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2018 web

5 things we can learn from real estate in 2018

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5 things we can learn from real estate in 2018

2018 web

With much of 2018 in the rear-view mirror, It’s been quite the year for the housing market in the GTA and elsewhere in Ontario. From sales and price fluctuations to supply concerns to rising housing costs. As 2019 approaches, here are five things we can learn from real estate in 2018.

 

1 Get used to the affordability issue

Get used to affordability challenges, especially in the GTA. This oft-cited issue is not going away any time soon, despite lobbying from the likes of the Building Industry and Land Development Association (BILD) and the Toronto Real Estate Board (TREB).

Key economic fundamentals such as population and employment growth will continue to drive housing market demand. Over the next decade, almost 700,000 first-time buyers will target the GTA or Hamilton markets, according to a report from the Ontario Real Estate Association. Meanwhile, the supply of new homes is not yet being addressed, which contributes to rising prices.

With recent interest rate hikes and other changes, sales and prices in the GTA saw some moderation in 2018. But this will be short-lived, and a return to price growth is expected.

 

2 Increased government involvement – finally

Government lobbying by BILD and TREB seems to be paying off, in the sense that the Province is increasingly aware of the issues facing the industry – and buyers.

Buyers, you may not realize it, but you should thank BILD, TREB and other associations for that.

In late November, Ontario announced it was committing to a housing action plan “to help create more housing faster, give people more choice and bring down housing costs.”

Like anything involving government, though, this process will likely be slow moving – meaning, some of the challenges, namely increasing housing supply – will take time to be resolved.

But at least the issues are on the agenda.

One real example of this improved awareness is Ontario’s recent plan to change the 40-year-old apprenticeship system in the province – a move the home building industry says is a “game changer.”

It’s a game changer because the new one-to-one ratio, a significant change from the existing 3-to-1 ratio, will enable home builders and renovators to more easily hire and train new apprentices. Besides creating more job opportunities for trades workers, the move also helps builders and renovators operate their businesses

 

3 Fixing on interest rates

The Bank of Canada raised its overnight rate three times in 2018 – January, July and October – to where it sits now, 1.75 per cent.

Canada’s major banks, as is usually the case, responded by immediately raising their own rates.

Naturally, all of this has Canadians feeling a little uneasy.

The Conference Board of Canada’s latest Index of Consumer Confidence confirms that rising interest rates and weaker wage growth have started to take their toll on confidence. With interest charges squeezing Canadian wallets and weakening wage growth offering little reprieve, consumers have become hesitant to make major purchases and are less positive about the state of their finances.

In its latest rate announcement on Dec. 5, the Bank of Canada noted that global economic expansion is slowing, and the effects of the “oil price shock” are being monitored.

“We expect that the Bank will not move the overnight rate until the effects of the declining energy sector are known,”according to interest rate comparison website ratehub.ca. “However, the Bank makes it clear that they still plan on raising the key interest rate in 2019, likely more than once.”

This moderated stance might put downward pressure on fixed rate mortgages, however, so Canadians may see better fixed rates in the coming weeks, ratehub.ca says.

 

4 Real estate is more local than ever

It’s a simple point that escapes some consumers: Real estate is local, and in 2018, it became more local than ever.

What do we mean?

Well, the Canadian Real Estate Association (CREA), Canada Mortgage and Housing Corp. (CMHC) and other major real estate bodies are mandated to oversee the national market.

So, when CREA issues a release that says Canadian home sales are down by X per cent, or when CMHC reports the national vacancy rate is down for the second consecutive year – and major media report such headlines – people tend to worry.

It’s essential to remember, however, that when you buy a home, you don’t buy the national market. You buy one house, on one street, in one neighbourhood, in one city and region.

If you live in Ontario, why do you care that Alberta’s ongoing oil industry struggles are pulling sales and prices down in markets in that province? Or that prices in Vancouver are even less affordable than in Toronto?

Forget the national headlines. Drill down into what’s happening in your market.

And why is real estate more local then ever? Because…

 

5 Lessons from Oshawa

General Motors Canada’s November announcement that it was closing its Oshawa assembly plant sent shockwaves not just through the province but all of Canada. To be sure, the loss of at least 2,500 jobs – not to mention untold positions in related suppliers – in a community of 170,000, is going to hurt. Hurt whom, and how badly, are the only questions.

This development should serve as a stark reminder to us all – of how important it is for cities to develop diversified, modern economies. Overdependence on any one ge, singular industries leads to overexposure in the case of downturns or, in GM’s case, outright shutdowns. It hurts the local economy, which impacts employment and wage growth, which impacts the housing market.

