The Calgary Real Estate Board is expecting home sales to remain above historical levels in 2022 after a record-breaking 2021, but the big issue will be supply.
Housing prices in Canada are expected to increase steadily in 2022, with inter-provincial migration continuing in many regions and a short supply of homes in those areas pushing up costs, according to Re/Max’s housing market outlook report published Wednesday.
Sale prices are projected to go up by 9.2 per cent on average across the country next year, the real-estate company estimates. It would follow an already “sensational” year in terms of sales and price appreciation, Re/Max’s president says.
“In the history of our nation, I don’t know of, certainly not in my tenure, of more than 95% of markets being in seller’s market territory,” he told CTVNews.ca in a phone interview. “So it can’t be overstated enough how strong the market was in Canada in 2021.”
That momentum will likely carry forward into next year, Alexander says, with 36 of 38 markets across the country poised to maintain their seller’s status.
Another trend he suspects will continue is inter-provincial migration as investors look for more affordable places to set up shop. The ability to work from home during the COVID-19 pandemic has given some homebuyers the flexibility to shop in different places.
“Remote work has really allowed people to set up in ways that weren’t possible before the pandemic,” Alexander said. “We”e hearing of some people that have moved to a different province but still hold their job in the province they left.”
The report indicates short supply in areas with high demand due to migration is a key factor in driving up the cost of real estate.
Despite prices seemingly set to continue going up, making home ownership more expensive for Canadians, the report says about half of residents across the country still view buying a house as a good investment option for next year.
“I don’t think people are nervous at all,” Alexander said of the real-estate market. “We surveyed a lot of consumers and more than half are confident that the market is going to remain strong for next year.”
Apart from outlining industry trends, the report breaks things down region by region in Canada, offering predictions and projections for different areas in the coming year.
In Western Canada, Calgary and Edmonton became seller’s markets this year, a trend that’s expected to continue into 2022. The report attributes this to heightened demand coming from homebuyers migrating from Ontario and British Columbia while supply remained low.
Cities such as Victoria, Nanaimo and Kelowna in B.C., along with Regina in Saskatchewan, also apparently saw a boost due to incoming buyers searching for more affordability.
Winnipeg is said to be an outlier and it seems will remain a buyer’s market next year, the report says, apparently due to more remote working options in the area.
Brokers in Ontario anticipate steady market activity and price growth in 2022, at least on average. Several regions experienced wild price appreciations across all property types this year, including Brampton (25 per cent), Durham (29 per cent) and London (30 per cent), while Toronto only saw a seven-per-cent increase.
All regions in Atlantic Canada are currently seller’s markets, according to the report, and could see sale prices rise between five and 20 per cent next year.
The spike in demand seems to be driven by out-of-province buyers from Ontario moving to cities like Moncton, Fredericton, Halifax, Charlottetown and St. John’s in search of more affordability.
Although places like Charlottetown may cool off, sales prices in Halifax and Moncton are projected to increase by 16 and 20 per cent, respectively.
Perhaps house hunters were counting on their rivals being snowed in.
The day after the January storm which dumped 36 centimetres of snow on Toronto, a horde of buyers made it through the unplowed streets to see a four-bedroom detached house in Davisville Village.
“We listed it in the blizzard,” says broker Patrick Rocca of Bosley Real Estate Ltd.. “We had 40 showings booked.”
Major arteries were still cluttered with abandoned cars and buses and the return to school was cancelled, but potential buyers made their way to the two-and-a-half storey house at 354 Soudan Ave., with an asking price of $1.549-million.
“You had to get through the snow banks, you couldn’t park on Soudan, but where there’s a will there’s a way,” Mr. Rocca says. “People figure it out.”
The following day, a bully submitted an offer and Mr. Rocca’s team notified everyone who was interested. Four more offers landed but the bully prevailed and the house sold for $1.92-million.
On the same day, Mr. Rocca listed an East York semi-detached house with an asking price of $999,000. That house sold for $1.45-million with two offers.
But while those two properties vanished quickly, some sellers did delay listing in the aftermath of the storm. Last week only 13 houses were listed in the midtown Toronto neighbourhoods of Davisville and Leaside where Mr. Rocca does much of his business.
“We’re seeing ridiculously low inventory,” he says.
Jimmy Molloy, real estate agent with Chestnut Park Real Estate Ltd., figures the dump of snow delayed many listings by a week or so.
“We did not need a blizzard on the first day of back-to-school in January, 2022,” he says. “That was not beneficial to anyone. People say ‘I’m going to wait until I see a little more sidewalk and a little less snow.’”
