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Excessive exuberance: Canada home prices boil over as policymakers sit back

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Canadian mortgage rates

By Julie Gordon and Nichola Saminather

OTTAWA (Reuters) – Canada‘s red-hot housing market has become a bonfire, spurring comparisons to earlier bubbles and prompting calls for cooling measures. But policymakers are standing back, unwilling to intervene for fear of undermining Canada‘s still-fragile economic recovery from the COVID-19 pandemic.

Real estate agents say after months of end users driving sales, investors are again a factor in the market and flipping activity is picking up. In response, desperate buyers are over-extending themselves, paying tens of thousands more than originally budgeted just to get in.

While Bank of Canada Governor Tiff Macklem in February acknowledged “some signs of excess exuberance” in the housing market, he downplayed the need for action.

“Right now the economy is weak, we’re just coming out of the second wave. I think we need the support, we need the growth we can get,” Macklem said.

The pandemic shift to working from home coupled with rock-bottom mortgage rates and government aid is driving up housing prices around the world – with suburban homes and vacation towns outperforming big cities from Australia to Europe and North America.

In Canada, the average home price jumped 22.8% in January to a record C$621,525 ($490,820). A sharp escalation since November is fueling fears that speculation and so-called FOMO, the fear of missing out, have again taken root.

 

Graphic: Home price escalation in Canada https://graphics.reuters.com/CANADA-ECONOMY/HOUSING/nmovazeolpa/chart.png

 

Toronto and Vancouver area brokers say it is starting to feel like the height of the last bubble, when regional prices were rising by as much as 6% each month.

“It’s on steroids. It really reminds me of 2017,” said Nasma Ali, a Toronto agent who sold a home last month for C$1.59 million, C$340,000 over the asking price.

In other markets, like Ottawa and the cottage towns that have boomed as white-collar workers gamble they will not be called back to the office, the frenzy is like nothing agents have ever seen before.

“If you got in four months ago, you just made C$100,000,” said Ottawa agent Judy Corriveau of entry-level homes popular with investors.

“As far as investments go, it’s a lot better than the stock market … Unless you got in on GameStop,” she said, referring to a Reddit-darling stock that skyrocketed earlier this year.

Mortgage lending has hit record levels and riskier higher-ratio borrowers now make up 23% of new uninsured loans, more than in the 2017 bubble, according to National Bank of Canada. If the flight to smaller cities reverses, a surge of homes could flood the market.

“It seems like policymakers are blowing a pretty big bubble here,” said Steve Saretsky, a Vancouver agent and analyst. “You have house prices up 20% in the midst of really high unemployment. It’s certainly not a healthy market.”

‘HEARTBREAKING’

While the Bank of Canada, like other central banks, is unlikely to raise interest rates just to cool housing, experts say policymakers could look at tax measures and tougher lending rules for investors, similar to those imposed by New Zealand’s central bank.

“A 40% equity downpayment for a rental purchase is a whole lot more of a stringent requirement than we have here. Those types of things are smart for our domestic regulators to be considering,” said Paul Taylor, chief executive of Mortgage Professionals Canada.

Taylor, who represents mortgage brokers and insurers, added that any policy should discourage investors while encouraging owner-occupants, particularly in lower-priced segments popular with first-time buyers.

Housing affordability advocates, meanwhile, are calling for tax changes to target investors and a rethink of an exemption that allows homeowners to pocket all profits from the sale of a primary residence.

But a senior government source said “now is not really the time to be ratcheting anything down,” pointing to the ongoing economic pressures.

Canada‘s residential real estate sector accounted for around 17% of GDP growth in the fourth quarter of 2020 and employment in the sector that includes real estate activity was 5.4% above pre-pandemic levels, with construction jobs up 3.4%.

Broker Corriveau in Ottawa said it is “heartbreaking” to see first-time buyers struggle.

“You don’t know if there is going to be that one person who has lost 10 bidding wars and now is going to bid C$50,000 more than necessary just because they want to be done with it.”

($1 = 1.2663 Canadian dollars)

 

(Reporting by Julie Gordon in Ottawa and Nichola Saminather in Toronto; Editing by Steve Scherer and Matthew Lewis)

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Canadian home sales, prices surge to new record in March

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OTTAWA (Reuters) – Canadian home sales rose 5.2% in March from February, setting a new all-time record amid strong demand in markets across the country, the Canadian Real Estate Association said on Thursday.

The industry group said actual sales, not seasonally adjusted, rose 76.2% from a year earlier, while the group’s Home Price Index was up 20.1% from last March and up 3.1% from February.

The actual national average selling price hit a new record at C$716,828 ($572,821) in March, up 31.6% from a year earlier and rising 5.7% from February.

($1 = 1.2514 Canadian dollars)

 

(Reporting by Julie Gordon in Ottawa)

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Hot real estate market sparks warnings to potential buyers as complaints to regulator double

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As home sales in the province continue on a dizzying trajectory, the province’s real estate watchdog and regulator are warning buyers to be wary of what they may be getting into.

The Real Estate Council of B.C. (RECBC) and the Office of the Superintendent of Real Estate said that in the first three months of 2021, they have seen an increase in inquiries and complaints.

