After a disappointing 2018, when housing prices and sales declined, 2019 has been a year of resilience for housing markets across most of Canada. Not only did sales numbers stabilize and resume an upward climb, but prices also demonstrated some strength.
As we move closer to 2020, those involved with the real estate industry and the million-plus Canadian households who are likely to buy or sell a residential property in the next year are wondering whether things will continue to improve in the year ahead, or if there is more trouble in store.
The good news is that a review of the forecasts by leading real estate experts in Canada points to a recovery in 2020. The Canadian Real Estate Association (CREA) estimates the national home sales to reach 530,000 units in 2020, an 8.9 per cent increase over the total expected for 2019. CREA also expects the national average price to hit $531,000 in 2020, a 6.2 per cent increase.
Royal LePage, meanwhile, is predicting a 3.2 per cent year-over-year increase in housing prices next year with RE/MAX a little more optimistic at 3.7 per cent. Though their benchmark prices are different from CREA, they see the market moving in the same direction.
Likewise, a poll of 18 economists, conducted by Reuters in November, also saw gains ahead, predicting Canadian housing prices would rise by 3 per cent in 2020 and 2.9 per cent in 2021.
The positive forecast for housing markets in 2020 is supported by strong immigration numbers that are likely to maintain a sustained demand for housing in Canada’s most populous housing markets. A Royal LePage survey reported in October 2019 that “newcomers to Canada are expected to purchase one in every five homes on the market over the next five years.”
At the same time, CREA notes that the Bank of Canada is unlikely to raise interest rates in 2020, which will drive demand for mortgage finance.
While most market watchers are optimistic about housing, there are some causes for concern. For starters, not everyone expects a three-plus per cent jump in prices. Fitch Ratings, a debt assessment firm, is forecasting a mere 1 per cent growth in housing prices in 2020. When adjusted for 2 per cent inflation, Fitch is forecasting a decline in real house prices for the next year.
Another concern is that listings are not keeping pace with sales. An increase in new listings, when sales are climbing, is needed to restrict inflationary pressures. Royal LePage, in its forecast for 2020, is also mindful of a lack of growth in listings. “The story in 2020 will be lack of supply,” warns the real estate firm.
Accompanying the tightened supply is growth in mortgage credit. This has caught the attention of the Bank of Canada. In a recent address, Carolyn Wilkins, senior deputy governor of the Bank, noted that a drop in mortgage rates had “boosted” the markets. “Many of the same ingredients that were present in some housing markets three years ago — namely strong underlying demand, tight supply and low-interest rates — are present again,” she noted.
Despite the concerns, markets are better equipped to deal with the determinants of inflationary pressures. The Bank of Canada expects “the regulatory and other measures in place will support the quality of new credit and mitigate the buildup of imbalances in the housing market.”
The regulatory measure credited the most with addressing housing price inflation is the stress test, which was expanded in January 2018 to include uninsured mortgages and required borrowers to qualify at a higher rate than the negotiated rate with the lender to address the possibility of a future rate hike.
While Prime Minister Justin Trudeau has directed his finance minister, Bill Morneau, to review the tests and potentially make them more dynamic, it is not certain if or precisely how that will happen. Any changes will have to balance the needs of Alberta and the Prairies, where housing markets have been struggling, with those of regions where demand has already started to pick up.
All told, a vibrant labour market, vigorous demand for housing and low interest rates suggest conditions will be favourable for housing in 2020. The federal government’s initiative to help new homebuyers with shared equity mortgages and a possible review of the stress test are also positive signs. But as always in real estate, there are plenty of unknowns that could disrupt that positive picture.
Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.
Why Buying Property in Italy Is Hot Real Estate Trend for Americans and Britons – Bloomberg
Homes in Italian cities and the countryside have always held an allure for foreign buyers. Now the pandemic is supercharging demand from well-off Americans and Britons.
That’s because a range of tax incentives, relatively lower prices and the potential for working remotely has kindled their desire to buy second homes in Italy.
Drexel alum-founded YieldEasy, a marketplace for real estate investors, launches next month – Technical.ly
Drexel University alum Jeffery Gopshtein has worn many hats since he graduated in 2017.
The first in his family to graduate from college, he was inspired by his parents’ entrepreneurial ventures. After a stint of founding and running a food truck business at Drexel, he earned his degree in finance and real estate, assuming he’d work on Wall Street. But Gopshtein soon realized through a co-op experience that he wasn’t built for staring at spreadsheets.
So he jumped into the traditional side of real estate, getting his license and selling homes, he told Technical.ly. He was intrigued by becoming an investor, and eventually bought his first property, a single family home. But he watched how big the commercial and multi-unit market was growing, and brainstormed a way to get in without a lot of capital.
“There was a real appeal there,” Gopshtein said, so he spent time with a development firm. “I watched and learned about all the implications of building urban areas.”
He felt there was a hole missing in the real estate market for those who were interested in investing in smaller multi-unit properties. Buildings that host between two and 20 units make up the majority of Philadelphia’s apartment buildings, according to Gopshtein, but many real estate agents and buyers stayed away from them. It takes about the same time and energy to sell a property with a few units as one with 40 units, he reasoned. But one of the paychecks is a lot bigger.
Gopshtein began work building an end-to-end marketplace for people buying apartment buildings. The platform sources, analyzes and markets these buildings, and also hosts many of the tools necessary in completing a property sale like title, financing and property management tools. The platform, YieldEasy, will launch next month in Philadelphia.
The company’s revenue comes through its tech-enabled marketplace, and both buyers and sellers save money, because the company doesn’t have the overhead of traditional brokerage, the founder said. Instead, it charges a flat, 1.5% transaction fee. Gopshtein realizes he’s not reinventing the wheel, he said, but creating a set of digital tools for an undeserved market.
“We’re not inventing the space, we’re digitizing a $13 billion market,” he said.
Currently, Gopshtein runs the business with one other person who’s working on getting to full-time. The company also has a group of trusted advisors, and has recently raised $100,000 in pre-seed money to get them to the platform’s launch and seed round later this year, Gopshtein said.
He foresees expanding next year to other markets that have a similar makeup of these multi-family units, perhaps in Austin or Miami. His main goal is to let people know that if they have a goal of property investing, it’s more accessible than they might think. The company will even be considering fractional ownership — where someone puts a partial investment into a property with others — for the future.
“It’s very capital intensive, so a lot of people stay in the single family home lane. There’s no real seamless way to get into it,” the founder said of ownership. “But someone who could buy a $500,000 home could also as easily buy a $500,000 duplex.”
Podcast: Investing in industrial real estate – Real Estate News EXchange
The Industrial Real Estate Show:
Host Chad Griffiths interviews Logan Hartle, an experienced industrial real estate investor and broker.
They discuss Hartle’s background as a residential investor who transitioned into industrial, and also speak about ways investors can find opportunities. As Griffiths notes, perhaps the most impactful point comes at 17:42, when Hartle provides a “great tip” for new industrial investors.
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