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All posts for the month January, 2022

Average Canadian Home Price Went Up $16.5K+ in December 2021

Published January 17, 2022 by Real Estate Leads

Having median price gains in excess of $15,000 dollars for homes across the country would be an incredulous possibility to consider for most countries, but here in Canada there is a unique multi-way equation that is pushing up home prices unlike anywhere else on the planet and the stories of housing unaffordability in Canada are as real as they could ever be. Price gains are welcome news for homeowners and realtors working with them, but even these people know there’s a threshold for what can be considered beneficial without being too harmful to citizens of the country as a whole.

This is exactly the reality that’s occurring in Canada. We spent much of last year using this same communication channel to talk about how without addressing the supply / demand gulf all these sort-of measure to attempt to cool the Canadian real estate market are going to go nowhere, and that’s as true as ever based on data recently released that talks about how – based most on demand vastly outpacing supply for decades – the average price of a home in Canada went up $16, 700 in December 2021.

Further, prices overall are now showing the fastest annual growth ever, and economists and industry experts are pretty much all in agreement that this trend isn’t likely to be slowing down anytime in 2022 or the foreseeable future either. This is uncharted territory for realtors working in the industry in many ways, but one thing this always does is remove buyers that would otherwise be qualified from the market. If that make the business tough for new realtors then our online real estate lead generation service

Fastest All-Time Rise of Composite Benchmark Price

And that rather surprising number is not all – the composite benchmark price reached $798,200 in December, and if you compare it to the one for last year (2021) at the same time we are seeing prices now 26.6% higher. In a number value that’s around $167K more on average for a home.

Further the annual rate of growth for a benchmark home across Canada is now at an all-time high too. It went to 26.6% in December, that is a 1.3 point jump from the month before. It is also interesting to note that this all-time record pace of growth came after the Liberals’ vanity election in September and was primarily a function of Q4. Who knows what is to be read into that but the government’s semi-measures to reign in housing prices are what they are.

More short-term growth is expected too, according to analysts who benchmark growth rates with short periods of data. Let’s do that ourselves with the same 3-month annualized period that the Bank of Canada would have used for Q4 2021 and highlighting the most notable points.

  • The 3-month (annualized) rate of growth cleared the 12-month trend for the first time in six months
  • The 3-month rate hit 27.8% in December, 1.3 points above the 12-month rate
  • First time since June 2021 that the 3-month accelerated at a faster pace than the 12-month one

Without sharp downward pressure, annual growth is likely to continue to rise.

Easy Money Continuing to Boost Demand

Yes, the BOC interest rate is expected to go up 6 basis points sometime this year. But that will not make much difference in the here and now, and some economists doubt it will even after that. There are plenty of reasons why that is, but let’s focus more on how low interest rates over the years have factored into this.

Long and short the low cost of borrowing money has lead to a tight market, and there is no tight market in the world with anything that will not promote price increased based primarily on competition for an insufficient supply of product. This is bang-on with where we are in Canada, and countering it is not something that’s going to be easily done.

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UBC Think Tank Proposing Gains Tax on Homes Worth $1M or More

Published January 10, 2022 by Real Estate Leads

Housing affordability and the lack of it continues to play into the Real Estate Market in Canada, and now it’s becoming more of a nationwide issue rather than one that is primarily factoring into Toronto and Vancouver’s markets. One thing hampering the federal efforts to get more new homes built is the lack of trades available for the task, and that’s an acute shortage given the influences that are pushing the demand for housing higher all the time.

The reality of course is that higher median home prices mean fewer buyers will be able to qualify for mortgages than would be the case otherwise. This not only adverse for would-be homebuyers but it’s also not good for realtors who may be new to the profession and struggling to establish new clientele given these fewer numbers of buyers able to buy homes in whatever area of the country they are located in. Our online real estate lead generation system here at Real Estate Leads is a way to counter that trend and be put in touch with legitimate potential real estate clients.

But affordability and housing supply remain the issue, and in Vancouver and Toronto there are few if any detached homes that are valued at less than $1 million. So this has lead to the suggestion that putting a tax on home value when it is at or above this mark is being floated now.  

$1 Million Baseline

A University of British Columbia Think Tank called Generation Squeeze is suggesting a new 0.2% tax on homes worth $1 million and up, and then progressively larger taxes on homes valued at $3 million and up and so on. The think tank has received some funding from the CMHC, Canada’s federal housing agency. According to the study’s author, Paul McGreesy, the tax would be calculated annually but then payable only when the home is sold.

The idea there is that it would function in the same way a land tax would, and those are taxes that many provinces and municipalities already have in place. McGreesy says more than 90% of homeowners wouldn’t pay any of this tax at all since it would only apply to those who are much higher on the real estate ladder and fortunate to be sitting on massive windfalls of currently non-taxable gains.

The money gained from the tax could then be redirected into affordable housing, something that is very much needed in many Canadian cities.

