Charlyse Amoussou calls Montreal’s real-estate market effervescent.
For buyers, sellers and the curious who find the whole thing a lot to navigate, the Via Capitale du Mont-Royal agent visualized one-kilometre bubbles around each Montreal métro station.
She spent weeks digging through 2020 sales data to calculate the median price of condos across the island and into Laval. She reached out to Julie Tristant and Chantale Huneault of Charlotte & Stella to help illustrate and publish her vision.
The median cost of a condo near Montmorency station in Laval was $250,000 in 2020. Want to be closer to downtown? It was $499,000 around McGill métro. The median cost along the métro network topped out at $869,000, near Édouard-Montpetit station.
Amoussou charted properties showing the median cost, but also the high and low selling prices for 2020. On the Orange Line, the lower end was also at Montmorency, with a property selling for $155,000. On the Green Line, properties near Atwater and Guy-Concordia stations sold for upward of $5 million.
“With the current sanitary crisis (during the COVID-19 pandemic), it is such a crucial time to find ways to connect differently,” she said. “I thought that offering such a map would be an original way to answer sellers and buyers’ needs as well as helping out my colleagues.”
Not just colleagues: Amoussou says teachers have reached out to say they’ve found the maps useful in their classrooms.
This Week’s Top Stories: BoC Says Canada Needs Real Estate Growth, While New Zealand Says Put People First – Better Dwelling
Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Canada’s central bank didn’t just dismiss concerns about the hot real estate market, but welcomed them. Bank of Canada governor Tiff Macklem dismissed the need for cooling measures during a media Q&A . Macklem said, “I think right now the economy is weak… I think we need the support.”
The governor repeated, “we need the growth we can get [from real estate].” In other words, Canada’s economy has become so dependent on real estate, it has no choice but to embrace the issue.
Bonds are normally boring, but a big swing makes this an exception – especially for real estate. The Bank of Canada’s 5-year benchmark bond influences 5-year fixed mortgage rates. The yield of that bond reached 0.94% on Thursday, increasing a whole 20 bps from a day before. Yields are now up 59.15% from a week before, and double a month before. They’re also about 3x from last year’s lows in August.
How does that influence mortgage rates? The 5-year fixed mortgage competes for the same capital. If the 5-year benchmark rises, mortgage rates are likely to rise as well. Rising bond rates also tend to reflect increased inflation risk. This could send other types of mortgage rates higher as well. Just in time to provide a cooling measure for the spring market.
The pandemic is slowing Canada’s population growth, but builders are still on time with deliveries. Builders delivered an unprecedented 18.41 homes per person the population grew by in Q4 2020. This is up from a record quarter of 2.26 homes per person in the previous quarters.
Over the past year, there was a new home completed for 95% of the population growth. Considering homes on average are occupied by 2.9 people on average, it’s a lot of supply. Pressure on home prices to rise should be released, but it’s not. It’s actually accelerating. That would be because once prices are no longer based on fundamentals, they no longer respond to them.
Canada’s consumer price index (CPI) is much higher when mortgage interest is excluded. CPI increased 0.58% in January, up 1.02% from a year before. When excluding mortgage interest, it rises 0.72% for the month, and is 1.30% higher. CPI has been extremely volatile during the pandemic, and this is just another example. If you didn’t refinance your home in the past year, your cost of living is 30% higher than the government thinks it is.
Canadian home equity lines of credit (HELOC) balances saw minor growth. The outstanding balance reached $2.59 billion in December, up 1.58% from a year before. The monthly drop was the biggest for the segment since 1992, and annual growth was the slowest since 2015. Great for households to minimize credit growth during a period of uncertainty. Bad for the economy, since it’s become so heavily dependent on credit growth to operate.
Canadian mortgage debt is growing at the fastest pace in over a decade. The balance of mortgage credit reached $1.66 trillion in December, up 7.67% from a year before. This marks the 22nd consecutive month of annual growth accelerating. This is also the highest rate of growth since 2010, over a decade ago. To put that number in context, mortgage debt over the past 12 months grew by over 6% of GDP.
