Connect with us

Real eState

No One Knows How the Coronavirus Will Impact Canadian Real Estate, But Here Are My Thoughts – WOLF STREET

Published

on


How will Canadians service $1.56 trillion in mortgage debt plus other debts such as credit cards? What about tenants who can’t pay their rent?

By Steve Saretsky, Vancouver Residential Realtor, Stevesaretsky.com:

We live in interesting times. I have been fielding a lot of questions regarding the market turmoil and what it may mean for the Canadian Real Estate market, particularly Vancouver. Yes it’s true, the S&P/TSX Composite Index fell 12% on Thursday, the biggest one day drop since May 1940 per Bloomberg. Surely this will all have serious implications, but what does it mean for our beloved housing?

The short answer is, I don’t know. Nobody does. What I can tell you is there are a few things I’m watching very closely and a few possible outcomes worth considering.

First, this is absolutely an economic shock, one that the Bank of Canada is probably ill-prepared for, just like the rest of us. Canadian households are the most indebted in the G7. We chose not to take the medicine in 2008, and thus, household balance sheets remain bloated today. The household debt servicing ratio sits at a record high, despite low interest rates.

Further, household savings rates are near 60 year lows. In other words, there’s not a whole lot of cash put aside for a rainy day, households are not well positioned for an economic shock.

This shock will unfortunately result in a hit to incomes, and will bring rise to job layoffs. Thus, servicing debts becomes increasingly difficult. Further, this is not something that can be fixed by lowering interest rates. We have a global pandemic where policy makers are encouraging people to disengage from economic activity. In other words, avoid restaurants, organized events, and travel — the very thing that makes society function and drives consumer spending, which accounts for over 65% of GDP. Remember, one man’s spending is another man’s income.

And so, this leaves us with a host of questions to ponder. How will Canadians service $1.56 trillion in mortgage debt, not to mention other debts such as credit lines and credit cards? What about tenants who can’t pay their rent?

Perhaps we should look at how other countries are coping. In Hong Kong, the Government will cut a check for HK$10,000 to every resident. In Italy, the Government is working with the banks to get a moratorium on mortgage payments. In the city of San Jose, they have adopted a moratorium on evictions for residents who can’t pay rent because of lost income resulting from the coronavirus outbreak.

These all seem entirely plausible in Canada. You can debate the moral hazard around it, and whether it’s the right or wrong thing to do, however we might not have a choice.

In terms of the overall real estate market, I suspect we will see a halt in activity. Not just a slowdown in sales, but in new listings as well. You won’t see this reflected in the data for several months, mostly because of the lag time for data processing. Further, while it seems logical prices could drop, if they do, that also won’t be reflected in official price metrics for many months. Due to the emotional nature of real estate, nobody cuts their price overnight. Unlike stocks, there is no mark to market on a daily basis.

I’m also thinking a lot about new construction projects, which are capital-intensive and often funded using significant amounts of leverage. Every month sales are delayed, carrying costs add up, putting profit margins under pressure. Further, closing risks are no doubt something to consider, should pre-sale buyers have a change in their employment status upon completion.

This comes as we are expected to see a record number of new completions this year with the number of units under construction at all time highs. Units under construction across Metro Vancouver.

Lastly, I am thinking a lot about the private credit market. We know private mortgage lending has been growing at a rapid pace these past few years. It’s estimated to be about 10% of new mortgage loans issued. This increases renewal risks for buyers who, again, might have a change in employment as the loan comes due. Most of these mortgage are one year terms.

.adsense_mobile_unit display: none;
@media only screen and (min-width:320px) and (max-width:480px) .adsense_mobile_unit display: inline-block; width: 320px; height: 50px; text-align: center;


Further, I would not be surprised to see Mortgage Investment Corporations halt redemptions on their investors, in order to stem liquidity issues from investors wanting to pull their money from the fund. Many of these mortgage investment corporations borrow on a line of credit from a bigger bank. Will these loans be recalled? In a best case scenario, we should at least expect an increase in private mortgage rates in order to account for the increased market risks.

As I have said, nobody knows how this will play out. I have heard from others in the industry that they expect real estate to act as a “flight to safety” and thus it won’t be impacted. I personally don’t share that same view. But perhaps they are proven correct and my concerns fail to materialize. To be honest, I hope they are right. Nothing is more destructive than a sharp decline in home prices. However, I am well aware there are others desperately hoping for this type of event.