Calls to the regulator were up 42 per cent over the previous year, while complaints, such as how offers were made and accepted, were double the number received in the same period in 2020.

“Buying a home is one of life’s biggest financial decisions. There are potential risks at the best of times, but with the added pressure and stress of the current market conditions, those risks are amplified,” Micheal Noseworthy, superintendent of real estate, said in a statement.

 

 

The Real Estate Board of Greater Vancouver says sales in the region have continued at a record-setting pace.

Residential home sales covered by the board totalled 5,708 in March 2021, up 126.1 per cent from March 2020, when the COVID-19 pandemic hit, and up 53.2 per cent from February of this year.

Rural and suburban areas have experienced the biggest spikes.

For the past two weeks, Jay Park has been in the middle of the buying frenzy.

He and his partner are trying to upgrade from their one-bedroom apartment to a two-bedroom condo or townhouse in Vancouver.

“I wish we had done this a month or two ago,” he said.

 

A condo tower under construction is pictured in downtown Vancouver in February 2020. (THE CANADIAN PRESS/Darryl Dyck)

 

Park put an offer on a $1-million condo, $4,000 above asking price.

“To entice the [seller], we put in a subject-free offer, but it wasn’t successful,” he said. “They accepted $110,000 over asking price that was also subject-free.”

The hot market has led to bidding wars. Some would-be buyers have even lined up outside for days to try to get a jump on a property.

Erin Seeley, the CEO of the council, is warning buyers to do their research and be aware of risks before making an offer.

“It’s really important that buyers have engaged with their lender before they’re making offers so they know how to stay within a reasonable budget,” she said.

Seeley said some of the complaints the council has heard from buyers is that they weren’t aware the seller has a right to take an early offer.

“And the seller was really in the driver’s seat about setting the pricing,” she said.

 

Demand continues to outstrip supply for housing in cities like Vancouver. (Rafferty Baker/CBC)

 

Aaron Jasper, a Vancouver realtor, advises clients to avoid cash offers and to include finance clauses even if it may mean they lose a deal.

“There’s a lot of frustration among buyers, feeling pressure to take some risk,” he said.

“You’re better to be delayed perhaps a year getting into the market as opposed to being completely financially ruined.”

Jasper also says realtors are limited in the advice they can give to clients on legal matters, home inspections, potential deficiencies with homes, and financing.

‘Caught up in the craziness’

Other tips from the council include seeking professional advice before making a subject-free offer or proceeding without a home inspection, and speaking to a professional to determine how market conditions may be affecting prices.

Meantime, people like Jay Park say they are still keen to buy. Park has more viewings scheduled and is optimistic.

“It’s a very exciting time for us, but I also don’t want to get caught up in the craziness and make a purchase that’s above our means.”

Source: – CBC.ca

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Black Press Media introduces one of Western Canada’s best real estate platforms helping home buyers Find. Love. Live. that new home

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Need an agent who knows the community?

Or, is it time to look for a new place to live, but you don’t know what’s on the market?

Whatever the real estate need is for residents in the communities of British Columbia, Yukon & Alberta, there’s a new way to do that one-stop shopping – by visiting Today’s Home.

The slogan for the site is “Find. Love. Live.”

“We want people to find their dream home, love it, and live in it,” said group publisher Lisa Farquharson.

Building on the success of Black Press Media’s niche digital platforms – Today’s Home brings the same wealth of knowledge and local expertise to the search for a home, be it buying, selling, or even just daydreaming about what changes you can make in the future.

Search hundreds of listings that local real estate agents have available.

The listings cover properties around the region, from a one-bedroom, one-bath condo for $339,900 to million-dollar acreages throughout the province of BC, Yukon, Central Alberta and beyond.

Click on a listing, and see not only the realtor handling the property sale, but links to his or her other listings and social media feeds. With the click of a mouse, take a virtual tour of the property, find the property’s walking score, and learn about nearby amenities.

There are links available to schedule a showing, or send the agent a comment or question.

Want to share a listing? When you click on the share button, you’ll actually send an attractive digital flyer of the prospective property, not just a link.

There’s even a button to help determine how much you have to spend, courtesy of the convenient mortgage calculator.

Plus, scroll down the page on Today’s Home and find a list of expert local real estate professionals who can answer questions or help with that home sale, Farquharson explained.

Today’s Home offers the advantage of the massive reach that Black Press Media has built throughout Western Canada with its network of community newspapers and online products. That allows the public to tailor real estate searches based on location, price, and other key factors while allowing real estate professionals to gain unprecedented audience reach with their listings.

Today’s Home will dovetail into the media company’s existing print real estate publications.

“Black Press Media has real estate solutions in print and now we can add in the digital component,” Farquharson said.

Watch for expansion of the Today’s Home platform in the near future, she added. That will come as Black Press Media adds a new component – the development community. Developers will be able to reach a huge audience when their projects are ready for presentation.

For information on Today’s Home, contact group publisher Lisa Farquharson at 604-994-1020 or via email.

Happy house hunting!

Source: – Aldergrove Star

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