Discussion around Real Estate Bubbles for places like Vancouver and Toronto have been had en masse for so many years now, and there’s a lot of legitimacy to suggesting that real estate markets in big cities have the bulk of homes on those markets being overvalued. Whether or not the bubble is soon to pop – as many have suggested and some even hoped for – isn’t such a sure thing. When demand outstrips supply so emphatically those bubbles tend to be fairly darn durable and can expand much more than you’d think possible.

A recent report from a Swiss Bank has pointed to Toronto as the 2^nd biggest real estate bubble in the world though. Naturally, this is the sort of stuff that grabs our attention and real estate agents working in Canada’s largest and most populous city may well want to take note of it too. Working in real estate often means having to roll with the punches, as the expression goes, and when it comes to a market with overvalued homes there may be something of a belief in getting while the getting is good. Easier said than done if you’re new to the business.

Bringing new clients into the fold can be a challenge for these realtors, but our online real estate lead generation system here at Real Estate Leads is a powerful ally to have on your side when it comes to that. Backed by solid Internet Marketing Principles, what it does is identify people who are planning to either buy or sell a home. When they volunteer contact details, those details go to the realtor and he or she has the opportunity to be first in touch with these prospective clients.

Back to our topic though, and let’s have a look at why this report showed that Toronto has the world’s 2^nd biggest real estate bubble.

Correction Coming?

Vancouver made the top 10 in the list put out by Swiss Bank UBS as part of their yearly ‘Bubble Index’, and that’s not a surprise either. Those who don’t share the beliefs of a ‘pop’ being on its way eventually point to the same argument, and it’s a very valid one – as long as there’s not enough in the way of new home builds and existing homes coming onto the market, the values are going to be fairly well protected and the status quo isn’t going to change by and large.

What is this UBS Global Real Estate Bubble Index? It is a yearly report that analyses residential property prices in 25 of the world’s major cities. It starts with the basis that a bubble can only be proved to exist after it has popped and they do make quite clear that they cannot claim any knowledge of when such a correction could come. The aim is more to track the factors that most indicate a possible bubble and the ones that make a city more at risk of this.

No one’s debating that the lack of affordability for homes in both cities is worsening the problem. There’s also the way rapid growth in housing prices have contributed to the high scores of cities around the world. Toronto came 3^rd in this last year, and came in second the year before that. Vancouver has gone as high as 4^th place.

Pop Unlikely

Nothing is going to change the belief of people with informed opinions who will insist that neither of these bubbles are popping, and there’s a whole lot to support that way of thinking. The warning signs should still be heeded, and particularly by the municipalities in both the GTA and GVA as to what they will do to improve housing affordability in Canada and see to it that supply does a better job of meeting the ever-growing demand.

It is true that the International Money Fund reported on the high possibility of a major price correction, and Canada’s home prices are rising faster than any other G7 country according to the US Federal Reserve. We also have the Canadian Mortgage and Housing Corporation listing most major cities in Canada as being at risk for major market vulnerability.

Even if there is a correction, it will likely be a very minor one and if that’s the case it might actually serve the purpose of meeting the two interests in the middle. Current homeowners shouldn’t be too disappointed with dropping values, and those looking to buy a home may find them at least somewhat more affordable.

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Discussion around Real Estate Bubbles for places like Vancouver and Toronto have been had en masse for so many years now, and there’s a lot of legitimacy to suggesting that real estate markets in big cities have the bulk of homes on those markets being overvalued. Whether or not the bubble is soon to pop – as many have suggested and some even hoped for – isn’t such a sure thing. When demand outstrips supply so emphatically those bubbles tend to be fairly darn durable and can expand much more than you’d think possible.

A recent report from a Swiss Bank has pointed to Toronto as the 2^nd biggest real estate bubble in the world though. Naturally, this is the sort of stuff that grabs our attention and real estate agents working in Canada’s largest and most populous city may well want to take note of it too. Working in real estate often means having to roll with the punches, as the expression goes, and when it comes to a market with overvalued homes there may be something of a belief in getting while the getting is good. Easier said than done if you’re new to the business.

Bringing new clients into the fold can be a challenge for these realtors, but our online real estate lead generation system here at Real Estate Leads is a powerful ally to have on your side when it comes to that. Backed by solid Internet Marketing Principles, what it does is identify people who are planning to either buy or sell a home. When they volunteer contact details, those details go to the realtor and he or she has the opportunity to be first in touch with these prospective clients.