Regardless, I will keep you all updated on how the situation develops. We all know how important Real Estate is to the Canadian economy, irrespective of your views of the current housing market. Now more than ever, we will need to navigate these waters carefully. Stay tuned, and stay safe. By Steve Saretsky.

The Fed is going nuts trying to contain this. Read… As Everything Bubble Implodes, Frazzled Fed Rolls Out Fastest Mega-Money Printer Ever, up to $4.5 Trillion in Four Weeks

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.


Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Real estate markets in Oakville and Burlington along with Milton and Halton Hills impacted by coronavirus – InsideHalton.com

Published

on


As for other stats in the region, data posted on Realoshopy’s website show that the average sale price for homes in Halton last month was up 11 per cent to just over $930,000 over the same period last year. The number of sales in March went up 7.5 per cent over the same month last year with 892 homes sold.

When it comes to supply, there were 1,556 homes for sale in March 2020, a decrease of 0.4 per cent compared to the same period in 2019.

Meanwhile, the CEO of Realtors Association of Hamilton-Burlington (RAHB) said in a news release that while there’s growth in the beginning of March, activity slowed in the latter half due to coronavirus.


“New listings and sales have been affected by the onset of COVID-19, but the average price continues to increase. We will have to wait for the April data to see the full impact on our market area,” said RAHB CEO Carol Ann Burrell.

A more pessimistic outlook was given by Robert Hogue, a senior economist with RBC, who provides analysis and forecast on Canadian housing market.

As posted on RBC’s website, he warns that the country’s housing market “will slow to a crawl this spring.”

The pandemic, he wrote, will be “a temporary shock” and that housing activity “will resume once the health crisis comes under control and authorities lift containment measures,” though there’s no telling of the timing and speed of the recovery.

Zurini said amid the crisis there’s no doubt that realtors had to change the way they do business.

“Being an essential service, we’ve really upped our game on the safety of our clients, buyers and sellers,” he noted, where more stringent measures are being taken in terms of questionnaires for in-person showings – as well increasing efforts in sanitization and consideration for social distancing.

Over the short term, Zurini believes that people are still going to be putting their property on the market. But if the lockdown continues for several more months, there might be fewer people doing so.

“But we haven’t seen it so far,” he said.

“There’s a lot of vibrancy still in the market.”

His advice for people who plan to sell their homes is to contact their local realtors to help “interpret the data and trends and make the right decision.”

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Saskatchewan real estate market records highest residential sales in 2 years – Global News

Published

on


Despite the COVID-19 pandemic, the real estate market in Saskatchewan saw a significant increase in residential sales in March, compared to the same period in the past two years.

Over 1,000 homes were sold last month compared to 925 and 906 in 2018 and 2019 respectively.

Comparing sales and sales volume figures since a state of emergency was declared in the province on March 18, to the same period last year showed that while there was a 6.2 per cent drop in total sales and a 9.6 per cent drop in total sales volume, none of this decline affected the residential market.


READ MORE:
Statistics Canada report highlights Sask.’s past real estate market

Sales in Saskatoon were up 6.2 per cent, going from 258 in March 2019 to 274 in March 2020, and up 7.2 per cent in the overall region, going from 346 to 371.

Story continues below advertisement

In both Saskatoon and the region, sales were less than 2.0 per cent under the 5-year average while they were more than 10 per cent below the 10-year average.

[ Sign up for our Health IQ newsletter for the latest coronavirus updates ]

Year-to-Date (YTD) sales in Saskatoon rose 8.2 per cent over last year, increasing from 668 to 723, while YTD sales in the larger region also increased 8.8 per cent, going from 891 to 969.






2:04
COVID-19 impacts Canada’s real estate markets


COVID-19 impacts Canada’s real estate markets

Sales in Regina were up 1.9 per cent, going from 210 in March 2019 to 214 in March 2020, and up 11.5 per cent in the overall region, going from 235 to 262.

In Regina, sales were approximately 2 per cent below the 5-year average and just over 9 per cent below the 10-year average, while in the region overall, sales were 3.7 per cent below their historical averages.

Year-To-Date (YTD) sales in Regina fell 8.6 per cent over last year, decreasing from 525 to 480, while YTD sales in the larger region fell a more modest 3.7 per cent going from 597 to 575.


