There are signs P.E.I.’s red-hot real estate market could be starting to cool — but that doesn’t mean it’s going to be any easier to break into the Island’s competitive real estate market.
Nationally, the market showed signs of cooling in March as both the number of homes sold and the average selling price declined compared to the previous month. But that’s not the case on P.E.I.
“The flattening hasn’t necessarily hit us yet here,” said James Marjerrison, the newly minted president of the P.E.I. Real Estate Association.
“But I would not be surprised, with rising interest rates and record highs, that there would be a bit of a flattening period — I just haven’t seen that just yet.”
The latest stats show prices continue to rise, for now. According to the P.E.I. Real Estate Association, of the 194 homes or units that sold on P.E.I. in April, the average price was a record $414,742, up more than 20 per cent from April 2021.
Low inventory
Despite those record prices, there were fewer homes sold in April on P.E.I. — almost 23 per cent fewer compared to last April’s all-time record sales. During the first four months of 2022, there were nine per cent fewer home sales than the same period last year.
James Marjerrison, president of the P.E.I. Real Estate Association. (Submitted by James Marjerrison)
That’s because, in part, there were fewer homes available to sell — what agents call low inventory. The number of new listings on the Island in April, at 265, was down more than 17 per cent from April 2021.
None of which is good news for buyers hoping the market cools so they can buy their first home or move up to a larger home.
“If housing prices were to fall a bit or if there was a bit of a correction, you might think that it could make it more affordable for people getting into the market,” said Marjerrison.
“But if interest rates continue to rise, that could put more pressure on affordability in terms of the monthly payment and the stress test, so that could level it off.”
Buyers might need to come up with a bigger down payment to keep their monthly mortgage commitments more manageable considering the higher interest rates, he explained.
“It’s a bit of a shell game when you’re juggling interest rates and house prices.”
‘Blessing and a curse’
Shaun Cathcart, a senior economist with the Canadian Real Estate Association who spoke to CBC P.E.I. from his home in Ottawa, said prices are rising more slowly than they were a year ago, which represents “a very slow topping out.”
“Our forecast is for things to sort of flatten out and to some extent … they kind of have been,” he said.
‘More affordable markets tend to be more immune to [mortgage] interest rate increases like this,’ says Shaun Cathcart, a senior economist with the Canadian Real Estate Association based in Ottawa. (CBC)
“Not so much in P.E.I.,” Cathcart explained. “More affordable markets tend to be more immune to interest rate increases like this.”
The wild card for the Maritime provinces of P.E.I., New Brunswick and Nova Scotia is buyers coming from outside the region who have just sold their homes in a hot market, and have plenty of money to spend, he said. They don’t care about mortgage rates, he said, because homes are still comparatively very affordable.
“It’s a blessing and a curse that it can keep activity going at a higher level than you’re seeing elsewhere in Canada, where we’ve seen some big slowdowns, but it’s also not great for locals competing for an almost record-low inventory of homes for sale.”
‘Going to make it worse’
Marjerrison said he has heard from potential buyers who have decided to keep renting until real estate prices come down.
If Cathcart’s predictions hold true, those buyers could be waiting a very long time.
Fewer homes for sale on P.E.I. means prices have continued to rise, CREA says. (Jonathan Hayward/Canadian Press)
In fact, he said the current market could make it even more difficult for locals who’ve been priced out of the market in the last few years.
“I think it’s going to make it worse,” Cathcart said.
“Typically what happens when markets slow down is you get a disconnect between buyers and sellers: sellers still want what the house across the street sold for last year, and buyers are not able to offer as much, or not willing to, and so what happens is the transaction doesn’t happen.”
Low inventories will rebuild as those homes sit on the market longer, he said, and prices will eventually flatten.
Affordability is going to come by way of decreasing the scarcity of homes.— Shaun Cathcart— Shaun Cathcart
“You go from everything selling to multiple offers, to the nicest homes still getting their asking prices and some of the other ones sitting around,” he said.
“That’s what I would expect: a flattening out of prices and a more normal number of sales. And that’s what our forecast is for most places in Canada.”
Mortgage rates will drive the change, Cathcart said. Bank rates that were 3.3 per cent last month have risen almost a full percentage point in one month, to 4.1 per cent.
“The market’s getting out in front of what the Bank of Canada is expected to do, which is to go from the overnight rate of one per cent right now to close to three per cent by the end of this year,” he said.
Fixed mortgage rates at banks have already priced in that prediction, he said.
The good news is if you are looking for a mortgage now, interest rates are unlikely to rise much more, he believes.
“It’s just going to be the variable rates playing catch-up with that over the rest of the year,” he said.
‘It’s going to increase inequality’
The combination of all these factors will hit first-time buyers the hardest.
Homeowners have had several years of building huge amounts of equity in their homes, Cathcart said, which means those looking to move will continue to outbid first-timers.
“If anything, it’s going to increase inequality, which is already terrible,” he said. “Where the haves can continue to have and move around, and the have-nots, it just makes it harder for them to acquire their first home … It’s unfortunate.”
Cathcart said CREA has been encouraging politicians to invest more in new housing. It’s the only way they see the housing crunch being alleviated, he said, but it’s easier said than done.
He believes the key is higher-density multi-unit development such as townhouses with “less space for cars and more space for people.”
“Affordability is going to come by way of decreasing the scarcity of homes, because the population is just going to keep on increasing” with international immigration, he said.
The scarcity of homes in turn has put, and will continue to put, pressure on rental markets, Cathcart said, and price low-income Canadians out of even renting.
“Maybe it’s a little bit depressing … but these are things we have to think about,” he said.
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