Back to our topic though, and let’s have a look at why this report showed that Toronto has the world’s 2^nd biggest real estate bubble.

Correction Coming?

Vancouver made the top 10 in the list put out by Swiss Bank UBS as part of their yearly ‘Bubble Index’, and that’s not a surprise either. Those who don’t share the beliefs of a ‘pop’ being on its way eventually point to the same argument, and it’s a very valid one – as long as there’s not enough in the way of new home builds and existing homes coming onto the market, the values are going to be fairly well protected and the status quo isn’t going to change by and large.

What is this UBS Global Real Estate Bubble Index? It is a yearly report that analyses residential property prices in 25 of the world’s major cities. It starts with the basis that a bubble can only be proved to exist after it has popped and they do make quite clear that they cannot claim any knowledge of when such a correction could come. The aim is more to track the factors that most indicate a possible bubble and the ones that make a city more at risk of this.

No one’s debating that the lack of affordability for homes in both cities is worsening the problem. There’s also the way rapid growth in housing prices have contributed to the high scores of cities around the world. Toronto came 3^rd in this last year, and came in second the year before that. Vancouver has gone as high as 4^th place.

Pop Unlikely

Nothing is going to change the belief of people with informed opinions who will insist that neither of these bubbles are popping, and there’s a whole lot to support that way of thinking. The warning signs should still be heeded, and particularly by the municipalities in both the GTA and GVA as to what they will do to improve housing affordability in Canada and see to it that supply does a better job of meeting the ever-growing demand.

It is true that the International Money Fund reported on the high possibility of a major price correction, and Canada’s home prices are rising faster than any other G7 country according to the US Federal Reserve. We also have the Canadian Mortgage and Housing Corporation listing most major cities in Canada as being at risk for major market vulnerability.

Even if there is a correction, it will likely be a very minor one and if that’s the case it might actually serve the purpose of meeting the two interests in the middle. Current homeowners shouldn’t be too disappointed with dropping values, and those looking to buy a home may find them at least somewhat more affordable.

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Sign up for Real Estate Leads here and receive a guaranteed quota of qualified, online-generated buyer and / or seller leads every month. We’ll be aware of where you work as a real estate agent in Canada, and your leads with be for prospective clients in the region. Add the fact that you’ll be the only realtor to receive that list of leads and it really does give you an exclusive advantage when it comes to building a client base as a new or existing realtor, and doing so much more quickly and effectively.

All sorts of talk about migrations these days, and it’s not just humans that have been migrating apparently. Many are now choosing to say that the housing unaffordability issue in Canada has done some migrating of its own. What is meant by that is housing unaffordability has moved out of the big major metro areas that have long been seen as ‘desirable’ and into smaller town Canada where homes were still reasonably priced until recently. This is a trend that’s been even more in focus for the last nearly 2 years, and it’s something to look at if you work in the Real Estate business.

For starters, this is a positive development for people in these less-populated areas of the country who are hoping to sell their home. Even more so for older homeowners who have been planning to have that fund their retirement and now have the possibility of an even better one with the fact they’re home is likely to sell for more. This is beneficial for the realtor working with them too, but one thing that has always been true is that it can be tough to make a living in real estate in smaller communities, and especially if there’s already many realtors working there.

Our online real estate lead generator here at Real Estate Leads is a great way of leveling that playing field for realtors who need it. It puts you immediately in touch with folks who have shown their willingness to either buy or sell a home in that area, and you get the advantage of being the only realtor who receives the leads.

A rise in median home prices in a region can’t be necessarily connected to housing unaffordability, as that is always going to be a relative term. But if it’s to be seen as a plus then where are the locations in Canada where we’ve seen biggest real estate value gains?

That’s what we will look at here this week.

Picking up Steam

The CREA recently released data showing that indicates sales are down 17.5% from the scorching pace we saw over September last year, but then being up 0.9% month over month to counter that some. September 2020 had the market setting a record for the month, but September 21 wasn’t bad either and came in as the second-highest September on record for sales. It also saw the first month-over-month increase since March.