READ MORE:
New downtown towers to impact commercial real estate in Saskatoon: report

The Saskatchewan Realtors Association believes the increase could be attributed to uncertainty over what could happen if the pandemic continues and could be a good time for prospective homeowners to make a purchase.

Story continues below advertisement

“Interest rates are the lowest in a long time, they’ve been almost negligible, we have seen a decline in inventory level so there’s a little less to choose from so prices have been coming down in the last three or more years,” CEO Jason Yochim said.

“For a buyer that is ready to go and is qualified to buy a home, I think it’s an ideal time.”

Tweet This

He added that homeowners and buyers should make sure they are getting good advice from a certified realtor before selling or purchasing a home.


READ MORE:
Regina salon owner calls for more COVID-19 support for small businesses: ‘We want assurances’

The association is also taking several steps to protect consumers and it’s members as they do their essential business during the pandemic.

“We have mandated that there be no open houses, whether they are realtor open houses or public open houses, for over two weeks now, we also have best practices that our members are utilizing when they do showings and we are asking people to only bring to the showing those who are essential in the decision,” Yochim said.

The Saskatchewan real estate market is expecting to see a significant decline in sales in the future while expert hope for a strong recovery once the pandemic is over.

© 2020 Global News, a division of Corus Entertainment Inc.

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Pandemic bites northern BC real estate market – Prince George Citizen

Published

on


The COVID-19 crisis is taking a toll on real estate sales in northern B.C., with demand for housing tailing off and fewer properties up for sale compared to 2019.

During the first quarter of 2020, from January through March, the BC Northern Real Estate Board had 753 sales worth a total of $217,389,724 through its Multiple Listing Service.

article continues below

There were 3,096 properties of all types available throughout the first three months of 2020, compared to 3,130 a year ago. As of March 31st there were 509 properties available, down from 534 at that time in 2019.

The sluggish economy in the region, especially in the forestry, mining and oil/gas sectors, is to blame for the 13 per cent decline in sales in the region, according to the BCNREB. With fewer listings available, the average price for a single-family home did increase by one per cent to $298,811.

In Prince George, 221 properties were $73.3 million were sold. That’s down from 257 properties worth about $90 million through the first three months of 2019. Three of the four sections of the city included in the report released Friday reported an increase in the median selling price of single-family homes over last year.

In the western part of Prince George, 34 single-family homes sold with a median value of $346,000 ($327,500 in 2019). East of Highway 97, 29 homes sold, worth a median $272,500 ($309,000).

In the Hart area north of the Nechako River, 29 homes sold with a median price of $401,250 ($370,000). In the southwest section, 37 homes sold in the first three months of the year had a median price of $453,500 ($429,500).

The board expects second-quarter sales will continue to decline in the wake of the pandemic and the resulting scale-back of operations for major resource projects in the region.

“The COVID-19 pandemic continues to cause significant challenges to everyone in our society,” said BCNREB president Shawna Kinsley. “Our members are committed to doing their part to ensure communities stay safe. Real estate is an essential service.

“Realtors are following all orders and guidance from the Public Health Authority… (and) are also modifying their practices around face-to-face meetings and showings. The real estate board has recommended that no open houses be held during this time.

“Sellers may now remain on the MLS system without the need for showings and all consumers can expect more phone or virtual meetings as well as limits on showings and new showing guidelines. We ask consumers to be patient with real estate practice changes at this time.”

Other real estate sales in the region from January-March 2020, with the 2019 numbers in parenthesis:

Mackenzie: Ten (12) properties were sold worth $1.5 million ($1.4 million) with 56 (63) properties available on MLS for purchase as of March 31;

Burns Lake: Four (16) properties worth $456,000 ($2.3 million) were sold with 80 (87) properties listed;

 Vanderhoof: Nineteen (30) sales worth $4.4 million ($12.2 million) with 89 (80) properties listed;

 Fort St. James: Eleven (nine) sales worth $2.1 million ($1.9 million) with 54 (61) properties listed;

Quesnel: Forty-seven (55) sales worth $8.5 million ($11.7 million) with 161 (147) properties listed.

Williams Lake: Fifty-eight (91) properties have sold worth $ 15.4 million ($21.4) with  190 (207) properties listed.

 

Let’s block ads! (Why?)



Source link

Continue Reading

Trending