The counter argument here is of course what about homeowners who have been in their homes for many decades and are looking to use some of the equity in their home to fund their retirement. They have not been any part of the reason why their homes have exploded in value, so why set an arbitrary number to apply to them based on the pre-existing value of their home based on what type of home it is and where it’s located.

Suggested Home Ownership Tax Shelter

Going with this belief is one that there is a home ownership tax shelter in Canada that motivates us to bank on rising home prices to gain wealth, but while that is true it’s important to also understand the extent to which Real Estate contributes to the country’s GDP. The current system that is benefitting some and disadvantaging others is one that was very much put into place by successive governments over the past 3 decades and each one has been quite happy to leave it in place.

However, only the portion of a home’s value above a threshold would be taxed at that 0.2% level, so for example a $1.2 million home would have tax applying to $200,000 of the value.

The belief is that the tax would be similar to what a mid-level salaried employee would pay, but again the premise of this would be that owning a home is a source of income and while that is true in an indirect way it has been that way for generations and one has to wonder if you make a change simply because of current realties and ones that may not be permanent.

Skepticism

Many experts think adding new taxes on existing owners is not the way to do it. We can at least say the most effective way to address the imbalance in the market isn’t to try to suppress demand, but to build more housing to satisfy that need without encouraging bidding wars for what little housing is available.

Targeting the demand side of the market will be less effective than addressing supply issues, and the only sustainable way to moderate price growth will be to bring on more supply. If that’s not possible because of available land for development, zoning regulations, or a lack of people qualified to build that number of homes then those are realities that should be taken into account and addressed first.

One thing this may actually do is encourage owners of single family homes to stay where they are and making the supply problem worse as a result. Keep in mind as well that adding a surtax to owners of multiple-unit properties would results in rental charging more rent in order to meet their needs as the owner and maintainer of the rental property.

The problem of housing affordability needs to be addressed, but yet again this proposed measure is off the mark and especially if it is going to punish people for when they bought the type of home they did, and where they bought it.

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Housing affordability and the lack of it continues to play into the Real Estate Market in Canada, and now it’s becoming more of a nationwide issue rather than one that is primarily factoring into Toronto and Vancouver’s markets. One thing hampering the federal efforts to get more new homes built is the lack of trades available for the task, and that’s an acute shortage given the influences that are pushing the demand for housing higher all the time.

The reality of course is that higher median home prices mean fewer buyers will be able to qualify for mortgages than would be the case otherwise. This not only adverse for would-be homebuyers but it’s also not good for realtors who may be new to the profession and struggling to establish new clientele given these fewer numbers of buyers able to buy homes in whatever area of the country they are located in. Our online real estate lead generation system here at Real Estate Leads is a way to counter that trend and be put in touch with legitimate potential real estate clients.

But affordability and housing supply remain the issue, and in Vancouver and Toronto there are few if any detached homes that are valued at less than $1 million. So this has lead to the suggestion that putting a tax on home value when it is at or above this mark is being floated now.  

$1 Million Baseline

A University of British Columbia Think Tank called Generation Squeeze is suggesting a new 0.2% tax on homes worth $1 million and up, and then progressively larger taxes on homes valued at $3 million and up and so on. The think tank has received some funding from the CMHC, Canada’s federal housing agency. According to the study’s author, Paul McGreesy, the tax would be calculated annually but then payable only when the home is sold.

The idea there is that it would function in the same way a land tax would, and those are taxes that many provinces and municipalities already have in place. McGreesy says more than 90% of homeowners wouldn’t pay any of this tax at all since it would only apply to those who are much higher on the real estate ladder and fortunate to be sitting on massive windfalls of currently non-taxable gains.

The money gained from the tax could then be redirected into affordable housing, something that is very much needed in many Canadian cities.

The counter argument here is of course what about homeowners who have been in their homes for many decades and are looking to use some of the equity in their home to fund their retirement. They have not been any part of the reason why their homes have exploded in value, so why set an arbitrary number to apply to them based on the pre-existing value of their home based on what type of home it is and where it’s located.

Suggested Home Ownership Tax Shelter

Going with this belief is one that there is a home ownership tax shelter in Canada that motivates us to bank on rising home prices to gain wealth, but while that is true it’s important to also understand the extent to which Real Estate contributes to the country’s GDP. The current system that is benefitting some and disadvantaging others is one that was very much put into place by successive governments over the past 3 decades and each one has been quite happy to leave it in place.

However, only the portion of a home’s value above a threshold would be taxed at that 0.2% level, so for example a $1.2 million home would have tax applying to $200,000 of the value.

The belief is that the tax would be similar to what a mid-level salaried employee would pay, but again the premise of this would be that owning a home is a source of income and while that is true in an indirect way it has been that way for generations and one has to wonder if you make a change simply because of current realties and ones that may not be permanent.

Skepticism

Many experts think adding new taxes on existing owners is not the way to do it. We can at least say the most effective way to address the imbalance in the market isn’t to try to suppress demand, but to build more housing to satisfy that need without encouraging bidding wars for what little housing is available.

