Optimism Over Canadian Home Prices Reaches Post-Pandemic High

Confidence in the Canadian housing market continues to boom, even as officials grapple with a resurgence of COVID-19 that’s slowing the economy, telephone polling shows. Some 45% of respondents in a weekly survey by Nanos Research Group believe the value of real estate in their neighbourhood will increase over the next six months, the highest reading since mid-March, when mass shutdowns were imposed to control the coronavirus outbreak. At the same time, only 13% believe values will decrease, the smallest reading over the same period.

Housing has been a consistent bright spot for the past several months. Historically low interest rates combined with the shift toward working from home are creating strong demand in a market that has limited supply, driving prices to record highs in many markets.

“The low interest rate environment is a massive impulse for demand,” Beata Caranci, chief economist at Toronto-Dominion Bank, said by phone. “It’s improved affordability for a key group of individuals who were waiting on the sidelines.” Low rates are also giving homeowners a chance to save money by refinancing their mortgages, Caranci said. The country’s sales to new listings ratio — a measure of market balance — is at its highest level in two decades, signalling demand vastly outweighing the supply of housing.

Continued optimism in the housing market is helping to offset growing worries elsewhere for households. Overall consumer confidence for October recorded its first monthly drop since the start of the pandemic amid signs the economic recovery is petering out. The Bloomberg Nanos Canadian Confidence Index ended the month at 52.5, down from 53.1 at the end of September.

Every week, Nanos Research surveys 250 Canadians for their views on personal finances, job security, and their outlook on the economy and real estate prices. Bloomberg publishes four-week rolling averages of the 1,000 responses. The outlook for housing was the only component showing any improvement over the past month. While overall confidence was down in October, there was a small rebound at the end of the month, ending a four-week skid in the numbers.

Source:  Toronto Star

Atlantic Canada’s Housing Market on Fire as Buyers From Across the Country Swoop in to Snap up Homes

In September, prices surged by double-digit percentage points on a year-over-year basis in each Atlantic province except Newfoundland, where they rose by 7.7%. Sales volumes, meanwhile, hit record totals across the board, according to the Canadian Real Estate Association. Even the worst-performing province, P.E.I., registered a 24.5% year-over-year increase. Newfoundland, at 39.5%, reported the largest bump. In just one year’s time, inventories have been halved, bringing Nova Scotia, Prince Edward Island and New Brunswick into seller’s market territory.

Realtors point to a variety of factors to explain the increasingly hot market, from low interest rates to the built-up demand caused by the freeze during the early months of COVID-19. What they all agree on, however, is that there is an increased surge from buyers coming from outside the East Coast and that the pandemic, in one way or another, is pushing them there.

Multiple realtors told the Post that buyers are moving to the region knowing that the shift to working from home means they no longer need to be near expensive city centres and that the aggressive restrictions on visitors to the region have made it something of a safe haven from the virus. It’s difficult to determine the precise degree to which the influx from outside Atlantic Canada is contributing to the property boom because no organization fully tracks the geographic origin of real estate buyers in Canada. 

Re/Max defaults to the numbers of one local agent in each province. In Nova Scotia, the company reports 20% of sales are coming from outside Atlantic Canada, when only 10% did pre-COVID. In P.E.I., it’s 15% — five times higher than the norm, while an agent in New Brunswick reports numbers around 10%. Sales to buyers outside of Atlantic Canada in Newfoundland have nearly tripled to reach 8%.

Those buyers are homing in on what’s always made the region a desirable one: affordability and safety. Even in the midst of one of the most heated housing markets in Canada, buyers from the most populated regions of Ontario could be looking at a $700,000 discount compared to buying a home in the province.

As of October 22, the four Atlantic provinces combined had 108 active cases of COVID-19. Ontario alone has lately been announcing about seven times that number in new cases on a daily basis. Much of the success the Atlantic provinces have had in controlling the virus can be attributed to the bubble that’s been set up to insulate it from outside carriers. Because of the restrictions, most buyers from outside Atlantic Canada are buying properties sight unseen, according to Donna Harding, a broker at Engel & Völkers in Halifax. “They’re not here for closings, they’re just grabbing properties so it has to be COVID-based,” she said. 

