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Downturn in Vancouver Real Estate Now Underway

Published May 24, 2022 by Real Estate Leads

Anyone with a correct understanding of the situation will have told you that the overheated housing market in Vancouver has primarily been the product of 2 factors. The first being demand far exceeding supply given the rate of population growth for the city, and the second – and likely the most influential one – is cheap money. What’s meant by that for anyone who might not have an understanding of economics is that it hasn’t cost much to borrow money in Canada for quite some time now. Interest rates needed to rise as it is and now that inflation needs to be repressed there was no choice for the BoC to raise the rates.

The market did need to return to some level of normalcy, and that’s true whether you’re a homeowner or a person who is looking to buy a home. That’s because people of average incomes should be able to afford a home that fits their family, and a city cannot forget that when creating policy. But what we are seeing now with Vancouver real estate will be bringing the value of homes down. Will they come down to the point that many more people will be able to buy a home?

That remains to be seen, but in a city like Vancouver you will see modest value decreases and overall it’s not a bad thing.

This will affect realtors working with certain clients and especially those who are looking to buy. But there will also be homeowners who will put off putting their home on the market to wait and see if home values in the Lower Mainland go up again in the future. Considering this has always been cyclical (albeit with some long cycles) that is likely, It can all be contributing to struggles gaining and retaining clientele and if so realtors are encouraged to use our online real estate lead generation service here at Real Estate Leads.

But more to the interest of realtors as it relates to this is that clients may be wanting to abandon purchasing commitments, and that’s a scenario realtors in this part of the province may have little to no experience with. Let’s look at the real estate cooldown in Vancouver in more detail here, as modest as it will likely be.

+ Recession?

The fact that many economists believe there is no way Canada is going to avoid a recession in the near future may well factor into all of this too, and again especially with regards to real estate in Vancouver or Toronto. We’ll see how painful the hit to the housing market will be for homeowners. Again for Vancouver and Toronto high immigration and migration from elsewhere in Canada may stimulate sufficient demand for housing to make any recessionary blow less impactful.

Right now there are areas of Vancouver where homes have sold for about 15% less than similar area houses did a few months ago. But as mentioned what we are also seeing is some homebuyers giving thought to walking away from their deposits and cancelling purchase commitments. Well, it’s not that easy and there can be repercussions, including lawsuits from others involved to compensate for any lost money.

For example, let’s say a home involved in a cancelled sale sells at a later date for a 10% discount. It is possible the courts could state the original contracted buyer who walked away from their purchasing commitment must now compensate the original owner for the difference in the home’s value.

Mortgage Factors Too

New and 1st time homebuyers will have difficulty finding a 5-year fixed mortgage for less than 4% today, while last year that same mortgage may well have been had for 1.5% or only slightly higher if at all. The Vancouver Real Estate board has stated that the benchmark price for all residential properties in Vancouver had a 1% price increase in April compared with March.

However, many industry experts and knowledgeable realtors will say this is an unreliable indicator of the current market because of its algorithm that determines what exactly a benchmark property is. Long story short, many of these people will see you won’t see real price declines in that home price index for at least 6 months, and probably longer.

Also consider Canada Mortgage and Housing Corporation’s April forecast suggested the country’s average home price would be around $782,400 by the end of the year, a drop of 1.7% from $796,000 in March. This will result in mortgages being more expensive, which may again take out the pool of qualified buyers who might want to consider purchasing a home at this time because of moderately lower prices.

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Canadian Home Prices Down for 2nd Month in a Row

Published May 16, 2022 by Real Estate Leads

When the rumors of the Bank of Canada’s interest rate hikes started to circulate last year economists were quick to point out how they would almost certainly factor into a cooling of the housing market. Now that the higher rates have been in place for a while we are starting to see this factoring occur, and we should be keeping in mind that there may be further rate hikes in the not-too-distant future either. And we will be plain about it and say that a cooling of the housing market is in line with interests of the collective good as homes in so much of the country are priced out of reach for the types of people we would want to see in those homes.

As expected, the biggest price depreciations are being seen in the big cities and those who are in favour of falling home prices also tend to be people living and hoping to one day be able to afford to buy there. Ideally that is something that is attainable for them, and we need to remember that a home is part of facilitating the right progression through life for people who are at that stage in it where they are ready to settle down and start a family.

At the same time these price drops will not be in the interest of those who have equity in their homes, and especially when it is the case for so many where that equity and increasing value is a key to their future retirement plans and / or to help their children with owning a home in the future. Both of those are very noble aims, and here at Real Estate leads our online real estate lead generation system is ideal for real estate agents who are new to the business and keen to increase their wealth by working in what is a potentially lucrative but VERY competitive business.

What it can do for new client generations is readily apparent for anyone who has already taken advantage of it. One thing that will happen if home prices continue to drop is that there will be more potential clientele as ever-greater numbers of people can get a home in line with what they’re approved for in a mortgage. But enough about that for now, and let’s look at back-to-back months of home prices dropping in greater detail.

