Demand forecasting in real estate has always been a puzzle for economists. Economics suggests consumption products like iPhone, cars, mobile data, have a falling demand curve which means as price falls their consumption increases.
For investment products like equities, as prices fall, trading volumes normally come down indicating lowered demand. However, when it comes to real estate, demand forecasting becomes a complex exercise, some buy homes for consumption, some for investment and there are others who look at homes for investment-cum-consumption. Therefore, demand forecasting has always remained a puzzle. However, a broad-based analysis can definitely throw a good amount of light on the expected trend.
A. 30-year empirical evidence
A 30-year period is generally considered to be a large period to analyse long term trends (see Table 1).
Since 1990, there have been three bull runs and three slowdowns in the property market. Interestingly, all of these have been driven by big-ticket events.
In 1992, the government eased norms for the flow of NRI money into Indian real estate. This big decision led to the first bull-run in 1993 that lasted till the emerging market crisis of 1995. During ’93-95, many NRIs had their first taste of buying a property in India. Navi Mumbai was the biggest beneficiary of this bull-run.
The slowdown of late 90s was reversed by the quantitative easement undertaken by the US Central bank in 2001 after the 9/11 crisis. Many other central banks followed easy money policies. The free-flowing money found its way into Indian real estate, largely through FDI in real estate. This triggered a historic real estate boom that lasted till the US housing crisis of 2008.
To fight the housing crisis, the US government propelled a massive liquidity push. With many countries following the big daddy, the global liquidity again found a way into Indian real estate through Real Estate funds, HFCs etc. So post-2009, we again saw a major upswing in realty prices coupled with huge volumes.
And then in 2016-17 came in the Triple Trauma for real estate developers (Demonetisation, GST and RERA). This led to a big slowdown in real estate markets across India.
After Covid-19 hit, we again have a scenario where most of the Western economies have developed oceans of liquidity. This has made yields on treasury bonds close to or below zero. Therefore, in all likelihood, one will see this surplus money making inroads into Indian real estate during the next twelve months. The only possible outcome will then be an upswing in real estate by 2022.
B. City-specific analysis
While the real estate market in every Indian city has its own character but most large cities have followed the Mumbai market. Since Mumbai remains the largest real estate market, it will continue to determine trends across India. Most local indicators in Mumbai now confirm the impending bottoming out of Mumbai market.
1. Reducing gaps between incomes and EMIs
The lockdown has resulted in lower income for homebuyers. However, over the years, incomes have been increasing and property prices and interest rates have been moving southwards. As a result, we have a situation where the EMI-to-income ratio has come down from about 50 percent in 2014 to about 25 percent in 2020. And this is a very healthy indicator.
2. Steady demand and reducing supply
During the last three years, the high level of debt in a developer’s balance sheet had forced them to liquidate inventory to make their commitments to the lenders. As a result, we experienced falling market prices. With more money flowing into the system, this pressure will come down resulting in significantly lower stress levels and fewer discount deals. Furthermore, the number of developers in Mumbai has come down by 40 percent which would further work towards tightening the supply.
On the demand side, Mumbai’s annual sales have been steady at 25,000-30,000 residential units (see Table 2). Steady sales in a bearish market indicate the market has been almost completely dominated by end-users (most investors prefer investing in a rising market). What further confirms early signs of an upcoming bull market is that the annual supply of housing units in Mumbai market has been coming down. In fact, during the last two years, the supply has lagged behind the actual demand and this deficit has reduced the inventory overhang. Therefore, we are not very far from the point of inflexion.
3. Increasing cost for developers
The logic that reduction in demand for new homes or fall in their prices would lead to a crash in land prices will not work. This is because the supply of clear title open land is extremely limited. Majority of the fresh supply of housing in Mumbai comes from the redevelopment. In the case of redevelopment projects, the cost of land largely comprises the cost of rehabilitating the tenants.
Over the years, due to changes in regulation and due to higher demand by the tenant the cost of rehabilitation has significantly increased. Accordingly, there is hardly any rehabilitation projects that is feasible below a selling price of Rs 20,000 per sq ft of carpet area.
With construction cost being inflationary, this cost is only going to increase. Therefore, the potential for cheaper supply coming through redevelopment has faded away. Accordingly, reducing supply coupled with the increasing cost of operations would mean that Mumbai housing will now have to prepare itself for cost-push inflation.
4. Reducing gaps between Rental yield and bank FD rates
In the past, rental yields in Mumbai were a low of 1.5-2 percent. With the fall in property prices and increase in rental over the years, rental yields are now in the range of 3-4 percent. During the same period, the interest on bank FDs has reduced from 8-8.5 percent to about 5-6 percent. This has significantly reduced the incentive to defer the decision to purchase a property.
With most of the deflationary factors having fizzled out, the consumption-driven buyers are using the current opportunity to buy the largest possible apartment their incomes can justify. At the same time, the investment-driven customers are waiting for the inventory to deplete further. However, given the easy global money and reduced supply, the wait for the bottom is unlikely to go beyond 2021.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
