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Real estate frenzy hits small cities in Ontario

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For sale signage is on display outside a residential property in Barrie, Ont., on March 19, 2021.

Tijana Martin/The Globe and Mail

When Stephanie Hunter and Braden Bonwick were searching for a house in the Niagara region, they were given a brief opportunity to view the properties and were advised to provide a cover letter and photo of themselves as they competed with dozens of buyers for homes that were selling for $100,000 over the asking price.

“It felt like we were playing a game of chance,” Ms. Hunter said. “You have 15 minutes to look at a place while a line of agents and their clients is forming outside the front door asking if you’re almost done. Then finding out the home you just had 15 minutes to look at had 65 viewings that day and all offers have to be in by 5 p.m. tomorrow.”

Welcome to the small city housing frenzy, where Toronto and Vancouver real estate tactics have become the norm. There are no home inspections and no conditional offers – and bids are routinely well over asking.

Since the pandemic began, buyers have sought more room for their home offices, entertainment and living. That has sent prices soaring and prompted recent warnings of real estate bubbles in areas well outside Toronto – not surburbs, but places that are 1.5 to two hours from downtown Toronto and have never experienced an overheated real estate market or at least one this hot. Niagara, Barrie, Tillsonburg, Woodstock, Ingersoll, Prince Edward County, Kawartha Lakes, Grey-Bruce Owen Sound and other smaller markets in Ontario have seen home prices climb more than 30 per cent.

“At first, everybody was excited because anybody looking to move up could sell their house and they made a pretty penny,” said Jim Diodati, the mayor of Niagara Falls. “Until they realized you make more money when you sell, [but] you are also going to pay more money when you buy.”

Now, smaller cities are increasingly grappling with the same problems created by skyrocketing real estate prices – unaffordability and housing inequity – that have plagued Toronto and Vancouver for decades.

“Appreciating real estate values show that you have a desirable market. On the other end, it is becoming unaffordable for people trying to enter the market,” said Mr. Diodati, who worries about housing for younger generations. “We are asking ourselves: Is this going to be an obstacle that they cannot get past? Are we committing our kids to renting for a long, long time?”

Barrie Mayor Jeff Lehman said his city is facing the same issues: “Not being able to afford housing – that is a problem in a number of places in Canada and it is a growing problem here.”

The benchmark price of a detached house in Barrie reached $721,000 in February. That was almost $100,000 more than three months ago and about $200,000 more than a year ago, according to Canadian Real Estate Association data. Three years ago, the price of a detached house in the city was less than $500,000; five years ago, it was less than $400,000.

Barrie, which is a 1.5-hour train ride from downtown Toronto, is also now one of the country’s priciest rental markets. The average monthly rent for a two-bedroom apartment was $1,393 last fall, according to the latest data from Canada Mortgage and Housing Corp. That puts Barrie fifth, behind Toronto, Vancouver, Ottawa and Victoria.

“I am definitely concerned about this. We had an affordable housing crisis before this happened,” Mr. Lehman said, adding that lower-income workers had to move farther out of the city even before the recent surge in real estate prices.

The same run-up in prices has happened elsewhere in the past few months. Detached houses in Kitchener-Waterloo, Burlington and Mississauga have gone up by a minimum of $100,000 over three months. In Milton and Oakville, prices are almost $200,000 more than they were in November.

The average price of a house in Hamilton, a commuter city that used to be considered affordable, is almost $800,000.

In Prince Edward County, a popular vacation area for Torontonians and Quebeckers, a local realtor says prices have become disconnected from reality. Treat Hull, who has sold properties in the county for almost a decade, said his region is in a real estate bubble. “I am really worried that we’re heading for a train wreck à la Toronto in 1990. I hope I am wrong,” he said.

Even places such as Owen Sound and Niagara Falls, which have had depressed prices for decades, have seen a flood of Toronto-region buyers looking for more room and access to nature. “A lot of people in big cities are reimagining their way of life,” said Owen Sound Mayor Ian Boddy, who agrees with the other mayors that higher prices are a double-edged sword.

That was the case for Ms. Hunter and Mr. Bonwick. After 17 years of living in Toronto, they were sick of renting small, gardenless spaces and tired of the expenses that accompany city living. The couple, in their late 30s, envisioned buying their first house in St. Catharines, where they both grew up.

“Braden and I imagined we’d move back and find the perfect starter home. How difficult can that be? Ha ha,” Ms. Hunter said. The longer they looked, the pricier homes got. They turned to Niagara Falls after being priced out of St. Catharines.

Ms. Hunter said the process was “frustrating, discouraging and upsetting.”

“You have to decide quickly if you both liked it and then try to figure out what kind of number you want to throw out there in hopes that they’ll pick you, while trying not to become house poor. Then you sit and wait, only to hear they went with an offer that came in $100,000 over asking,” she said.

The couple made offers on five properties and competed against 15 to 25 buyers each time. They finally found a house in Niagara Falls for less than $450,000 and said their offer with no conditions put them ahead of the pack.

Source: – The Globe and Mail

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Real eState

What Is the Canada Mortgage and Housing Corporation (CMHC)

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The Canada Mortgage and Housing Corporation (CMHC) is a Canadian Crown Corporation that serves as the national housing agency of Canada and provides mortgage loans to prospective buyers, particularly those in need.

Understanding the Canada Mortgage and Housing Corporation (CMHC)

The Canada Mortgage and Housing Corporation (CMHC) serves as the national housing agency of Canada. CMHC is a state-owned enterprise, or a Crown corporation, that provides a range of services for home buyers, the government, and the housing industry.