Down 6% Overall

Canadian home prices went down 6% to $746,000 last month (April 2022), and primarily as the result of higher interest rates putting a new chill on what was a red-hot real estate market that had been red-hot for a long time. Home sales themselves dropped 12% nationally in April, and as mentioned the biggest declines have happened in big cities like Toronto, according to the CREA. What we can assume now is that the $816K median price for a home in Canada that was seen in February 2022 will probably stand as the high water mark for some time now.

In March it went down to $796 and that of course was right in step with higher interest rates taking effect. And let’s not look past the fact that a decline in April is one that is happening during a month that is typically strong for the housing market, with lots of buyers typically buying homes in April and May of each year as has been the case for many decades.

May Be Misleading

The CREA is quick to remind people that the average selling price can be misleading because it is easily skewed by big cities like Toronto and Vancouver having such a high number of expensive homes sales, and just more home listings and sales in general. They point to the House Price Index (HPI) in this argument as a better gauge of the market. It is better because it adjusts for the volume and type of homes sold.

And although prices are indeed down from their recent peak, they remain up by about 7% from where they were at this time last year, and that is likely because we are still experiencing the pent-up demand affect resulting from the pandemic. But nonetheless the housing market is cooling from the feverish activity that characterized it just a few short months ago. The numbers put out by the CREA are national, but there’s no debate that Toronto and Vancouver are dragging them down. Especially Toronto, where prices have decline by about $80,000 since March.

This has the potential to be a problem for both buyers and sellers. While it is true that lower prices may be welcome news for buyers trying to get into the market, they can be majorly dissuading for someone who might have been listing their home without hesitation if prices were higher. Let’s keep in mind that lack of supply is the number one factor that is keeping real estate markets hot here in Canada.

Another scenario is someone who bought high assuming lenders would loan them a certain amount and then discovering in the appraisals process that the property is much less valued by the bank than anticipated. What this does is force the buyers to have to come up with more than they were expecting to need up front.

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Sign up for Real Estate Leads here and receive a monthly quota of leads for potential clients who have indicated their willingness to buy or sell a home in the near future and doing so in the city or town where you are working as a real estate agent. But what’s most relevant here is that only ONE realtor receives these leads – you! That means you have the exclusive opportunity to reach out to these people and offer your expertise to them as a person who knows real estate and will help them have the best outcome when selling a home or the perfect fit when buying a new one.

Short-Term Taxation Measures on Homeowners Could Be Deal-Breaker for Buyers

Published May 9, 2022 by Real Estate Leads

Government intervention in the housing market is the hottest topic around these days, and when you have a country with so much of its GDP in real estate it’s not surprising that you have the skyrocketing price appreciations and real apprehension on the part of policy makers to be messing with something that in the big picture is quite integral to keeping the ship afloat. It’s certainly not a beneficial reality, but it is the path that was chosen for Canada a long time ago.

So in the here and now of 2022 it is what it is, but we shouldn’t expect the constituents and their outcries about housing affordability to be diminishing anytime soon. As is always the case elected officials need to be receptive to the wishes of those constituents, and what they are asking is for housing to be more affordable than it is now. Easier said than done? You bet it is and as we’ve gone about at length here there is no fix to this if demand continues to way outstrip supply and the country’s population continues to grow by hundreds of thousands of people each year.

Another reality that there’s no escaping is that fewer qualified buyers and more money than ever chasing after goods, services, and commodities it makes things difficult for people who have only just recently begun to work as realtors. Many would-be clients will be reaching out to established agents to help them, but with our online real estate lead generation system here at Real Estate Leads they will have a leg up on that and be directly connected with these same individuals or couples.

Concerns Across the Board

Recent survey results from RE/MAX Canada finds that 78% of Canadians have taxation, interest rates, economic recession, climate change, mixed housing, and/or public transportation as very real concerns, with some of them saying these factors may influence their home-buying prerogatives over the next five years.

With that understood, let’s start by considering that 2020 saw the Canadian economy experiencing a 5.2% decline. That was buttressed some by 4.6% growth in 2021. But now we have the Government realizing they have had no choice but to raise interest rates to combat inflation, and most economists will tell you they’ve been artificially low for way too long if we’re going to be right honest about it.

All of this comes in stride with demand for new housing starts as demanded by the populous. With the influx of immigration expected in the coming years and the Fed’s goal to welcome 432,000 immigrants in 2022, we are going to see demand go through the roof with our housing market and – as always –  Vancouver and Toronto will take the brunt of it all on the chin. With massively rising demand, how can affordability still exist? Is taxing existing homeowners on the value of their home a possibility?

Real Life Investment in Real Estate

Well, despite the moral impropriety of that suggestion and the fact it would create (legitimately) a massive outcry from people who have worked hard and are looking forward to using their home equity for retirement, this is what some are actually suggesting. The Canadian housing market has historically given homeowners great long-term returns and solid financial security, and so the smart move would be to have governments and policy makers taking a more collaborative approach that takes the worries Canadians have when it comes to home ownership into account.

Respondents to the survey responded in the exact same way that anyone would expect they would in the face of heavy-handed government intervention in a market where so many people are life-invested in what they have their money in there. 64% have concerns about rising property-related taxes. 58% have concerns about ongoing home affordability with a mortgage in the face of the rising interest rates.

