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Up, up, up: Canada house prices poised to surge again despite central bank warning

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Canadian housing prices are set to surge again in the coming months as investors and first-time buyers scramble to buy before interest rates go up, ignoring a warning from the Bank of Canada that there is a high risk of a sudden price drop.

Central bank Deputy Governor Paul Beaudry told would-be home buyers on Tuesday to consider if it is a “good time to buy or not,” pointing to market frothiness in certain cities and renewed investor activity.

Those conditions could “expose the market to a higher chance of a correction,” he said.

The Bank of Canada last month signaled the overnight rate, currently at a record low 0.25%, could start rising in the “middle quarters” of 2022. Another rush to buy is probably already under way, analysts said.

“Whenever interest rates start rising, people get into the market, including investors. So you will see an acceleration in activity over the next few months,” said Benjamin Tal, deputy chief economist at CIBC Capital Markets.

Canadian house prices skyrocketed 31.6% year-over-year in March to hit a record high before softening a bit over the summer. Prices are now accelerating again, with October’s average price barely below the March peak.

Ratings agencies are taking notice. Fitch has pegged Toronto’s housing market at 32% overvalued and Vancouver’s at 23%. Moody’s Analytics also has Vancouver 23% overvalued, Toronto 40% and Hamilton, Ontario, 73%.

The average price of a home in Toronto, Canada’s biggest city, hit C$1.2 million ($947,493) in October, up 19.3% from the previous year, and detached homes now average C$1.5 million.

Canadian Prime Minister Justin Trudeau has pledged to act on the runaway market, but critics note prices have climbed 77% nationwide since he took office in 2015.

Toronto mortgage broker Ron Butler says he is getting busier by the hour with clients desperate to get into the market.

“We see it, literally, hourly here … people who have simply given up and say: ‘The prices are going to go up forever, I have to buy now,'” he said.

Butler said he is working with one longtime Toronto renter who has been waiting years for prices to fall so he could get into the market. Now he is buying an hour’s drive west in Hamilton because he is worried he will never own a home otherwise.

Fear “is not a good motivator when you’re buying a house,” said Butler, adding that investors too are increasingly gripped by the “fear of missing out,” or FOMO.

‘RUSH TO BEAT RATE HIKES’

Butler estimates that investors – those who buy properties to rent out or to hold for speculative gains – make up about 25% of housing demand at this point, with that number far higher in major cities and particularly in pre-sale condo markets.

The Bank of Canada said investor buying has doubled since the onset of the COVID-19 pandemic, but economists see demand holding up.

“We don’t expect a collapse. But we see prices being close to flat next year,” said Jimmy Jean, chief economist at Desjardins Group in Montreal, adding that demand is expected to remain “pretty decent,” pointing to strong immigration.

Doug Porter, chief economist at BMO Capital Markets, also expects a short-term “rush to beat rate hikes,” but then only a moderate pullback in markets that were supercharged by the pandemic.

“The history of the last 15 years has been cluttered with those calling for a crash in the Canadian housing market to be proved wrong time and time again,” Porter said.

($1 = 1.2665 Canadian dollars)

 

(Reporting by Julie Gordon in Ottawa; Additional reporting by Steve Scherer; Editing by Steve Scherer and Peter Cooney)

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Google real estate executive says 5% more workers coming in to office each week

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Alphabet Inc’s Google has seen an increasing number of employees coming in to its offices each week, particularly younger workers, the company’s real estate chief said during an interview at the Reuters Next conference on Friday.

On Thursday, Google indefinitely pushed back the mandated return date for employees due to concerns about the Omicron variant. The company had previously said its 150,000 global employees could be required to come in to the office as soon as Jan. 10.

Nevertheless, David Radcliffe, Google’s vice president for real estate and workplace services, said many Googlers are returning of their own volition. About 40% of its U.S. employees on average came in to the office daily in recent weeks, up from 20-25% three months ago, he said. Globally, 5% more employees are returning to offices week after week, he added.

“People are actually showing voluntarily that they want to be back in the office,” Radcliffe said. “We’re moving in the right direction.”

Younger employees and those who joined Google more recently have been coming in at higher rates, seeking opportunities to learn from colleagues, Radcliffe added.

Google expects workers in the office at least three days a week once it mandates a new return date.

Based on feedback from those already back, it is redesigning floor plans to increase private, quiet spaces for distraction-free individual work and adding conferencing and other collaboration areas in open spaces both indoors and outdoors.

Real estate and human resources experts have considered Google a trailblazer for the past 20 years in sustainable office design and variety of workplace perks, including free meals, massages and gyms.

To extend those sustainability and wellness benefits to remote work, Google has encouraged employees to buy carbon offsets and non-toxic furniture for their home offices. It also has provided free cooking classes and discounts to fitness studios near workers’ homes.

“It was amazing how many employees had really never cooked themselves,” Radcliffe said.