A few days before our above column on soaring yields, we noticed yields were positioning to climb. The 5-year GOC benchmark bond yield reached 0.59% on February 18, 2021 – an increase of 17 bps from a month before. This was enough to watch the bump. A couple days after this article was written, yields bumped 20 bps higher in a single day. Some mortgage lenders have already announced higher 5-year fixed rates. The rest are likely to follow over the next few days.
Data from Canada’s national statistics agency shows commercial real estate isn’t uniformly impacted. Commercial retail rents have fallen 3.96% in Q4 2020, bringing them 6.14% lower than a year before. Office rents climbed 0.49% in the same quarter, and are now up 1.29% from a year before though. Retail rents are at a multi-year low, while office rents just printed an all-time high. An unusual dynamic, considering office rents are bucking the work-from-home trend, while retail is feeling the full brunt.
Canada’s largest bank widened the spread of their best and worst case scenario. RBC’s best case for real estate is the benchmark price rising 8% over the next 12 months. This is an increase of 2 points compared to the previous quarterly forecast. The downside remained the same though, with a worst case of 29.6% in this scenario. A positive revision across the board would have been a good thing. However, the worst case staying the same means a wider range of outcomes. This means more uncertainty is being considered.
Toronto Real Estate
Greater Toronto new home sales are ripping higher, but the city is being left behind. There are 2,171 new home sales in January, up 4.43% from the same year before. The modest increase was despite a 40% drop in new home sales for Toronto. The suburb of Durham more than picked up the slack, with sales in the region rising 301% from last year, and 876% from a year before. The flight from the city has spread to new homes.
Global Real Estate
New Zealand’s government will require the central bank to consider affordability in policy. The government stated housing is a “critical component of a sustainable and inclusive economy, and promotes the maintenance of a sound and efficient financial system.”
To ensure they can accomplish this, the Reserve Bank of New Zealand has requested new tools. One of those tools is the ability to utilize debt-to-income ratio limits. Both the government and central bank didn’t mince words, openly stating these measures are to target investors. The government is expected to announce further measures in the coming weeks.
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We Sell, You Save! What you can expect with New Era Real Estate – InsideHalton.com
Priced Out: Liquidity Is Also Causing Global Real Estate Prices To Rip – Forbes
It’s not just low interest rates and low inventory, it’s global liquidity.
That means that if you thought buying a house was hard pre-pandemic and felt priced out, these last few months have done absolutely nothing for you. It’s a seller’s market. Not just in Florida and Massachusetts, but across most of the world.
I have a friend who is renting a house in Panama. And while Panama was always pretty expensive because it is dollarized, the rent there for two bedrooms was double my mortgage.
My brother is looking for a house in Massachusetts. I went with him a few days ago to look at an Open House. There were at least five couples waiting to check it out. The broker tells me that it will go for at least $25,000 over asking and it was under 1,000 square feet and the master bedroom had no bathroom and…no closet! What is this, New York City? Tokyo? San Francisco?
In a world awash with liquidity and Bitcoin riches, everyone is buying real estate right now just to put their money somewhere. A lot of the buyers are second home investors.
Low inventory here and elsewhere is also pushing rents higher at precisely the wrong time.
“In Sao Paolo, the rental housing prices rose by an average of 3%, the biggest year over year rise in almost five years,” Rentberry CEO Oleksiy Lubinsky tells me in an email.
Over the past month, on the Rentberry website, the average rent for a studio apartment in New York — locked down and facing protests that only recently ended — increased by 8% to $2,150. The average rent for a 1-bedroom apartment increased by 6% to $2,490 in a city with nothing happening.
“Miami saw a mostly upward trend in the rental market, too,” Lubinksy says, adding that one-bedroom rentals increased by 2.3%. Overall, Miami rents continue to rise, making the city the 8th most expensive place to rent, according to Rentberry data. The website is like a global search engine for rental and residential/commercial property worldwide.
If you wanted to know, rent is up 8.7% in St. Petersburg. No more masks. It’s like the Florida of Russia now, by the looks of its housing market and its “over it” attitude regarding SARS2.
Here at home, housing prices have soared throughout the pandemic. That’s fine for those looking for equity loans, or selling. It’s helped push people’s wealth to record highs as housing is always a key part of an Americans core assets. All of this points to a strong economic recovery in 2021, but it does not bode well for renters and house hunters who are priced out.