But most notable is that more than half (55%) are concerned – and likely borderline offended – at the idea of a capital gains tax on primary residences. Now to be fair the current Liberal government has said this type of tax is not something they are considering, but let’s not lose track of the fact that Liberal Governments have a decades-on-decades track record of saying one thing and doing another. Anything for votes after all.

The Great Dissuader?

Economists and level-headed real estate market experts will tell you that economic decision-makers should instead make pragmatic and evidenced-based decisions that do not penalize Canadians. And instead incentivize then with regards to interest rates, immigration and taxation. That is the approach that will help the housing market be stable over the next decade, even if it doesn’t become inexpensive in the way some hope it will.

So what would the realities be if the capital gains tax exemption was removed? For starters it would upend the retirement plans of millions of Canadians who plan to cash in on the full gains from the sale of their principal home to fund their retirement. Which, of course, is the way it should be and the way it’s been for generations.

What WILL happen is that a) fewer homeowners will sell their home on the same timeline they would otherwise, and b) homeowners will list their homes for higher amounts to cover the difference they’ll be expected to pay in capital gains tax to the government. And they’ll do that knowing that bidding wars will still mean their home will sell for over asking at any price because – again- demand exceeds supply in Canada in a way that is unmatched in any G7 country in the world.

Would there be an initial surge of properties on the market put there by sellers who were planning to sell already and hoping to avoid the tax before it is implemented? Absolutely, but that’s it as far as positive ramifications. After that there will be nothing positive to come of it at all, and you can be darn sure that hardworking and financially responsible Canadians who have worked hard to have the equity in their home that they do will not be voting Liberal next time around.

For what it’s worth, that would be a smart choice no matter what transpires around removing a capital gains tax exemption on principal residences.

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BC NDP Government Rushes Headlong into Controversial ‘Cooling Off Period’ Legislation for Real Estate Sales

Published May 2, 2022 by Real Estate Leads

Ask any real estate agent and they will tell you how common it is to have clients who’ve just sold a home be putting offers in on a new home in immediate succession. They have the confidence in doing that knowing that buyer of their previous home has contractually agreed to purchase the home, and the sale being complete that way meaning that they can comfortably go ahead and pay what they need to for their new home. Now imagine if they might be surprised in a few days time to learn that their buyer has had second thoughts and isn’t buying the home now.

Needless to say that can be throwing the largest of wrenches into their plans and in many cases it will mean they don’t get the new home they would have it the current BC NDP Government had any sense of discretion when it comes to their new ‘Cooling Off’ legislation that will allow buyers to have a grace period where they can back out of a home purchase without repercussions. The optics of all this may be good considering the housing crisis in Canada, but the working of it look absolutely terrible for home sellers, buyers, and the realtors who are working with these clients.

This is something that is fairly cut and dried for those of us here at Real Estate Leads. While our online real estate lead generation system is ideal for new realtors who want an advantage in being first in-touch with prospective clients is worth talking about, we’re going to skip that promotion and focus on this 4-page bill that is rather ominously being described by industry experts as being ‘painfully’ short on details.

Figure-it-Out Later Approach

It is no secret to anyone that the current NDP Government in BC has taken a sit on the fence approach to governance, and like many governments that have come before them there has always been a focus on placating people and hopefully doing it with as little as possible. What this legislation is yet another example of Government that wouldn’t be particularly inclined to facilitate changes to the housing market even if they did have even the slightest idea where to get started with that.

But they fully understand the importance of at least looking like they care, so here we go with a hastily and sloppily put together attempt to show the voting populous that there is some way for the Government to make housing affordable again. Of course it will do nothing of the sort, but again with these types of Governments the optics are all that matters.

A major change to how real estate purchases will work in British Columbia was quietly passed by the legislature this week, enabling new “cooling off” periods for home buyers.

List of What’s Missing

For starters, we here in the industry have no idea when this ‘cooling off’ period legislation is even going to be put in place. That’s the first of many parts of this that are missing entirely, and it does speak to the Government flying by the seat of its pants and saying what people want to hear despite their knowing full well it’s the furthest thing from a smart idea.

None of us know when will it start. None of us know how many days the cooling-off period will be. None of us know if you will have to pay a financial penalty if you back out of a deal to buy a home? We also don’t know if this will apply to every community in the province or just Metro Vancouver and Greater Victoria. Considering that left-leaning Governments rely on blind-faith voting bases in big metro areas to be able continue with their malfeasance this might not be surprising.

What we do know is that this has the potential to make homeowners selling their homes be subjected to unnecessary consternation and being put a big-time disadvantage. And for no other reason that both Federal and Provincial Governments in Canada have allowed this housing shortage and affordability crisis to grow on their watch with little to nothing in the way of trying to slow it much less put a stop to it.

‘Rationale’

The NDP’s Finance Minister is saying that they are still waiting on recommendations by an independent financial agency on how a cooling-off period would work, and in which cities it should apply. She did state though that she wanted to pass the bill now so the province could be in a position to act before the busy summer real estate season. So let’s get this straight; in the interest of disadvantaging home sellers as means of advantaging home buyers because one needs more protection than the other it’s important that this gets done asap and we’ll just rush it out and figure out the details later.

Right then. Gotcha.