CMHC’s stated mission is to “promote housing affordability and choice; to facilitate access to, and competition and efficiency in the provision of, housing finance; to protect the availability of adequate funding for housing, and generally to contribute to the well-being of the housing sector.”1

A primary focus of CMHC is to provide federal funding for Canadian housing programs, particularly to buyers with demonstrated needs. CMHC, headquartered in Ottawa, provides many additional services to renters and home buyers, including mortgage insurance and financial assistance programs. CMHC acts as an information hub for consumers, providing information on renting, financial planning, home buying, and mortgage management.

CMHC also provides mortgage loan insurance for public and private housing organizations and facilitates affordable, accessible, and adaptable housing in Canada.2 Additionally, CMHC provides financial assistance and housing programs to First Nations and Indigenous communities in Canada.3

Professionals and Consumers

CMHC provides services to both professionals and consumers. For professionals, CMHC aims to work in collaboration with different groups to provide affordable housing. Services include project funding and mortgage financing, providing information to understand Canada’s housing market, innovation and leadership networks to access funding and talent to spur housing innovation and increase supply, and providing speakers and hosting events for the industry.4

For consumers, CMHC seeks to provide all the tools an individual would need to either buy a home or rent a home and a variety of information and assistance for current homeowners, such as managing a mortgage, services for seniors to age in place, and financial hardship assistance.56

For financial hardship and mortgage assistance, CMHC provides tools that include payment deferrals, extending the repayment period, adding missed payments to the mortgage balance, moving from a variable-rate to a fixed-rate mortgage, and other special payment arrangements.7

Canada Mortgage and Housing Corporation (CMHC) and the National Housing Strategy

In November 2017, the Canadian government announced the National Housing Strategy.8 Rooted in the idea that housing is a human right, this 10-year, $70 billion project will largely be administered by CMHC, although some services and deliverables will be provided by third-party contractors and other Canadian federal agencies.9

Strategic initiatives of the National Housing Strategy include:

  • Building new affordable housing and renewing existing affordable housing stock
  • Providing technical assistance, tools, and resources to build capacity in the community housing sector and funds to support local organizations
  • Supporting research, capacity-building, excellence, and innovation in housing research10

History of the Canada Mortgage and Housing Corporation (CMHC)

CMHC was established in 1946 as the Central Mortgage and Housing Corporation by the federal government in Canada with the primary mission of administering the National Housing Act and the Home Improvement Loans Guarantee Act and facilitating discounts to mortgage companies. Initially, CMHC began by providing housing to returning Canadian war veterans, and toward the end of the 1940s, CMHC began to administer a program providing low-income housing across Canada.11

In 1947, CMHC was responsible for opening Regent Park, a large low-income housing project, and Toronto’s first urban renewal project. By the 1960s, CMHC introduced co-op housing and multi-unit apartment buildings throughout Canada.11

In 1979, the Central Mortgage and Housing Corporation changed its name to the Canada Mortgage and Housing Corporation

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Real eState

Canadian home price gains accelerate again in May

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Canadian home prices accelerated again in May from the previous month, posting the largest monthly rise in the history of the Teranet-National Bank Composite House Price Index, data showed on Thursday.

The index, which tracks repeat sales of single-family homes in 11 major Canadian markets, rose 2.8% on the month in May, led by strong month-over-month gains in the Ottawa-Gatineau capital region, in Halifax, Nova Scotia, and in Hamilton, Ontario.

“It was a third consecutive month in which all 11 markets of the composite index were up from the month before,” said Daren King, an economist at National Bank of Canada, in a note.

On an annual basis, the Teranet index was up 13.7% from a year earlier, the 10th consecutive acceleration and the strongest 12-month gain since July 2017.

Halifax led the year-over-year gains, up 29.9%, followed by Hamilton at 25.5% and Ottawa-Gatineau at 22.8%.

Housing price gains in smaller cities outside Toronto and its immediate suburbs again outpaced the major urban centers, with Barrie, Ontario leading the pack, up 31.4%.

On a month-over-month basis, prices rose 4.9% in Ottawa-Gatineau, 4.3% in Halifax and 3.7% in Hamilton.

The Teranet index measures price gains based on the change between the two most recent sales of properties that have been sold at least twice.

Canada‘s average home selling price, meanwhile, fell 1.1% in May from April, Canadian Real Estate Association data showed on Tuesday, but jumped 38.4% from May 2020.

 

(Reporting by Julie Gordon in Ottawa; Editing by Christopher Cushing)

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Economy

Bank of Canada seeing signs of cooling in hot housing market

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The Bank of Canada is starting to see signs that the country’s red hot housing market is cooling down, although a return to a normality will take time, Governor Tiff Macklem said on Wednesday.

The sector surged in late 2020 and early 2021, with home prices escalating sharply amid investor activity and fear of missing out. The national average selling price fell 1.1% in May from April but was still up 38.4% from May 2020.

“You are starting to see some early signs of some slowing in the housing market. We are expecting supply to improve and demand to slow down, so we are expecting the housing market to come into better balance,” Macklem said.

“But we do think it is going to take some time and it is something that we are watching closely,” he told the Canadian Senate’s banking committee.

Macklem reiterated that the central bank saw evidence people were buying houses with a view to selling them for a profit and said recent price jumps were not sustainable.

“Interest rates are unusually low, which means eventually there’s more scope for them to go up,” he said.

Last year, the central bank slashed its key interest rate to a record-low 0.25% and Macklem reiterated it would stay there at least until economic slack had been fully absorbed, which should be some time in the second half of 2022.

“The economic recovery is making good progress … (but) a complete recovery will still take some time. The third wave of the virus has been a setback,” he said.

The bank has seen some choppiness in growth in the second quarter of 2021 following a sharp economic recovery from the COVID-19 pandemic at the start of the year, he added.

(Reporting by David Ljunggren and Julie Gordon; Editing by Peter Cooney and Richard Pullin)

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