Further, the national benchmark price increased 1.7% month-over-month and 21.5% year-over-year. Halifax is often referred to as the Victoria of the East Coast, and real estate there is up 27.5% this year. Montreal has always been a popular location but to have it up 15.5% over the same time is something that is unusual too.

But the really big gains are being seen in much smaller centers where house price gains have only ever occurred very modestly if at all.

Here’s the list of them

1. Kawartha Lakes (Ontario) – up 33.1%
2. Woodstock Ingersoll (Ontario) – up 33.1%
3. Kitchener Waterloo – up 33%
4. Lakelands (Ontario) – up 32.1%
5. North Bay – up 32.1%
6. Vancouver Island – up 31.9%
7. London St. Thomas – up 31.7%
8. Cambridge – up 31.7%
9. Peterborough Kawartha – up 31.6%
10. Chilliwack and District (BC) – up 31.6%
11. Northumberland Hills (Ontario) – up 28.1%
12. BC Interior Region – up 27.7%
13. Oakville Milton – up 26.9%
14. Hamilton Burlington – up 26.6%
15. Guelph District – 26.4%

Lack of Homes for Sale a Key Factor behind Price Gains

The current estimates are that we haven’t improved on the 2 months of national inventory that has been the market reality for well over a year now. This is going to be very integral to how the behaviour of prices goes, and even though the acceleration in home prices seen for September was more than we expected, the fact that prices are now moving back in that direction is also not coming as a surprise to industry experts.

It’s also true that mortgage rates could be a factor, but more realistically ongoing supply issues (shortages) will have price gains continuing to accelerate. At least for the short foreseeable future. However, with demand continuing to be at historically high levels, listing being quickly absorbed, and price growth running steady near a 20% pace it is very likely that this isn’t a short-term phenomenon.

There is a belief that because of these market realities 5-year fixed mortgage rates are going to have real upside in the months ahead, and that could work to have a dampening effect.

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We have been parroting much the same message as knowledgeable industry experts when it comes to how the simple laws of supply and demand are at the root of why homes are as expensive as they are in places like Toronto and Vancouver, and it is well known that the median prices for homes nationwide are up too for the same reason along with more people moving out of dense urban areas to find more affordable homes elsewhere. People are always going to be looking to downsize and if it is possible to do that and sell your existing home it will be best to work with a realtor who can advise on how you should best set your asking price.

Any realtor will have an understanding of current home values in their local market, and that’s true even of those who are new to the business. Establishing a client base does take time, but realtors can speed up the process by taking advantage of our online real estate lead generation system here at Real Estate Leads. Based on Internet Marketing principles it generates leads on individuals and couples who are genuinely considering buying or selling a home in the area of the country where you’re working as a realtor.

Back to topic, a new report is indicating that here in Vancouver there are way more people looking to buy a home than there are ones who are either selling one now or are likely to be putting their home on the market in the near future. That’s to the tune of approximately 7 to 1, meaning for every home on the market there’s 7 different parties that are wishing to buy a home there. That type of discrepancy means that even with increased new home building starts there’s never going to be downward pressure on the market because of the availability of homes.

Basic Economic Principle

This prospective buyers to actual sellers ration has been put forward by the B.C. Real Estate Association and it reinforces the unavoidable realities of the law of supply and demand. The gap between the number of buyers and sellers has been predictive of growth in home prices, and the prices for detached homes in Greater Vancouver and the Fraser Valley have seen yearly increases in the vicinity of 32%. Consider as well that the average price of a home in BC went up 25% since COVID-19 struck last year.

Behind all of these factors is supply and demand. At the peak of market activity in March of this year, there were an estimated 67,000 buyers were searching for homes across BC. The number of homes on the market during that time? The estimate is around 24,000, and that works out to a ratio of homebuyers to sellers of almost 3 to 1.

This creates the most common scenario as one where there is significant upward pressure on prices and transactions often occurring after multiple offers. March of 2021 saw realtors across B.C. selling a total of 15,073 homes, and that’s a new record. Most home sell very quickly, and as mentioned it is almost expected that many homes will sell for over asking.

And for the most part it is local buyers who are driving this. While it is a trend that will likely eventually shift back, the number of foreign buyers in B.C.’s property market dropped to almost zero due travel and border restrictions put in place because of COVID-19.

