, with the trend going back a few years now, to when home prices took off.
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ACT NOW: 1 Real Estate Stock That Could Double in Value – The Motley Fool Canada
Bridgemarq Real Estate Services (TSX:BRE) is headquartered in Toronto, Canada and provides services to residential real estate brokers and realtors in Canada. It offers information, tools, and services that assist the company’s customers in the delivery of real estate sales services. The company was incorporated in 2003 and was formerly known as Brookfield Real Estate Services.
Bridgemarq generates cash flow from franchise fees and other services derived from a national network of real estate brokers and realtors. Brokers and realtors in Canada provides services while operating under the Royal LePage, Via Capitale and Johnston & Daniel brand names. The company’s franchise network controls a 17% share of the Canadian residential resale real estate market based on transactional dollar volume.
The Royal LePage brand is geographically diverse as realtors operate throughout Canada. While the Johnston & Daniel brand operates as a division of Royal LePage in central Ontario, it’s positioned to expand geographically. The Via Capitale brand operates substantially in the province of Quebec.
The company generates both fixed franchise fees and variable franchise fees. Variable franchise fees are primarily driven by the total transactional dollar volume from the sales commissions of realtors, while fixed franchise fees are based on the number of realtors in the franchise network. The franchise systems are designed to allow franchisees and realtors to focus on customers, business development and spend less time on administrative activities, thereby increasing overall productivity and profitability.
Bridgemarq also earns revenue from ancillary services provided to realtors including referrals to financial institutions and lead generation for brokers and realtors. Services provided to brokers and realtors are intended to assist them with the profitable, efficient and effective delivery of real estate sales services.
Through a portfolio of highly regarded real estate franchise brands, Bridgemarq caters to the diverse service requirements of regional real estate professionals across Canada. The company’s revenue is driven primarily by franchise fees derived from long-term franchise agreements. These franchise fees are weighted toward fees that are fixed in nature, which moderates the impact of cyclical variations in Canadian residential real estate.
Bridgemarq has no employees and the underlying costs of the company are comprised primarily of management fees paid, public company operating costs and carrying costs associated with the company’s debt.
Key drivers that impact the company’s financial and operating performance include the number of realtors in the franchise network, transactional dollar volumes, the manner in which the company’s contracted revenue streams are structured and the company’s success in attracting realtors and brokers to the company’s brands. The company’s performance is impacted by the general economic activity, Canadian housing market, and government and regulatory activity.
The company seeks to grow earnings and cash flows by increasing the number of realtors in the franchise network. It does this by attracting and retaining brokers and realtors through the provision of high quality, fee-for-service offerings. The provision of these services is intended to increase the productivity and profitability of brokers and realtors and encourage brokers and realtors to enter into franchise agreements with Bridgemarq.
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LACKIE: Toronto real estate defying all conceivable expectations amid pandemic – Toronto Sun
Article content continued
It was a perfect storm.
By the end of 2020, rental transactions in Toronto were down 20% from the year before. Average rent, down 5% across the GTA, fell a full 15% in the downtown core alone.
Notwithstanding the broader social and economic concerns of this moment we’re in, it is finally a good time to be an apartment hunter.
Now, prospective tenants considering a move have options — units without thoughtful floor plans, outdoor space, a great view and daytime sun will languish. So would-be landlords are doing all they can to sweeten the deal — everything from signing incentives to rent rebates, to free parking, cable and Wi-Fi — anything to be competitive.
The question is then, how low can it go and how much longer can we expect this to last?
Given that the current state of things is a direct result of the fallout of the pandemic economy, it’s a safe bet that recovery will depend on how long it takes for life to return to some semblance of normal.
Simply put: this is a COVID problem – not a standalone crisis of the rental market. Once vaccines are widely distributed, universities and workplaces reopen, and Toronto reclaims its position as a hub for business, culture, and nightlife, it is a certainty that things will stabilize. And when it does, we will be reminded of the looming crisis we were bracing for prior to the pandemic — a housing supply falling well behind keeping pace with population growth and new immigration.
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