Some of the buyers Harding has moved told her that they were already toying with a move before the pandemic, but safety concerns and new work-from-home policies brought on by COVID-19 convinced them to move up their timelines. As a result of the added competition for homes, locals, according to multiple realtors, are having a difficult time adjusting. Ontarians, however, are used to aggressively bidding above asking price.

But it’s difficult for realtors to assess whether the current activity in the market is here to stay. At Hanlon Realty in St. John’s, Larry Hann, worries that change could come as early as the winter. Many high-earning Newfoundlanders were laid off due to the struggles of the Alberta oil patch. If the sector doesn’t recover before their cash runs out, Hann suspects Newfoundland will see a wave of foreclosures.

Harding offers a different idea about the current market dynamics. Most realtors would describe the Atlantic bubble as being one of the predominant factors drawing in more outside buyers, but she can’t help but think it’s keeping others out.

Nova Scotia and P.E.I. have 2.7 and three months of inventory respectively. New Brunswick is sitting just above them at 3.2 months’ worth. To put those numbers in perspective, all three provinces are quickly approaching the 2.6 months of inventory Ontario’s blistering market had in September 2019. Once the Atlantic bubble protecting residents from COVID-19 is dissolved, Harding worries that buyers will become even more aggressive and that these numbers will continue to decline.

“If the Atlantic bubble wasn’t there, I don’t know what kind of market we’d have,” Harding said. “There’s so much demand that if you open the bubble, I’m a little concerned we’re going to have enough inventory to handle the demand.”

Source: Financial Post

The Retirement Downsizing Myth: No, Seniors Aren’t Moving in Droves — and That Will Affect the Housing Market

Retirement community developers, for-profit retirement homes, and aspiring young homebuyers are all counting on aging seniors to downsize their homes. While some seniors will move to a smaller home, what if they do not downsize to the degree expected?

A recent survey by Ryerson’s National Institute on Ageing found that 91% of respondents would try “to live safely and independently in their own home as long as possible.” The survey was conducted this summer, so the findings may be influenced by the impact of COVID-19 on retirement and nursing home residents.

However, Mustel Group and Sotheby’s International Realty Canada’s pre-pandemic 2020 Generational Real Estate Trends Report: Aging in Place revealed similar findings, with 86% of boomer homeowners looking to live in their current home as long as possible.

Survey results about seniors’ intentions are interesting to consider, but statistics about what they are actually doing may be more insightful. In the 2016 Census, Statistics Canada found “seniors are less likely to move than the general population. In 2016, only 5.5% of seniors 65 to 74 years old, and 4.7% of those 75 years and older had moved compared to 13% of the general population in the previous year.”

The seniors most likely to move were those who were separated, divorced, or widowed, suggesting unexpected life events may be triggers for moving in retirement as opposed to proactively downsizing as part of a retirement plan. If seniors are not downsizing in droves, there must be reasons, as well as ramifications, for the wider real estate market.

The high rates of price appreciation in some cities may be further fuelling a hesitancy among seniors to sell their homes and causing them to stay put. Another hesitation may be due to the cost per square foot of condos — a potential downsizing option for seniors  — compared to houses. Without a significant square footage downsize, or a move away from city centres, seniors may not pocket much in net proceeds from a downsize, especially after transaction costs.

Seniors will continue to sell their homes and move to lifestyle communities, and some may require long-term care not available at their homes. In addition, demand for condos and bungalows will also remain high as the population ages. But if most people want to stay in their homes as long as they can — and many will stay put for the rest of their lives — it is important that we are planning for it.

Most financial advisors are paid to manage investments. If seniors are depleting their stocks, bonds, and mutual funds in retirement and do not want to sell their homes to replenish their accounts, that could limit the financial industry’s interest in providing retirement planning advice to them. Furthermore, retirement planners who simply assume a house will be downsized or sold at some time should be having conversations with their aging clients about the different ways to access home equity if it’s needed.

Families of aging seniors can try to talk to them about the lifestyle and financial implications of a downsize, but ultimately, the decision is theirs as long as they can make their own decisions. Many homeowners will move in retirement, and given the size of the aging boomer population, this will amount to millions of seniors in the coming years. However, many millions more will not downsize, and that has financial and practical implications for them and everyone else.

Source: Financial Post