Housing markets in desirable cities have proven impervious to the effects of the pandemic, Vancouver included. Royal LePage released its quarterly house price survey last week that showed the median price of a two-storey detached house in Greater Vancouver had gone up 8.8 per cent by the end of 2020.
That hypothetical two-storey house will now cost you $1,507,279. A bungalow in the region will take you back $1,265,285, and a condo $662,120. The company has forecasted that prices will climb even higher by spring.
Vancouver is not an outlier in Canada – 64 per cent of all regions surveyed showed year-over-year median-price increases of more than 10 per cent for two-storey houses. Others have reported similar numbers.
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Since May, multiple offers have been common for sales of detached houses, says Randy Ryalls, the general manager for Royal LePage Sterling Realty in Port Moody. He points to low inventory and anxious millennial buyers for fuelling the market. While many service-industry workers lost their jobs because of the pandemic, the market is strong because it’s the older, higher-income bracket that is driving it. Millennials, in particular, are buying, now that many have reached peak earning potential and have families.
“[The pandemic] has probably persuaded some of those people that are paying $2,500 or $3,000 a month in rent to start thinking about buying something, and so those people have moved into the marketplace in significant numbers.
“The millennial demographic plays a huge role in our real estate market, and they are the biggest group demographically in the real estate market now. They are all at that time in their lives where they are starting to have families and they have better jobs and can afford to buy something, and they are out there doing that,” Mr. Ryalls says.
“Some of them are buying $700,000 or $900,000 homes – or $1-million houses further out.”
Over all, the Vancouver market has gone up around 10 per cent, mostly since May, Mr. Ryalls says. Surrey has gone up around 14 per cent, as purchasers snap up houses. The condo market, which had slowed considerably in the past year, also seems to be gaining traction. Investors are returning to the market.
A three-unit house in Vancouver’s Riley Park recently sold for $202,000 over asking, demonstrating the strong appeal of investor properties. The house at 719-723 E. 29th Ave., had an asking price of $1.599-million and sold for $1.801-million after 12 days on the market. The sale closes Feb. 9. Listing agent Cheryl Davie of Re/Max Crest Realty received ten offers.
The property actually comprises three separate units: a 1,965-square-foot detached character home built in 1908 and fully remodelled, with ground level and upstairs suites, and a two-level laneway house built in 2017 and renting for $2,200 a month.
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“The Fraser area of East Vancouver has seen a lot of development over the past decade, and there is the possibility this parcel could be bought and redeveloped in the future,” Ms. Davie said.
Ian Watt, a downtown realtor, says he had an investor buyer put in an offer on a downtown one-bedroom condo recently that went into multiple offers. All offers, he says, came from investors.
“I have a feeling this year will be a crazy year because a lot of people are back out there and looking to buy,” Mr. Watt said.
At the outset of the global health crisis, nobody could have predicted that housing prices would actually go up. Mr. Ryalls from Royal LePage says he had braced for the worst, and the buoyant market has shocked him. At this rate, he doesn’t see the Lower Mainland ever going back to prices considered affordable to the average income earner.
“In March, we were all wondering how much longer we would be in business,” he says. “I can appreciate that it sounds very self-serving from the real estate industry, but if you look back, every 10 years the prices have doubled in the Lower Mainland. That goes back historically for decades. We have a pretty resilient real estate market here.”
It strikes urban designer, professor and author Patrick Condon as noteworthy that the housing market would thrive amid a pandemic. Prof. Condon says the situation underscores the fact that housing prices, and rents, too, remain disconnected from the jobs market.
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“Somehow, when people all over the world are losing heir jobs, the value of housing has inflated rather than crashed. So how do you explain that?”
Prof. Condon just released a book, Sick City, in which he does just that. While Sick City focuses on the U.S. housing situation, and growing inequality in that country, there are many parallels with what’s happening in Canada, says Prof. Condon, who’s from Massachusetts.