Stagers bringing in furniture and photographers trying to create appealing images all have more trouble manoeuvring in the snow on narrow city streets. Parents who thought their kids would be returning to the classroom suddenly found them at home for an additional two days.
“It just slows everyone down,” he says. “When the obstacles get in the way, it doesn’t lessen the demand – it just builds up pressure on the system. You still have buyers who haven’t seen a house since maybe the first week of December.”
Kevin Larose, a real estate agent with Keller Williams Real Estate Associates, says the lack of supply is tempting some buyers and agents to try and circumvent the bidding process all together.
Often houses in the Greater Toronto Area are listed with a relatively low asking price and a date for reviewing offers is set for a week or so later. So-called bullies pre-empt the process by coming in before the offer date with an eye-popping bid that expires after a short window of time.
But Mr. Larose is seeing an increase in aggressive tactics now that bully offers have become standard practice. Two of his recent listings received a large amount of attention and queries from potential buyers.
In one case Mr. Larose listed a four-bedroom, detached house at 2461 Jarvis St., in Mississisauga with an asking price of $2.198-million.
The house sold after four days for $2.77-million.
Another property he recently listed in Mississauga received 10 offers and sold after seven days. The four-bedroom detached at 1069 Greaves Ave., was listed with an asking price of $1.698-million and sold for $2.1-million.
Mr. Larose has seen an increasing tendency for buyers who are frustrated at losing out on a few deals to fire their agent and approach him on their own. In some cases they haven’t signed a contract known as a Buyer Representation Agreement or it has expired.
“They’re going directly to the listing agent because we have the inventory.”
He regularly receives calls from prospective buyers looking for an edge in a bidding war. “What’s it going to take?” is a frequent question, says Mr. Larose, who advises the caller to line up an agent. In some cases another member of his team will negotiate on behalf of a buyer.
“The listing agent’s responsibility is to the seller,” he points out. “The buyer needs to be represented.”
At the same time, the ranks of real estate agents have swelled in the Greater Toronto Area. Mr. Larose figures the reason there are so many exasperated buyers trying to go it alone is that many agents are unethical or unprepared.
With so many agents and so little inventory, many are struggling to find business. And some simply lack professionalism.
“Many don’t treat it like a business and many don’t understand their fiduciary duties,” he says.
Some will try to boost their client’s chances in a bidding competition by offering to accept a smaller commission than the standard 2.5-per-cent paid to buyers’ agents on a deal.
“They give up commission right in the middle of negotiating.”
In such cases, the listing agent is obligated to inform the seller and the other agents at the table that one agent is willing to lower their commission.
Mr. Rocca at Bosley has also noticed such practices becoming more common in the past year as the heated Canadian market set new records for sales and prices.
Commission cutting creates havoc in a bidding contest, he says, and it clouds the process for the seller.
He explicitly states in writing in his listings that he will not allow it.
“If I have five offers and one agent says ‘I’m cutting my commission’, I say no you’re not,” Mr. Rocca says. “I don’t work that way. There are no deals – you’re going to get in line with the rest of the people.”
Mr. Rocca believes that the lack of supply in the market is contributing to strategies of desperation. But he’s receiving lots of calls from homeowners seeking evaluations, so he expects listings to see a good bump in coming weeks.
Farah Omran, economist at Bank of Nova Scotia, expects new inventory to be almost immediately picked up by buyers.
While housing sales in Canada were essentially flat in December compared with November, even after adjusting for the season, she believes sales were dampened by the lack of listings.
The increased tightness in the market is pushing prices up by a larger magnitude than the increase in sales.
Bay Street is forecasting a series of interest rate hikes from the Bank of Canada this year and those expectations may have contributed to a winter market that’s more hectic than usual, she adds.
“Stay tuned for what is likely to be yet another busy spring market,” Ms. Omran says.
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The Calgary Real Estate Board is expecting home sales to remain above historical levels in 2022 after a record-breaking 2021, but the big issue will be supply.
While sales likely will not grow at the same level as last year, the CREB is predicting price growth to hit four per cent this year after hitting eight per cent last year.
“We expect sales activity will come off of those record levels but remain relatively strong,” Ann-Marie Lurie, CREB chief economist, said during the organization’s annual conference Tuesday. “There’s a lot of factors that are still supporting that sales activity and that demand growth.”
Calgary began the new year with about two months’ supply, the lowest since 2006. The shortage is not due to a lack of people looking to sell, with a 34 per cent increase in new houses on the market in 2021. Sales, however, increased by 71 per cent.