2 things are certain in all of this; One, this is going to nothing to bring down the cost of homes for buyers, and – more importantly – this is going to do very little to stop buyers from having to bid on homes without going through the proper processes because housing demand outstrips supply more in Canada than in any other G7 nation. And more than 70% of the real estate offers in BC these days are made without conditions, because of how competitive the market is and all the bidding wars.

The reality of the situation is that the playing field is altered for new homebuyers in Canada now and it simply is what it is. Any thing that works to cater to the inequality of that without addressing the root cause of it is simply window dressing, but in this case it is window dressing that stands to hurt homeowners who should have the security of a legally-binding agreement when someone makes the choice to buy a house.

Certainly nobody is forcing them to do so, and it is a purchase of such a significance to both buyer and seller that letting anyone get a ‘refund’ because they’ve reconsidered is simply not appropriate or acceptable.

If you’re a prospective home seller who is displeased about this you are encouraged to speak to you local MP. It is high time this ongoing collection of half-measures and ‘look at us’ empty actions from the Provincial NDP come to an end.

A Better Suggestion

BC’s real estate sector has a much better idea around implementing a 5-day ‘presale’ period where a new listing goes online but no offers are to be considered until those 5 days pass. Buyers could use the five days to line up inspections and financing, and sellers wouldn’t have to take on the uncertainty of being locked up in a cooling-off period with just one buyer that might fall through.

There is not debate that this is the much less potentially-harmful means of protecting the interests of buyers while still seeing to it that home sellers aren’t disadvantaged ‘just because’ of market conditions that have nothing to with them whatsoever.

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Multiple-Property Owners Increasingly the Norm in 4 Canadian Provinces

Published April 25, 2022 by Real Estate Leads
Hand of Business people calculating interest, taxes and profits to invest in real estate and home buying

These days there are all sorts of examples of people in power taking a ‘do as I say, not as I do’ position when it comes to their influence on policy. When it comes to housing it is a little remarkable to note how that applies to housing and members of parliament during what they themselves have described as an affordability crisis. The best example would be Vancouver-Granville Liberal MP Taleeb Noormohammad flipping 41 homes for profit over the course of a few years, all the while towing the line and stating that the cabal he belonged to would be the one to make housing affordability for Canadians a reality.

Now we’ll steer well clear of making the connection between the Federal Liberal party being of the ‘say one thing, do another’ variety, despite the whole truth of that. Or the equally accurate one of promising what people want to hear despite no intention of following through on any of it. That’s the Liberal way in Canada. However, what we’re going to talk about here is the way that it is the investor class – many who come from these same well-heeled backgrounds – are in fact dominating home ownership to rather staggering percentages in some parts of the country.

This is something that should be of interest and concern for people from all walks of life, and including the realtors who would be selling these homes to the investors who own multiple properties in the cities in which they reside – or don’t. Having home prices out of reach for the average buyer is not beneficial on any level, and that applies to the business of real estate too in that a healthy market means more would-be buyers are qualified ones able to buy a home. Our online real estate lead generation system here at Real Estate leads can help realtors who have fewer new clients all the time because of this.

But enough about that, multiple-property owners are a massive influence in a distorted housing market – and that is certainly what we have in Canada at this time. To what extent is it a problem? Read on.

41% of Housing Stock in Some Regions

There is now data from Stats Can showing that multiple-property owners continue to hold between 29 and 41 percent of the housing stock in Ontario, British Columbia, Nova Scotia, and New Brunswick. Nova Scotia is where it is the highest at 41%, and of course the problem is that these multiple property owners are not daunted by stratospheric high prices for homes when they can simply go the HELOC route to afford whatever they may be based on the all the homes they already own and are – besides from their principal residence – being rented out for high rents.

New Brunswick came in at 39%, 31% for Ontario, and 29% for BC. What is also interesting to note is that in Ontario and BC governments and other entities own in the vicinity of 10% of property stock in those provinces too. And of course all of this comes on the heels of the BoC stating in February of 2021 that investors were making around 20% of all home purchases in the country. There is no changing the reality that investing in housing is safer than investing elsewhere, and as regrettable as that is there is no changing it in the short term.

A healthier and less distorted housing market benefits everyone long term, and the federal Government needs to be much more proactive in making it so that home hoarders aren’t able to do as they wish, even if they can afford to do it.

The numbers offer a pre-pandemic window into some of the country’s most heated markets and quantify some of the influence investors have on housing supplies, but are not a complete picture because many provinces and territories were not studied, the data does not break down how many properties are being rented out or used as a cottage and the figures don’t account for the health crisis.

“In the last couple of years, we have seen millennials deciding that real estate is one of the safest investments and they are taking money, not only to buy their first home, but from other investing sources to buy a second home,” she said.

“I have clients that are retired or semi-retired who have a lot of equity in homes they have owned for 30 years, so they are pulling equity out of that property to buy another property as retirement income.”

Over on the East Coast, Jacqui Rostek said her clients who are choosing to own multiple homes are typically wealthy and “not looking to get rich quick.”

They see Nova Scotia’s shrinking vacancy rates and steady need for rental homes as a way to pad their bank accounts, though many are realizing it will take longer to make back the money they spent on another home.