Oshawa, thankfully in recent years, has been diversifying its economy and expanding in technology, education and other industries. It will help, but the impact of the GM closure will likely play out over many months, if not years.

These developments could push housing in Oshawa into a buyers’ market, and prospective buyers could benefit from more options and softening prices.

In new homes, builders remain undeterred, encouraged by the longer-term growth and development throughout the Durham Region. Still, some may offer incentives such as discounts or inclusions to entice qualified buyers.

 

RELATED READING

GTA moving into balanced market for 2019

GTA new home market gains further momentum in October

What the GM plant closure means for Oshawa’s economy and housing market

New home buying opportunities abound in Oshawa and Durham Region

Where are interest rates headed in 2019?

 

 

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U.S. interest in Canadian real estate surges following presidential election

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U.S. interest in Canadian real estate surges following presidential election

(CNW) — According to data released January 20, 2017 by Royal LePage, Canada’s leading real estate services provider, American interest in Canadian property has risen following the U.S. presidential election, with an increased number of Americans conducting research into real estate markets across the nation.

American web traffic on RoyalLePage.ca, the company’s consumer real estate portal, has been correlated to recent U.S. political events. U.S.-originated sessions surged 329 per cent the day following the election and climbed 210.1 per cent year-over-year the week after Donald Trump’s victory. Looking at the full month of November, 2016, U.S. web traffic grew 73.7 per cent year-over-year when compared to the same period in 2015. This trend continued throughout the remainder of 2016, with American web traffic rising by 40.9 per cent year-over-year during the fourth quarter.

According to a new Canada-wide survey of 1,226 Royal LePage real estate advisors, U.S. interest in Canadian property will continue to climb, with 39.5 per cent of respondents forecasting that American inquiries into Canadian real estate will rise under Trump. In the fourth quarter of 2016 – of which November and December are traditionally quieter times for North American real estate activity – 15.6 per cent of the advisors polled received inquiries from south of the border.

“Always a desirable destination for migrants, Canada’s attractiveness as a country for international relocation has surged this decade,” said Phil Soper, president and chief executive officer of Royal LePage. “The United States was already a top source for immigration into Canada, and now in the period following the recent U.S. election, we are witnessing a material bump in American interest in Canadian real estate.”

During the fourth quarter of 2016, American interest was primarily focused on Canada’s largest markets, with Ontario, British Columbia and Quebec receiving 72.7 per cent of all U.S. regional page views generated on RoyalLePage.ca. Those looking to purchase Canadian real property were largely interested in the country’s residential market, with three quarters (75.2 per cent) of all American inquiries pertaining to this market segment.

“U.S. interest in Canadian real estate is not a new phenomenon –– we are next door neighbours,” said Soper. “From Whistler to Muskoka, to Tremblant and Nova Scotia’s south shore, Americans have traditionally been the largest foreign cohort of recreational property purchasers in Canada. With our country’s ever-growing global reputation as a financially sound, happy and culturally tolerant place to raise a family, it is not surprising that interest has moved from a place to play, to a potential place to live and work.

“Given America’s vast population, even a fractional increase in the number of households following through on this initial interest and successfully completing the demanding process of emigrating to Canada could drive a material increase in the number of homebuyers from south of the border,” concluded Soper. “Our federal government is seriously considering increasing the quota of new Canadians welcomed from abroad, and with the high value of the U.S. dollar increasing Americans purchasing power, we may be seeing more moving trucks with U.S. license plates in our future.”

In last year’s inaugural “Best Countries” ranking published by US News in partnership with BAV and the Wharton School, Canada was ranked second worldwide in the comprehensive 75 element study, scoring very high on culture, sustainability, entrepreneurship and open-for-business categories. In the United Nations’ “Global Happiness Ranking,” Canadians scored in sixth place. Additionally, the Economist magazine’s widely followed “Most Liveable Cities” analysis, which ranks cities based on a balance of economic, safety and environmental factors, placed Vancouver, Toronto and Calgary in three of the top five spots worldwide, with no U.S. city ranked in the Top 10.