There is also a lack of stock in surrounding communities such as Airdrie and Okotoks, which have become attractive destinations for those looking for quieter communities with more affordable real estate.
Lurie said she expects continued growth in prices to bring more houses to market, but it will take several months to achieve balance. She noted they expected that gap to begin to close at the end of 2021, but then had massive sales in December.
Low supply numbers could be aided by the record number of new housing starts in 2021, many of which will be completed this year.
She also said pressure on the market will continue to build through economic recovery, improved energy markets and technological and financial diversification, which is expected to increase migration to Calgary and also improve the rental market.
Calgary Mayor Jyoti Gondek said the city is focused on aiding this recovery, including prioritizing a rejuvenation of downtown.
“While it has been hit hard, we still are aware that a strong core is essential to our economy for jobs and to fund city services that we rely on every single day,” she said.
There are a few factors that will limit growth, however.
Chief among these are inflation and interest rates. Interest rates have been low throughout the pandemic but are expected to be raised by the Bank of Canada as soon as Wednesday. Lurie cautioned the increase may not come just yet, and said she has seen forecasts ranging between an increase of one and two per cent.
“This is something that tends to slow down housing demand,” she said. “When you have rate increases, that naturally changes what people can afford and it is one of those main factors why we don’t expect sales will continue to maintain that record pace.”
She added it could lead to a busy spring market as people attempt to buy before rates increase.
Lurie also said the unpredictability of the ongoing pandemic could be a factor.
The industrial real estate market in Southwestern Ontario is nearly full, a new report finds, with some of the country’s most in-demand places found along Highway 401.
The report Another Year, Another Record, from commercial real estate brokerage CBRE, outlines the fourth quarter industrial real estate market in Windsor and surrounding area. It found that the availability rate in Southwestern Ontario — from Waterloo to Windsor — was far below national averages.
Waterloo reported the lowest industrial real estate availability rate in the county at 0.6 per cent — beating out major markets like Vancouver and Toronto — while London reported an availability rate of 0.8 per cent. Windsor clocked in at 1.4 per cent availability, following Montreal, Vancouver and Toronto tied at 0.9 per cent. The current national average is 1.8 per cent availability.
It’s definitely a challenging market
“The industrial market today has never been stronger,” said Brook Handysides, vice-president for CBRE in Windsor.
The CBRE report finds that in Windsor, asking prices for industrial real estate rose 35 per cent year-over-year in 2021 to a record-high $123 per square foot, while rents for industrial space rose about six per cent, to a new high of $8.22 per square foot.
The low availability rate can be a mixed bag, depending on whether you’re buying or renting as opposed to selling, said Brad Collins, a senior associate with CBRE.
“When we talk about 1.4 per cent availability, that is almost a fully occupied market,” Collins said. “I don’t know that you can call it good or bad — it depends what side of the coin you’re on. It’s definitely a challenging market.”
It does mean the Windsor and Essex County region is a desirable — and still relatively affordable — market for businesses to set up shop when compared to other hotspots in the province, mirroring a similar trend in residential real estate.
“We work with clients that are looking to grow here because of the price,” Collins said. “Markets like Toronto, where they’ve had to compete and either been priced out or just beat, and they’ve worked their way down to Windsor and see value.
“We’ve got unprecedented demand coming in from users looking to come to Windsor and obviously bring jobs … unless that demand tapers, or we get a substantial influx of new construction buildings, there’s really no end in sight.”
The trend is driven by high prices in the Greater Toronto Area trickling out to elsewhere in the province.
“Even though we’ve seen unprecedented growth in Windsor, you look at that in terms of what’s going on up the highway,” Handysides said. “Relatively speaking we still have a very well-priced market, even irrespective of the fact that sale prices and lease rates continue to accelerate in price.”
But an availability rate of just 1.4 per cent represents a market that is essentially full, Collins said, whereas a more balanced market might have a six to eight per cent availability rate.
The CBRE report also found there are 92,000 square feet of new industrial space in construction, all of which is pre-sold or leased, meaning it offers little relief on the supply side of the equation.
Windsor’s industrial availability has been trending down since about 2012, the report found. In the second quarter of 2012 availability for industrial real estate was 15 per cent, dropping to four per cent in 2017.
There aren’t any quick fixes, Handysides said. It’s about supply, and building more industrial real estate can be expensive and time-consuming — so low availability and growing prices for industrial real estate are likely to stick around, at least in the near future.
“Timelines for construction still may not go at the speed of business,” he said. “Our expectation is going forward is that these numbers will continue to tighten and become more aggressive.”
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