The demographic Rostek noted shifting toward multi-property ownership is in line with Statistics Canada’s data, which shows that the top 10 per cent of owners in those provinces earn more than the bottom 50 per cent combined, with the top 10 per cent of owners in Ontario and British Columbia each earning yearly incomes above $125,000.

But for many, multi-home ownership remains a difficult feat, especially amid inflation and an environment with rising interest rates.

The national average home price climbed by more than 20 per cent since last year to hit a record $816,720 in February, the Canadian Real Estate Association said.

Rostek has seen many multi-property holders, especially those who are small-time, relinquish homes during the COVID-19 pandemic.

“A few people decided to reinvest their capital in other ways, like the stock market, businesses, other holdings, and it was a good time because your investment was worth more,” said the broker with Platinum Group Halifax.

“I also definitely had a fair amount of people who said it was very hard to be a landlord. If you have a few bad experiences as a landlord, you lose money, a tenant damages things, you want out.”

As a result, many are sticking to owning one home and are being joined by an influx of first-time buyers.

Statistics Canada’s data shows between 2018 and 2019 the number of first-time homebuyers increased by 17 per cent in New Brunswick, 9 per cent in Nova Scotia and 6 per cent in British Columbia.

Hermary believes the increase is being driven by people earning more and banking on there being stability in real estate investments.

“People are starting to realize they should have confidence in real estate,” she said.

“We are going to start seeing millennials and people up to the 35 or 40 start looking at investment properties as something they can do to build equity.”

The data’s release comes less than a week after the federal government announced a slew of housing measures, including the end of blind bidding, a two-year ban on foreign buyers and a first-time buyers savings account, meant to make homes more affordable and temporarily less accessible for non-residents.

This report by The Canadian Press was first published April 12, 2022.

Discrepancy Between Real Estate Prices In Canada and Average Incomes Continues to Expand

Published April 18, 2022 by Real Estate Leads

It’s understood as common knowledge that young people starting their careers these days will not have it as easy as their parents’ generation did, and that certainly applies to being able to afford a home in Canada too. Or at least one that’s not a 600 sq. feet or less and in the sky when they may have already started or a family or are planning to in the near future. We do need to keep in mind that we are living in a time of unprecedented and disruptive change in both the world and our country, but it is somewhat staggering just how disconnected the price of real estate has become from what people earn.

And that’s fair to say even for people who make good money doing whatever it is they do for a living. There are plenty of people under the age of 30 who have already established well-paying careers that cannot afford any type of home in Vancouver, Toronto, Montreal, or even Halifax now. The prices for housing in Canada are being pushed up all over the country now, and many people who would have been working with a realtor if they were at this time of their life a couple of decades earlier (or less even) are now doing nothing of the sort.

This is something that resonates with us here at Real Estate Leads. While our online real estate lead generation system is ideally for helping realtors with that shortfall of would-be clients due to this current global housing unaffordability trend, it is more of a associative thing when it comes to our understanding of the factors that are creating such a gap between house prices and incomes in Canada.

It is something we touch on regularly, but let’s use this week’s entry to really crunch some of the numbers and other very relevant information for anyone who wants a better understanding of why housing has become so staggeringly unaffordable.

18x Higher Over Course of 40 Years

Average house prices in Canada today in 2022 are just over 18 times higher than they were in 1975. While that IS a long time ago, that type of growth is not seen in any other industry or any other consumer commodity AT all across that 40+ years and it highlights how entirely unnatural that is.

Consider as well that Canadian home prices grew 5.7% in Q4 2021, bringing annual growth to 25.1% for 2021. But since Q1 2020 those same prices are up 36%  Annual growth last hit this rate in the early 1980s during the last inflation crisis. Which of course is interesting considering that inflation is taking off in North America and higher interest rates may be poised to put the pinch on over-leveraged homeowners the same way the whole situation did in the 1980s.

Take a look – any look – indexed value of residential real estate prices and household disposable income in Canada and you’ll see exactly what is being laid out here, and it doesn’t look very promising for anyone who hasn’t had the means of buying a home up until now.

Let’s look at it from other angles too. Canadian home prices grew 219.5% from 2005 to the end of 2021. That is a fairly slamming figure much like the one from earlier comparing 1975 to now, and we should also remember that Canadians have 8x less disposable income than they did in 1975.

Wages Nowhere Near Keeping Pace

They certainly haven’t. Disposable income fell 1.2% in Q4 2021, which then brought down annual growth to 2.4% for 2021. And since 2020, disposable income has only climbed 7.4%, with that promising to be swallowed up by inflation here in very short order. Wages are barely keeping up with inflation, and any increased come nowhere close to touching skyrocketing home prices and values for homes that are not supported at all by the quality of the home, its size, or in some cases its location.

Long-term wage growth is equally a part of the problem when it comes to fewer and fewer people being legitimately able to afford a home that suits them. And this is very much a recent phenomenon, as is how home prices are greatly outpacing income. Home price growth over the past year has been even greater, rising to 10.5x disposable income growth.