Provincial Summaries and Trends

Ontario led the country as the top-researched destination by Americans on RoyalLePage.ca in the fourth quarter of 2016, with 41.4 per cent of U.S. regional page views directed to the province. Over the same period, Ontario listings received a significant boost in U.S. page views, rising 54.5 per cent this year over last. According to the survey, 62.5 per cent of real estate advisors polled in Ontario cited the GTA as the most desirable location for U.S. parties making inquiries into a home purchase since October 2016, while just over two-thirds (67.2 per cent) pointed to the GTA as the region in which Americans purchased the most property over the same period of time. Looking ahead, 38.4 per cent of survey respondents from Ontario expect U.S. inquiries into Canadian real estate to increase following Trump’s assumption of power.

In the fourth quarter of 2016, British Columbia accounted for 17.4 per cent of U.S. regional page views, while also showing a 62.9 per cent increase year-over-year. Interestingly, according to the survey, Victoria garnered the most attention among B.C. cities from prospective U.S. homebuyers, being cited as the preferred location by approximately one third (32.1 per cent) of respondents. In comparison, one quarter (25.0 per cent) of respondents cited Greater Vancouver as the top region of interest among American homebuyers considering a real estate purchase in B.C. Looking ahead to 2017, 43.6 per cent of B.C. respondents anticipate American inquiries into Canadian real estate will increase after Trump takes office.

U.S. traffic to Royal LePage’s Quebec listings accounted for 13.9 per cent of the total website sessions logged across provinces in the fourth quarter of 2016, and showed a 17.6 per cent increase in U.S. page views, year-over-year. Meanwhile, the survey found that 40.0 per cent of Quebec respondents named the Greater Montreal Area as the main market in Quebec that Americans considered for a potential property purchase. In looking at property acquisitions by Americans since October 2016, of those polled in Quebec, over one half (53.3 per cent) of real estate advisors who sold a home to an American did so in the Greater Montreal Area, while 20.0 per cent sold a home in each of Quebec City and Mont-Tremblant. When Trump takes office, 52.2 per cent of Quebec respondents believe the region will see an increase in U.S. inquiries in the period that follows.

Despite accounting for a smaller percentage of U.S. website traffic provincially (7.4 per cent in Nova Scotia, 5.7 per cent in New Brunswick, 2.3 per cent in Prince Edward Island and 2.1 per cent in Newfoundland and Labrador), according to real estate advisors surveyed, Atlantic Canada saw the highest percentage of sales inquiries from Americans since October 2016. In fact, during the fourth quarter, Royal LePage’s data showed a year-over-year increase in U.S. website sessions of 180.4 per cent, 125.5. per cent, 53.4 per cent and 41.7 per cent for New Brunswick, Nova Scotia,  Prince Edward Island and Newfoundland and Labrador, respectively. Over one quarter (27.9 per cent) of survey respondents indicated that Americans have expressed interest in a property in the Atlantic region since October 2016, with a large majority of inquiries (54.8 per cent) and purchases (54.2 per cent) taking place in Halifax. Furthermore, almost half (48.1 per cent) of those surveyed in the region expect inquiries to increase Trump assumes power.

Provinces affected by recent economic downturns saw minimal interest from American buyers, with U.S website sessions for Alberta accounting for only 7.6 per cent of the total. The survey showed that, of those interested in Alberta, Calgary (54.6 per cent) and Edmonton (27.3 per cent) were cited by respondents as receiving the most interest from potential U.S. buyers. Notably, all (100 per cent) survey respondents working in the region indicated that they have not sold a home to an American since October 2016 – the only region in the country to report zero U.S. real estate transactions for this period. Similarly, only 26.4 per cent of respondents believe the region will see an increase in real estate inquiries by Americans after Trump takes office.

The other provinces in the Prairies saw the least amount of interest by prospective American homeowners since October 2016, with only 1.6 per cent of U.S. website sessions being associated with Manitoba and 0.5 per cent with Saskatchewan. According to survey respondents, of the U.S. buyers interested in these provinces, Americans mostly inquired about property purchases in Winnipeg (50 per cent), Saskatoon (20 per cent) and rural Saskatchewan (15 per cent). Looking ahead, one third (33.3 per cent) of respondents expect to see an increase in American inquires after Trump assumes power.

Survey Methodology

Royal LePage polled 1,226 real estate advisors across Canada between January 12-17, 2017. Each respondent was asked to complete a survey composed of questions regarding their region of expertise and observations and beliefs pertaining to U.S. interest in Canadian real estate since the 2016 presidential election.

Serving Canadians since 1913, Royal LePage is the country’s leading provider of services to real estate brokerages, with a network of over 17,000 real estate professionals in more than 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women’s and children’s shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company.

www.royallepage.ca


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