Change over 2 Year Span

During the slowdown of 2018 and 2019, the numbers of buyers and sellers were fairly even, with demand picking up right before the pandemic resulting in a drop in market activity. This ratio continued to rise rapidly until March 2021, surpassing a value of three and regions covered by the Real Estate Board of Greater Vancouver saw a sharp increase in the ratio of buyers to sellers. This was also true in Surrey, Langley, and Abbotsford.

This rise in total demand during the pandemic was a reflection of potential buyers looking outside of the Vancouver area for more affordable space and at the height of the market during the spring the BCREA estimates that buyers outnumbered sellers by similar 7 to 1 or-so numbers in the Fraser Valley and Chilliwack too.

As home prices rose around 14% in the Greater Vancouver Area, the increase seen in the Fraser Valley and Chilliwack was closer to 30%. These model-based estimates of the imbalance between supply and demand confirm the trends observed throughout the pandemic as well as the broader long-run issues with the challenges of housing affordability in BC.

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One of the interesting takeaways from the Q3 real estate industry reports issued from reputable sources here in Canada was that there’s only one city in the entire country where the trend of slowed homes sales across Canada bringing down median home prices hasn’t applied. Most people would guess that to be Vancouver or Toronto, and if so you’re on the right line of thinking given how that’s where the greatest demand is for homes in the country. You’ve also got a 50 / 50 chance of being correct, and if you guessed Vancouver you are right.

It would also be natural to assume that the geographical constraints of the Vancouver area preventing new home builds would be the primary reason for this, and while that is true it’s also because so much of the land that is available for development in the Vancouver isn’t suitable for residential. That is true elsewhere too, but it’s a very pressing reality in Vancouver. The city has a lot of potential for people who want to see profitability working in real estate, but it’s equally common for new realtors to struggle with getting their foot in the door in a profession where so many people are already hanging their hat in Vancouver.

This is in part what makes our online real estate lead generation system here at Real Estate Leads so beneficial for anyone new to real estate in hot markets who wants an added advantage when it comes to prospecting new clients. It works, and when utilized by an ambitious and studious realtor who works to better themselves and become more of an industry professional everyday it can be immensely helpful in getting their real estate business thriving as soon as possible.

So what is it specifically about Vancouver that has made it immune to price drops on homes caused by a nationwide slowing of sales? That’s what we’ll get to with this week’s entry here.

Demand WAY Outstripping Supply

Metro Vancouver real estate sales are still significantly slowed from the scorching pace seen all through 2020, but that hasn’t meant much in the way of deals for homebuyers because demand continues to outstrip supply. The REB of Greater Vancouver reported 3,149 homes being sold in September, which works out to a 13.6% drop from the 3,643 sold in September 2020 and down 0.1% from the previous month.

Plus, even though sales were up quite a bit compared to the same time last year they were 20.8% above the 10-year September average. At the same time the number of newly listed homes dropped 19.2% compared to September 2020, but went up 28% compared to the previous month. New listings came up short 1.2% of the 10-year average.

What is more expected was that the summer trend of above-average home sales and historically typical new listings activity were seen in Vancouver last month. This is working to keep the overall supply of homes for sale low, and the same upward intensity on home prices today is not being seen like it was in the spring. Property type and neighbourhood type are also much more of factors here, and people and their entire home buying decisions (and selling ones to a lesser extent) are adjusted by this.

Floor on Home Prices in Vancouver

The MLS Home Price Index composite benchmark for homes for sale in Vancouver is up 13.8% (currently) year over year and 0.8 per cent month over month to $1,186,100. This type of percentage value has been standard for many years now, and it works to reinforce the reality that the demand for Vancouver homes will always insulate this market from nationwide real estate market trends and give Vancouver Home Prices a higher floor to the extent that it makes for a higher ceiling too.

Add bidding wars to that equation and it’s all too easy to have median prices for home sold to stay high in the face of influences that would pull them down in any other location of the country, except maybe the GTA. Low mortgage rates definitely factor in too, and of course nothing is as pivotal to all of this like the shortage of homes on the market in contrast to the demand for them. The total number of homes listed for sale is 27.7% below the 10-year September average.

In Vancouver, detached homes have had a 20.4% increase year over year and 1.2% rise month over month to $1,828,200 compared to August 2021. The total number of homes currently listed for sale is down 29.5% compared to September of last year.

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