The beneficiaries of rising land prices fall into two categories, he says. There are the older homeowners who have been lucky enough to buy into the market before the outrageous inflation, and whose equity has grown significantly; they have the advantage of borrowing against that equity or adding significant value to their properties by building infill. And then there are the speculators, who have driven prices up on their way to reaping capital gains. The smart ones purchase land near new transit or some new improvement. That behaviour has pushed up prices not just for homeowners, but for renters, too.
Going back to the 1990s, Prof. Condon says that urban land became a class of assets that went beyond the rate of inflation in desirable cities such as Vancouver, Sydney, London, New York and Singapore. When properties became an asset for global wealth and speculation, they became disconnected from incomes. That decoupling lead to the lack of affordable housing we see today.
“It had nothing to do at all with the wages of people who are basically competing for that, and it influences not just housing costs, but also the cost of rent, as the value of the land under the rental buildings gets bid up and up and up.”
Land has always made a sound investment; however, in the new environment, the returns are higher than ever.
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“If you are going to invest, you’re smartest to invest in urban land in this host of cities and you don’t care how much it will cost – because you know it will go up for sure, 8 to 12 per cent.”
Prof. Condon also disagrees with prevailing policies that call for more supply as the answer to the affordability crisis, as if we can build our way to healthy, thriving cities where residents are properly housed and no one is displaced. Instead of lowering housing costs, rezoning for more density only increases the price of the land. Price is based on the buildable square feet that zoning allows.
“In the long run, it prevents access to affordable housing for the average wage earner, because it all ends up being absorbed in the price of urban land.”
That’s why he’s long argued for taxing new developments, along the Broadway Corridor, for example. It’s a cost that would have to be included in the purchase price of the land, thereby lowering land costs. He cites parallels to the Vienna model. Decades ago, the Austrian capital’s rent controls and taxation on land reduced land prices, which gave the city a chance to develop much of the rental stock. Today, Vienna has a considerable amount of publicly owned housing and co-ops.
“It’s the land market that needs to be disciplined. It’s not the developers that are the problem – it’s the land speculators,” Prof. Condon says. “Tax at the full value of that increased land value, and take the lion’s share of that money and use it to build non-market housing that would be permanently affordable.”
Sick City by author Patrick Condon is freely distributed on a creative commons license. It can be downloaded here.
A longtime Weyburn realtor, Winston Bailey, said there are many positive aspects to the real estate market in the city and area right now, in a presentation he gave to the Weyburn Rotary Club on Thursday via Zoom.
He noted he’s been in business in the city for 46 years, since he began with a construction company in 1976, and in real estate for the last 16 years, “and I have no intentions of quitting just yet.”
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Sharing statistics about how real estate is doing in this area, Bailey noted that provincially the real estate market has had one of its strongest ever starts to a year, according to the Saskatchewan Real Estate Association, with housing values up by one per cent after going down for the previous four or five years.
One factor is the low interest rates, said Bailey, pointing out that on a recent home sale the buyers were able to get 1.79 per cent on a 20-year mortgage with a five-year term.
Comparatively, when he built a home in 1983, the interest rate went down from 14 per cent to 11.5 per cent, “and I said yep, we can afford this — so that’s quite a difference.”
He added that in the last few months, he hasn’t seen any interest rates higher than 2.25 per cent, which can make a large difference in mortgage payments.
Currently the number of houses and other properties on the market has dropped by about 30 per cent, which has the positive effect of quick sales for a seller — unless it’s a condominium unit, which are “very sluggish” right now with 41 condos on the market in Weyburn right now.
Overall, there are about 135 properties on the market in Weyburn right now, including the condos, where normally the city has over 200 properties for sale. Bailey noted that “well over 200” properties sold in 2020, and “that’s pretty impressive. We haven’t seen that for a long time.”
There are few housing starts right now due to the high cost of building materials, said Bailey. He noted his son, Chad, recently built a fishing shack, and a sheet of plywood cost about $60, up from the past average price of around $22-23 a sheet.