Targeting the demand side of the market will be less effective than addressing supply issues, and the only sustainable way to moderate price growth will be to bring on more supply. If that’s not possible because of available land for development, zoning regulations, or a lack of people qualified to build that number of homes then those are realities that should be taken into account and addressed first.

One thing this may actually do is encourage owners of single family homes to stay where they are and making the supply problem worse as a result. Keep in mind as well that adding a surtax to owners of multiple-unit properties would results in rental charging more rent in order to meet their needs as the owner and maintainer of the rental property.

The problem of housing affordability needs to be addressed, but yet again this proposed measure is off the mark and especially if it is going to punish people for when they bought the type of home they did, and where they bought it.

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Sign up for Real Estate Leads here and receive a quota of qualified, online-generated buyer and / or seller leads that are delivered each month and provided only to you. YOU are the only realtor who will receive them and that creates an exclusive opportunity for you to be in touch with these prospective clients. This is a proven-effective way to get more out of your client prospecting efforts and do so quite quickly.

Housing Affordability in Canada at Lowest Levels Ever Through 2021

Published January 3, 2022 by Real Estate Leads

Many people won’t need to be convinced of the unattractiveness of the housing market in Canada with how so many people who are struggling to get into the market nowadays wouldn’t have had the same problems a decade or so ago. What the market will bear at any given time is out of any one person’s control, and of course it will be different again in the future. Better? Worse? Who’s to know really. But one thing that has been confirmed as we closed out 2021 is that it was the worst year of all time for housing affordability in Canada.

Why that is shouldn’t need a whole lot of explanation, as again the age-old equation of supply and demand had demand leaving supply in the dust. Then there’s the factor of a rapidly expanding population base and the ‘heat’ of certain housing markets being dispersed to other areas of the country where price gains like this on detached homes haven’t been seen ever before 2020. The ‘blame’ for this – if there is any – can’t be laid solely at the feet of the federal government but it is true that successive numbers of them haven’t invested in housing like they should.

Then you have developers who aren’t going to lose money building certain types of housing that need to be built and you have something of a recipe for what we’re seeing now with housing in Canada. Is it going to get better with BOC interest rate hikes sometime later this year? Not likely if you’re to believe the economists who tend to be in the right about this stuff more often than not. Realtors will say the same thing for the most part, and here at Real Estate Leads our online real estate lead generations system is a great way for realtors anywhere in Canada to get more out of client prospecting efforts.

Returning to our topic, what can be seen when looking deeper into why housing affordability was a real problem for Canadians last year? Turns out it’s not even that much of a deeply layered issue and most of what is making homes unaffordable for average Canadian is fairly straightforward.

31 Years Since

It has been a full 3 decades and then some since housing affordability has been this bad in Canada, and the suggestion that it has mostly been because of foreign buyers and / or money laundering has been fully disproven by this point. Are they factors? Yes, they are but they are minor ones compared to the simple fact that there are not enough homes available for the number of people living in Canada who want to buy them and may in fact be qualified to do so if there was a home for them to buy.

The aggregate cost for home ownership in Canada went up to 47.5% of median household income in Q4 of 2021. That works out to a  sequential increase of 2 percentage points and is a nearly six point increase compared to the same quarter for 2020 when the COVID pandemic was at its peak. Factors like mortgage payments, property taxes and utilities to measure ownership costs are incorporated into this.

Bidding wars and home selling for obscenely over asking highlights the need for many more new housing starts in Canada, but people need to also be aware that there is nearly no room if any available for detached home builds in a lot of major metro areas now.

Until demand and supply return closer to balance, prices will continue to rise and that’s the way it’s always been.

Vancouver’s #1 Ranking No Surprise

To no one’s surprise Vancouver had the least affordable housing market in the country last year, with the average being that ownership costs were taking up a massive 64.3% of median household income in Q3 2021, and that was up 0.9% from Q2. Toronto was only slightly better, with households there spending 61.9% on average to pay for their housing. But that is up a larger percentage in comparison with Q2 – 2.7%.

The overall outlook is similarly bleak for the cities across the country as a whole. There’s different reasons for that, but none are as pivotal as the Bank of Canada and their near-certain plans for raise rates around some 6 basis points sometime in Q2 or Q3 of this year. Economists estimate the Royal Bank’s national affordability gauge of affordability could go up by another 2 points to 3.5 when the new rates go into effect and they alter the buyer and mortgage qualification landscape.

The Exception

Only a single city managed to not see a Q4 affordability loss in their Q3 for 2021 – St. John’s, NL. Home ownership costs only account for 22% of median household income there, and that’s a shocking departure from the portion of it that folks in Vancouver and Toronto are putting towards housing.

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Sign up for Real Estate Leads here and receive a quota of qualified, online-generated buyer and / or seller leads every month. These leads are only passed to one realtor, and that’s you once you’ve signed up and let us know where you’re currently working as a real estate agent in Canada. The opportunity then becomes yours to reach out to these people who are ready to make a real estate move and convince them you are the qualified and knowledgeable expert they need to buy or sell a house.