 

(Reporting by Paresh Dave in Oakland, Calif., and Julia Love in San Francisco; Editing by Sonya Hepinstall and Matthew Lewis)

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Calgary real estate is on a late-year roll – Western Investor

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With $468 million in sales – not counting the $1.2-billion Bow office tower purchase that has yet to close – in the third quarter (Q3) 2021, Calgary is on track to top $2 billion in commercial and industrial real estate sales this year, according to Altus Group.

Meanwhile housing sales in November reached 2,110 transactions, just shy of the record for the month set in 2005, as the sales-to-new-listing ratio hit a blistering 100 per cent.

Altus reports that the Calgary’s commercial real estate market recorded 115 transactions for a total investment volume of $468 million in the third quarter, bringing the total investment volume for the year close to $2 billion. The total sales volume was up 37 per cent from the first three quarters of 2020.

Industrial sales led the commercial and industrial assets investment parade in the third quarter, with 27 transactions valued at $188 million. This sector was dominated by two substantial distribution logistics centre deals. These were the $69.7 million purchase of a Canadian Tire 496,000-square-foot distribution centre by Skyline Commercial Real Estate Investment Trust (REIT); and the $32.18 million sale of the Valad Construction headquarters industrial and office complex to Nexus REIT.

The ICI (industrial-commercial-institutional) land sector was the second most active in terms of dollar volume with 38 transactions amounting to $83 million, up 62 per cent from Q3 of 2020.

The multi-family rental apartment sector saw 15 transactions totalling $82 million, a 70 per cent increase from the same point last year, and only a marginal decrease from the previous quarter.

The retail sector tallied $44 million in transactions amounting to a 110 per cent increase from Q3 2020.

The biggest retail sale was the $8.35 million purchase of the Hansen Ranch Plaza, a near-12,000-square-foot retail centre in northwest Calgary, bought by local investors.

“Calgary’s beleaguered office market has remained flat, with five transactions amounting to $15 million, a negligible change from the same quarter last year,” noted Ben Tatterton, manager of data solutions at Altus, who prepared the Calgary report with national research manager Krut DSesai.

The landmark sale of the Bow office tower will be registered in a future quarter, Altus noted.

The two-million-square-foot Bow tower was purchased in August from Toronto-based H&R REIT by Oak Street Real Estate Capital, of Chicago, for $1.216 million, in a deal expected to close by the end of this year.

The Calgary Real Estate Board (CREB) reported a rush of home buyers in November.

“Lending rates are expected to increase next year, which has created a sense of urgency among purchasers who want to get into the housing market before rates rise,” said CREB chief economist Ann-Marie Lurie. She added that supply levels have tightened, causing prices to rise.

The benchmark composite home price in November was $461,000, up nearly 9 per cent from November of 2020, according to Lurie.

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Saskatchewan real estate market conditions making it hard for buyers: realtors – Globalnews.ca

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Saskatoon real estate agent Warren Ens says the current real estate market conditions in Saskatchewan aren’t for the faint of heart.

“The really good houses, you pretty much have to go the exact same day as (they’re) listed, and even then you probably are going to get into a bidding war,” he said Friday.

Read more:

Saskatoon real estate market slows but still healthy, says realtors association

He adds that bidding wars over Saskatoon homes are happening at a rate he has never seen in his 11 years working in Saskatchewan.

“(Last) Friday I got into two bidding wars with two different clients,” he laughed. “That’s not something you see too much of.”

A new report from RE/MAX shows this is the case across the country, making it harder for first-time homebuyers to get into the market.

Read more:

Canada’s housing market hotter than ever — and investors are playing a big role

RE/MAX Canada Regional Executive Vice President Elton Ash says this competition could continue.

“In March, we’re anticipating the Bank of Canada to start edging the overnight rate up with inflation concerns and that sort of thing,” he said Thursday. “That’s going to push buyers suddenly, because they’ve been looking and they’re going to want to lock in at a lower rate.”


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Rural Boom: Why millennials are flocking to small town Canada – Nov 20, 2021

He said buyers from all across Canada are now seeing the value of an affordable new house in the Prairies.

“People are looking at that and saying, ‘Hey, yeah I might today be working in Toronto but I can work remotely and I can move back home to Saskatchewan where prices are much more affordable; family life will be better and I can work remote,’” Ash explained.

Read more:

Toronto-area home sales top November record, prices reach all time high

Ens says he’s seen this play out in his day-to-day job, with plenty of newcomers in the last year.

“We’ve seen people from Toronto, Chilliwack, B.C., places like that that are coming here,” he said.

From his perspective, the report is accurate in its prediction that houses will likely only continue to slowly increase in price, but he says a seller’s market won’t always make things easier.

Read more:

‘Not as crazy as it seems’: How COVID-19 gave rise to home-buying sight unseen

“When you have bidding wars and you have multiple offers it sounds great for a seller,” he explained. “But it’s also very tricky because you could actually lose all the offers because you do something wrong.”

The bottom line, he says, is that Canada is a seller’s market — and Saskatchewan is selling fast.

© 2021 Global News, a division of Corus Entertainment Inc.

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