The strongest real estate markets right now are in the larger cities, like Regina, Saskatoon and Prince Albert, while in the smaller cities, like Weyburn, Estevan, North Battleford and Kindersley, most of them have a strong presence of the oil industry.
“When the boom was on, it was our cities that grew the most. We’re suffering a little bit right now, but by the same token, we’re not in trouble. I don’t think that’s too negative a thing, I’m still very optimistic,” said Bailey.
Farmland values have been very strong in the Weyburn region, particularly good quality farm land from Yellow Grass, Lang and Colfax areas up to Regina, said Bailey.
He pointed to two recent land sales just north of Yellow Grass, with six quarters selling for $3,500 an acre in one sale, and in a smaller parcel, the land sold for $4,000 an acre, “so $600,000 for a quarter is what you’re seeing on some farmland.”
Land in the Weyburn area has sold for around $250,000 a quarter, he added, saying as a general rule, farmland will sell for 1.2 to 1.3 times its assessment, and high-quality farmland will sell for 1.5 to 1.6 times its assessed value.
“Even pasture land will sell for $150-175,000 a quarter,” he added.
For commercial properties, Bailey said some oil-related properties have had their tenants move on, but many of them have tenants renting so very few of those are sitting empty.
Addressing how COVID-19 has impacted the real estate business, Bailey said they are making it work and are abiding by the provincial regulations around how businesses are to operate.
“When I go to show a house, I have a mask on and keep a physical distance, and use hand sanitizer. You just comply by the rules,” he said. “People in general have been very open to allow us in. Some ask us to wear gloves, and that’s fine, that’s not a problem. In all, it’s a different way of doing business, but we just comply with the provincial standards, rules and regulations, and we can live with that.”
Weyburn has a lot going for it, such as being declared one of the best communities to live in on the prairies and in Canada.
“I’m a believer in our city, and in what we have going for us. It continues to attract people of all walks of life,” said Bailey, pointing out Weyburn has a new school and a new recreation and culture centre under construction, and a new hospital is on the way.
“I’ve had the privilege of taking a couple of tours (of the new facilities) and it’s absolutely amazing, it’s unbelievable. We should be very, very proud to have that facility here,” he said, adding the new hospital will also be a big boost for the city.
Combined with having Southeast College here, Weyburn has a lot to offer, he said. “Education and health care always assist in attracting people to the city.”
The ranking of Weyburn as one of Canada’s top communities is based on many factors, he added, including affordability, crime rate, schools, recreation and sporting facilities, and the business community, not to mention Weyburn’s friendliness, which is mentioned to him all the time by visitors from other communities.
Asked if Weyburn’s Golf Club is a selling feature for potential buyers, Bailey said it absolutely is a major recreational asset, along with the other sporting and recreation facilities that are here.
HUNTSVILLE, ONT. —
Over the past year, one thing has become abundantly clear as we work from home. We now know with crystal clear clarity what our homespace should look like. If it didn’t meet your new expectations, you likely have been on the move.
The result? Home prices are on the rise, and this has caught the attention of the Bank of Canada governor Tiff Macklem.
Throughout the pandemic, one of the pillars of the economy has been the real estate market. Rising demand, constrained supply and rock-bottom rates are all conspiring to lead us to believe home prices have only one way to go: higher.
Now to be fair, home prices have been on the rise, but we still have a long way to go before we get to the heated market of five years ago. But that doesn’t mean the Bank of Canada isn’t watching this closely. Macklem has stated he is seeing early signs of what he called “excess exuberance,” with people expecting the recent increases in prices to go on indefinitely.
I have learned that nothing goes on indefinitely when one of the variables changes. In this case, it could be mortgage rates.
Canadians might have grown accustomed to fixed rates continuously declining after the five-year fixed rate in Canada reached a record low this past summer of 1.39 per cent.
This is about to change for the first time since the pandemic began.