The price of a median single-family home is up slightly more than 15% in less than 12 months in the U.S., according to the National Association of Realtors.
“A typical homeowner in 2020, just by being a homeowner, they would have accumulated around $24,000 in housing wealth,” Dr. Lawrence Yun, a senior economist at the National Association of Realtors, was quoted saying by ABC News last week.
Global demand is booming due to low interest rates. That’s another thing that’s pushing prices through the roof.
No House Flipping In China
People in several major Chinese cities signed more rental contracts than usual over the Lunar New Year break, according to the subscription service of Caixin Global, a China business daily.
The total number of rental contracts it facilitated in 18 cities hit a six-year high.
Average monthly rents in the cities climbed to 61.7 yuan ($9.53) per square meter, representing a 6% increase from the week prior. The 18 cities include the country’s four biggest municipalities — Beijing, Shanghai, Tianjin and Chongqing.
Some China cities are taking restrictive measures to crack down on real estate speculation amid surging housing prices. People have so much money, they don’t know where to put it other than third and fourth homes.
Housing authorities in the eastern China city of Hangzhou actually banned buyers of new residential properties from selling out within five years. Despite a series of restrictions, housing prices started 2021 in China at record highs.
In Brazil, the residential market has been recovering for the past four years, driven by low interest rates for home buyers. As a result, home builders have successfully tapped capital markets for resources that are now being deployed into new houses, focused on the upper middle segment in southeastern Brazil, according to a report by Imeri Capital.
I’m looking to buy in the southern state of Santa Catarina, actually. Brazil is great right now for expats and foreigners looking for tropical vacation homes. You can buy half a million dollar properties for under $150,000, though for that you will need to speak the language and deal with the local brokers and sellers otherwise you’re getting soaked with “gringo pricing”.
Unprecedented low inflation and interest rates present real estate investors with a macro backdrop that favors real assets. Property markets have been recovering faster than rental markets, including in hard-hit economies like Brazil, but have not peaked yet. Cap rate spreads remain high despite economic slowdowns and restrictions in Brazil and elsewhere.
One of the biggest standouts in the opposite direction has been India. They’ve been one of the hardest hit by the pandemic and their housing market has done poorly.
According to Knight Frank, housing sales in the top 8 Indian cities fell by a massive 54% year over year in the summer months to a decade low. New homes built also fell by a sharp 46% to 60,489 units in those cities, though that is picking up now. These numbers from Knight Frank are from July. I suspect India is turning the corner and joining the party.
If you’re looking for a place in Mumbai, Rentberry has a 2,390 square foot 3 bedroom, 3 bath house going for — get this — $879,865!
I’ll take Les Pelicans in Miami for half the price. Then again, it is half the size.
Forbes contributor Ellen Paris, who writes about real estate, says the last few months have been like “Groundhog Day” for real estate.
Home price growth in the U.S. ended 2020 at their fastest pace in eight years. The results top off what was a record year for the housing market despite the pandemic, Amanda Fung from Yahoo! Finance reported on February 23.
The S&P CoreLogic Case-Shiller national home price index rose 10.4% in December versus a year ago and rose 9.5% from November. The 20-City Composite rose by 10.1% in December, up from the 9.2% gain in November. That beat consensus estimates.
Rentberry’s Lubinksy says that — by looking out the window in his offices in San Francisco — its the old, tired story of Silicon Valley riches pricing out the riff-raff.
“The steady rise of income for tech workers is the key factor driving an overall increase in home prices and sales in the Bay Area,” he says. “Based on the data we have, we predict 2021 home prices will grow around 5% in the U.S. The correlation of the strong stock market and the continued increase in home prices is a global phenomenon at the moment,” Lubinksy says.
Global real estate investors looking for rental property will bring the same liquidity to prime real estate in countries throughout the Americas, for example, making it harder for new families to buy a home as price spikes have no end in sight. A stronger dollar is helpful to American buyers, but this window could be closing in Brazil and elsewhere. And although it is closing, I don’t expect the Brazilian currency, for instance, to head to four to one anytime soon. It is still trading over 5.30 to the dollar.
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