The speed with which this is happening should be more of a concern than the simple fact IT IS happening, and the rapidity with which more and more people are priced out of being homeowners is something that decision-makers at the federal level are really going to have to dig into and try to come up with some sort of solution. One that will put a very essential part of people’s lives and personal / family growth back into the realm of possibility when they are doing just fine with their career and making what should be considered good money.

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Liberal Government’s 2021 Federal Budget to Include 2-Year Foreign Home buyer Ban

Published April 11, 2022 by Real Estate Leads

It had long been expected that the new Federal budget was going to include some type of ban on foreign ownership as the current Government works to find ways to address a very real problem that needs addressing – the overheated nature of the Canadian housing market and homes that are becomingly increasingly unavoidable for the vast majority of the population in Canada. The population outside Canada? Well that’s an entirely different story as the current prices of homes here are affordable for a great many of them and there’s all sorts of reason why that is.

We won’t get into that here, but we will concur that foreign ownership is a part of the problem as to why homes cost too much for average Canadians. It certainly does factor into the supply end of the equation, and homes purchased for more than they are worth if fueling price appreciations in a very negative way for people who have yet to get into the real estate market. The challenge for these people is very real, as is the entirely different type of challenge for those who work with both home buyers and those selling homes – realtors like you who’ll be reading this.

That challenge is generating new clientele. This is why our online real estate lead generation system here at Real Estate Leads is so highly recommended for those new to the business who want to get more of out their client prospecting efforts, and here in the 21st century Internet Marketing resources make that possible and that’s why we are able to offer realtors what we do.

But back to our topic for this week; what more can we know about the 2-year foreign buyer’s ban for Real Estate in Canada?

Paired with Explosive Population Growth

This ban will be helpful in cooling the market, but the question is to what extent will it be helpful? Experts tend to think it will only be marginally beneficial, as so much of the forces pushing demand to WAY outstrip supply is based around 2 facts:

  • Population growth in Canada and inbound immigration is far beyond what the rate of new home building can even be close to keeping pace with. Some 400, 000 new Canadians are expected to arrive just this year alone, and most will be seeking housing in the same metro areas where the housing crisis is most acute as it is.
  • There is a massive shortage in skilled trades that make new home builds difficult to commence, even if the will to build them and funding is in place. Homes need to be quality built, and that takes a certain developer with the right people building the homes to be able to do that.

One thing that is true is that certain bidding processes and new realities around real estate sales favour investors, and as we all know many of those investing in Canadian real estate live outside of the country. To be fair, there’s nothing wrong with that provided the market is health and not skewed one way or the other. But that is not the case in Canada, and that’s why we agree that this 2-year ban on foreign buyers is a good move, although we also agree it will likely make little difference in the big picture.

Primary Residence and Other Exemptions

The Government has explained that permanent residents, foreign students, and TFWs (temporary foreign workers) will be exempted from the ban. But what is most notable about the exemptions is that foreigners who are buying a primary residence – that is, not buying homes as investments with the intention to leave the empty OR rent them out – will not be banned from buying real estate either.

Can we assume that there will be a good amount of homes bought by investors who find one of these individuals to have their name on the deed, or any other of a number of likely loopholes? Absolutely, but this is an issue where progress is probably going to be made incrementally and as such this foreign buyer ban over the next 2 years may help contribute to more normalcy in the housing market. Maybe not as much as hoped, but it will be a positive to at least some extent.

What it does do is allow the Government to appear as if it cares about the everyday Canadian’s ability to afford housing for themselves, and whether or not that’s true it is something that has been expected for some time. Here it is now, and we are already looking forward to 2 years from now when the success of this move can be evaluated.

Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads. These leads are delivered to your exclusively, meaning you will the only realtor to get them and what that does of course is give you first crack at being in touch with these prospective clients, ones that live in the same area of any city or town in Canada where you are working as a real estate agent. It’s telling that every realtor who has signed up for REL already sees it is a great investment in growing their real estate business, and you will almost certainly feel the same way.

5 Years In, Ontario expands on Foreign Buyer Speculation Tax

Published April 4, 2022 by Real Estate Leads

It’s no secret that the 2 housing markets most coveted by foreign investors outside of Canada are Toronto and Vancouver. That will have nothing to do with the fact these are nice places to live with plenty of job opportunities. Nice and all, but these investors want to buy here exclusively because the demand outstripping supply reality is so pronounced in these two cities that home prices continue to go up meteorically. Of course that means significant gains on the investment, but the problem is it takes housing stock away from families who are struggling to afford a home.

And furthermore, a home that they would actually live in and in many cases raise children. Governments have a responsibility to cater to the interests of the constituents who vote them into office, and that is why both Vancouver and Toronto have a speculation tax that is attached to homes that are purchased as investments by someone who isn’t a Canadian. It’s an honourable move, although if we are going to be honest there are plenty of ways around it if people know what to do.

But that’s not the point here; these speculation taxes are a good thing and are needed. There’s no debating that, and even the most ruthless realtor will probably agree that a house that sold for $600K 5 years ago shouldn’t be going for quite a ways over $1M in such a short period of time. Ambition is a good thing, but not when it comes at the expense of others too decidedly.

On the topic though, real estate IS as competitive a business as there is and new realtors may struggle to drum up new clientele. Enter our online real estate lead generation system here at Real Estate Leads. It is proven effective and highly recommended. Back to topic though, what can we know for more about why Ontario is joining BC in increasing their speculation tax.