According to RateHub.ca, fixed rates are on the rise in response to higher-than-expected inflation in January. And if this inflation continues to go higher and optimism around the vaccine rollout continues, Canadians should expect to see rates continue to move higher. By the end of the week, the expectation is for the best rate to be 1.54 per cent.
Call to action: if you are in a variable rate mortgage, you might want to consider locking in. If you are first time homebuyer, a mortgage pre-approval today will hold rates for 90-120 days.
According to the RateHub.ca mortgage calculator, a homeowner with a 10 per cent downpayment on a $500,000 home with a five-year fixed rate of 1.39 per cent and a 25-year amortization would see their payments increase per month by $32.00, or $384.00 per year, if rates increase to 1.54 per cent.
One recent sale went more than $1.6 million over the asking price, while another went $700,000 higher.
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When the COVID-19 real estate boom started, multiple offers and over-asking sale prices were mostly happening for detached homes in the $1.5 million to $2 million range in parts of East Vancouver and North Vancouver, and lower-prices houses in the Fraser Valley.
Now, there are signs of this moving into more expensive housing. In particular, there were two eye-popping sales in mid-February, one that went for over $700,000 the asking price, and the other for more than $1.6 million higher than the asking price.
In a fast-escalating market with heated demand and multiple offers, it can be challenging for sellers and real estate agents to determine an asking price by relying on a property’s assessment or recent sales of a similar property. This can lead to sale prices that are hundreds of thousands of dollars over the asking price.
For example, at the beginning of the real estate boom between 2014 to 2018, a home in Shaughnessy sold for $2 million over the asking price of $5.99 million in March 2015. Later, in June 2015, there was a sale of a home in West Vancouver that caught attention for selling for $1.1 million over the asking price of $2.98 million. These were one-off sales, but they help set a higher comparable price or margin for next sales.
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Real estate agents say “cheap money” or very low interest rates are spurring sales and prices. Existing homeowners are refinancing at low rates and taking that cash to make another property investment. First time buyers or those with less home equity also benefit from low interest rates, but they are at a disadvantage when it comes to competing for sales that involve multiple and over asking price offers because they have to bid in smaller increments and take fewer risks such as forgoing a house inspection before the sale closes.
Vancouver real estate agent Muzda Stenner described the recent scene at a West Vancouver detached home on Queens Avenue that was on sale for $2.877 million.
“It was almost like a garage sale (with) cars lined up on the street,” said Stenner. “Even with COVID, and people wearing masks, it was a full house, and people were trying to get in.”
The home is assessed at $2.69 million. She helped her client bid “$3 million, with subjects” to buy the home. “And it was like, ‘no, no, no.’ I had one of the lowest bids.”
With some 19 other offers, the home went under contract in mid-February to be sold for $3.6 million or $723,000 over the asking price.
“It had great potential, but it was a very small house,” said Stenner of the 3,000-square-foot, two-storey home on a 12,000-square foot lot with ocean views that was built in 1957.
On the West side, a 4,000-square-foot, five bedroom, rancher-style home on West 41st Avenue just west of Granville Street went under contract in mid-February to be sold for $5.66 million.
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The property, which is assessed at $3.95 million got one offer at the asking price of $3.98 million, but three other offers that were all above that, according to the listing agent, Sarina Han. The sale price was $1.68 million over the asking price.
Han said the property has RS-3 zoning, which allows for a single-family home in keeping with the design and density of the surrounding area, even though it is on busy 41st Street near a major intersection at Granville Street.
The condo market, which has been described as more balanced in pricing because there is more supply of listings and because more buyers were seeking larger homes with outdoor space to cope with the pandemic, is also seeing some of this frenzied activity, according to some real estate agents.
Ian Watt said he was juggling two multiple offer situations for potential condo buyers one recent evening. One condo they were interested in got five offers and the other had 14 of them. It was a one-bedroom, 965-square-foot condo in Kits that was asking $899,999, but sold for $1.107 million or $207,001 over asking price.
“I lost out with my buyers because someone totally overpaid,” said Watt.
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