Up to 20%

The Ontario government introduced its NRST (Non-Resident Speculation Tax) 5 years ago in an effort to slow Southern Ontario’s rapidly growing housing market. As the market has continued upwards even faster in recent years, it’s become clear the NRST isn’t the deterrent policy makers had hoped it would be. So now it has gone up an additional 5%.

It is also province wide now. Up until 4 days ago the NRST was applied to only homes purchased in the Golden Horseshoe region, and by buyers – either individuals or corporations – who were not Canadian citizens or permanent residents. Plus the 15% was previously added on top of the purchase of a property. With the new changes that rate is increasing to 20% and will apply to homes sold anywhere in Ontario. According to the Provincial Government, the aim is to ‘strengthen efforts to deter non-resident investors from speculating in Ontario’s housing market, and in doing so making home ownership more realistic for Ontario residents who live and work in this Province.’

The government there has also managed to close loopholes in the tax that previously allowed for tax avoidance with some purchases. Foreign speculation has been highlighted as a primary factor driving prices up in Ontario, but we need to be clear that it is not the only primary factor.

Vacancy Tax Coming Too

Toronto is also following Vancouver’s lead in having both speculation AND vacancy taxes, and they’ve said they will be adding a home vacancy tax to also add funds to building affordable housing across the Province. Ottawa has said that they will do the same thing

In the press release, the province also indicates that they are working with municipalities to instate a vacant home tax as part of a plan in progress to ease affordability issues for Ontario home buyers. A vacancy tax has already been put in place in the City of Toronto and the City of Ottawa is in the process of preparing a similar tax.

In the coming months we should likely expect further measures coming from both provincial and federal authorities in an attempt to counter out-of-control price growth and supply deficiencies. While it is true the current Liberal performers did make it a campaign promise to ban all new foreign ownership for up to two years, they backtracked on that right quick in the face of pushback from many interest groups.

What we can all agree on is that addressing the housing supply crisis needs a long-term strategy featuring similarly long-term commitment and coordination with our partners and between all levels of government. A speculation and vacancy tax may in Ontario isn’t appealing in a basic sense for anyone who has worked hard to own a home, but it is now necessary in the light of years of Government indifference to foreign money – some of it being laundered – being allowed to buy Canadian real estate.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that will only be delivered to you and that applies to every batch of them you receive each month. They are yours exclusively, and with them you have an exclusive opportunity to bring them in as your clients before any other realtor becomes aware of the same possibility. There’s everything to like about that as realtor given how competitive the business is, so sign up now and claim the advantage for yourself.

Have Clients Consider REIT if Homes are Not Affordable

Published March 28, 2022 by Real Estate Leads
Toronto Homebuyers Continuing to Eye Detached Homes Despite Challenging Market

So many Canadians are finding themselves nowhere near being able to afford a house, despite being at or just past the age where there parents and grandparents were becoming 1st-time homeowners. We live in a very different world now and these people have the unfortunate reality of being young adults at a time when salaries and wages are not keeping up with inflation or the price of housing in Canada. Why fewer people than ever before are able to afford a home – even a starter – has been covered at length in the media and to a lesser extent here too.

People who do have a sufficient nest egg saved up for buying a home but don’t want to purchase something at a price that may make it have negative value in the future have options. One of them is to invest that money in a REIT – a real estate investment trust. These investment groups have for the most part been very successful in Canada and America because in both countries the value of real estate can be relied upon to appreciate significantly. When your money is invested in one that makes smart calls about where to invest in real estate, it can net you the return you need to buy a home down the road.

This, along with the affordability challenges facing many would-be buyers, is something that we can relate to here at Real Estate Leads, and in the same way we know that generating new clients can be similarly challenging for new agents. That’s why we are so keen to promote our online real estate lead generation system to any new real estate agent who is eager to do everything they can to make their career profitable as soon as possible.

But back to our topic and why investing money in a REIT may be a good choice for clients who can’t get into the market but feel they still want to make an investment in real estate.

Fave of Yield-Hungry Investors

For decades now REITs have been preferable for yield-hungry investors because they provide steady dividend income and tax benefits. There is a lot of insider belief right now that it is an opportune time to invest in REITs amid rising inflation, record capital flowing into the property sector and tight real estate supply. Of course there is risk, but there always is to some extent. But we need to remember we are in an inflationary period and historically real estate investments have performed well in inflationary times.

The stats certainly bare out that’s where we are right now with Canada’s economy. The country’s inflation rate climbed 7.5% in February from a year earlier to a 31-year-high, and the Bank of Canada raising interest rates earlier this month was a big part of why that happened. All the while home prices went up 20+%  in February to a record $816,720, and this has not surprisingly left many Canadians priced out of the housing market.

Interest rates can go up because of inflation during an economic expansion, and this is also what we have happening here moving into Q2 for 2022. Along with that rental income for REIT companies goes up too, and the profits then become dividends redistributed to shareholders.

Role of Private Capital

Another very noteworthy reality for 2022 is we have a RECORD amount of private capital chasing real estate, which makes this space that much more attractive to potential investors. Somewhere areound USD $364 billion in private capital was earmarked for global real estate investment over the past year.

The best of REITS if you have the means of investing in them are single-family home REITs, and the reason is simply because most now have double-digit growth in net operating income growth. Need to be convinced of that? Investors who put big money in Canadian residential REITs over the last 10 years have gotten an average 220% return out of that investment. Looking at it from the other end of the equation, homeowners have seen somewhere around an average of a  137% increase in home prices from 10 years ago. Tax measures need to be taken into consideration there, but still.

Long story short – investors can appreciate their wealth through REITs without taking on the costs of a mortgage, property taxes, and home maintenance. Industrial REIT investments are smart too, there are many people who choose to be invested in both.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to you exclusively to ensure you are the only realtor who has the chance to be in touch with these people. People who live where you work as an agent and are likely ready to make some type of foray into or further into the world of buying and selling homes. Either as investors or for people who need the right home for their family. It’s a dynamite way to build up your client base much more quickly than you would otherwise.

Canada with 2nd Most Overvalued Real Estate for Country with Advanced Economy

Published March 21, 2022 by Real Estate Leads

If there was any dispute about homes in Canada being valued at more than they are truly worth, there isn’t anymore if a new report from the Organisation for Economic Co-operation and Development is to be taken at face value. Many people will suggest – with some merit to it – that a home is like any other consumer product in that it’s real value is what someone is willing to pay for it. But the real estate market is different and primarily because so much of this country’s GDP is actually in real estate, and that’s to say nothing of all the lesser factors that are factoring in too.

It is also true that homes have their value inflated unnaturally here in Canada simply because new housing starts are nowhere near keeping up with immense population growth, and that is doubly true for cities that are desirable for job opportunities, cost of living, and the natural environment. This is something that is very different from other countries, and very notably our neighbour the USA to the South.

Real estate agents do better for themselves when houses sell for well over asking, but most realtors are also aware of the negative realities of when houses are overvalued and people who would be qualified buyers in any other country are not able to get into the market here. We will also say that most realtors are civic-minded people who realize that home ownership allows people to be more solid fixtures when contributing to a community. Acquiring new clientele can be more challenging these days, and our online real estate lead generation system here at Real Estate Leads is a great way to gain an advantage there.

Back to topic, let’s look what this OECD report is detailing exactly and how it highlights how Canada’s housing market isn’t in the best of health overall with homes that are overvalued. So much so that only one country – the Netherlands – overall has homes that are more overvalued.

House Price to Income Ratio

One of the fundamentals of housing affordability is the house price to income ratio. It’s the ratio of the market price of a typical property based on the share of household income. An upward trending ratio will indicate that prices for homes are outpacing median income growth, and the result then is always worsening housing affordability for the average citizen. If the ration is going down then incomes must be outpacing home prices, and housing affordability is improved as a result.

The OECD created an index for cross-country comparison. By setting 2015 at 100 and the indexed value from that period indicates the changes and variances. An index of 110 would indicate home prices have grown 10% faster than household incomes between 2015 and today. An index of 90 would mean incomes gained 10% on home prices. The hope here is that by measuring the rapidity with which these metrics are changing, the problem can be addressed before it becomes a runaway one.

Surging Canadian real estate prices over recent years are not due to an income boom. The index reached 141.9 in Q4 2021, which shows us that from 2015 incomes trailed home prices by 41.9%. And home prices have more than doubled the pace of income growth over the 20+ years since 2000. It is interesting to note that these house price surges are being seen in most advanced economies. The situation in Canada, however, is different and one needs to keep our smaller overall population in mind first and foremost there.

Canada Outpacing USA

If we look at home prices in the USA it puts the situation in even more pointed perspective. The US house price to income ratio index went up to 130.5 for the 4th and final quarter for 2021. Since 2015 there home prices grew 30.5% faster than incomes but if we then look at the similar since-2000 number it’s only around 23%.

The important takeaway here is that Canada’s gap between home prices and incomes grew almost 5x faster than the US over the last 20+ years, and that’s not something that should happen naturally. And of all G7 countries Canada has the most overvalued real estate according to this report. The disconnect here is fast growing, and the fix for all of this is something that decision makers in Ottawa are obviously struggling with.

We need to understand further that Canada’s very large gap is due in part to the extent of time it has gone on. Following the central banks overstimulating markets in 2020, price surges have been observed nearly everywhere. But in Canada it has been a different story, starting with bering flagged by the US Federal Reserve back in 2015 for housing exuberance. Home prices have been on an expressway for almost half a decade, and unfortunately the wider this gap becomes, the more difficult it will be to effectively remedy it and make houses more affordable for larger numbers of people.

Which will also promote a better working environment and a more suitable type of qualified-buyer client base for the real estate agents like you who will be reading this.

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Sign up for Real Estate Leads here and receive a monthly quota of qualified buyer and / or seller leads that will be provided to you exclusively. They’re your leads and will not be shared with other realtors, and these leads will be identifying people who live in the same region of the country as you and have shown themselves to be ready to either buy or sell a home there. It’s a dynamite way to get more out of your client prospecting efforts, and for new agents in particular it really is an invaluable digital resource for you.