Efforts to cool the housing markets in both BC and Ontario are admirable when you look at them on an elemental level, but there is reason to be critical when those efforts are left in the hands of Provincial Governments that have proven themselves to be wholly incompetent. That is very much the case in British Columbia, as in addition to all the other preceding measures introduced by the Government to disadvantage hard working home owners we now have them with new proposed legislation slated to be introduced this spring.

What this ‘Cooling Off’ legislation will do is give homebuyers a window to back out of deal for a property with no or diminished legal consequences. Not only will this create very real problematic scenarios for people selling their home, but industry experts are saying it will do next to nothing to cool down the housing market, and particularly in the very overheated Lower Mainland. It is an effort to placate those who can’t afford to get into the housing market, but we suppose there is some value in that.

Indeed, getting into the real estate market is much more difficult than it used to be, and at the same time working in real estate is more challenging that ever too. It has become competitive in just the way you’d imagine it would with home value increases meaning more in earning capacity for realtors, and there are hundreds of thousands of realtors working across Canada. If generating new clients is a struggle then our online real estate lead generation system here at Real Estate Leads is highly recommended.

Back to topic – let’s look at why the BCREA is not in favour of the new legislation and their explanations as to how it will not affect the market positively much if at all.

Ineffectual at Best

The general consensus is based on similar cooling-off periods in other global jurisdictions that showed the policy to be ineffectual at best. Industry experts point to how chronically low inventory supply is the major stumbling block for this type of legislation having the type of effect intended for it. The lack of inventory will promote ever greater numbers of prospective homeowners willing to consider overextending themselves to buy a home, and this means greater numbers of them potentially backing out when reconsidering their purchase.

Again, in theory that is not a bad thing and there will be some buyers that will be saved from making a hasty purchase that would end up hating them down the road. But there are going to be far too many of them in that potential scenario unless there is more of a natural supply of inventory that allows for an inherent balance between interests of both home seller and the homebuyer.

The position of the Government is that there is a need to ensure ‘buyers have time to get the information they need to make a sound decision that is right for them’ according to Minister Robinson, who added further that the real estate industry’s commission-based nature means the BCREA has a vested interest in keeping the market hot. That is also likely true, but again the focus needs to be on the fact that similar efforts have failed in other markets around North America – and ones that have much less of a supply crisis and lack of new housing starts like Vancouver does, and to a lesser extent BC as a whole.

Bad Unintended Consequences

It is entirely fair to say that this hast the potential to put homeowners who in a difficult situation. Many homeowners who accept an offer on their home when they have plans to move to another one have a very real chain of events to consider. Having an accepted offer be unvalidated summarily has the potential to hurt them, especially if they themselves are putting in their own offer on a new home. Yes, that will not always apply but it will in many instances and this is something that needs to be considered.

This uncertainty for sellers who may be involved in another transaction is reason enough to say that this proposed legislation is poorly thought out, and that is to say nothing of other factors that will grow out of this:

• Worsening affordability
• Increase in frivolous offers as some buyers figure they can be loose with making offers knowing they won’t be held to them so long as they go back on them within the time period

Pressing Low Inventory Factor

It was just earlier this month that VREB pointed to a lack of supply causing January home sales to slow from a record-setting pace last year. The benchmark price still went up 18.5% as compared to last January, and that was to roughly $1.2 million for a detached home. Industry experts are also saying that BC is 25,000 listings short of the amount that would be required for a balanced market and that the lack of supply may be even more problematic with the 70,000 to 80,000 immigrants expected in BC this year.

As an alternative, the BCREA is very astutely suggesting a mandatory ‘pre-offer period’ where offers will be blocked from being made for at least 5 business days after the property is first put on the market. The idea there is that prospective buyers have enough time to do their research on a home and evaluate their ability to afford it without having to worry about offers being made and / or the home selling before they have a chance to do this due diligence.

The BCREA also suggests the province create more transparency in the homebuying process, so people can make more informed decisions when they find themselves in multiple-offer scenarios and are unsure if they want to continue bidding higher.

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Nearly everyone and their dog will be aware by this point that that Bank of Canada is likely going to be raising interest rates soon, but one thing that we all have seen over the past year is so many people saying that higher interest rates are going to work to cool the real estate market in Canada. That may still be true, but that cooling off is not manifesting itself in buyer and seller activity in the market. At least not yet. The standard logic is that higher rates may mean new buyers have overextended themselves with the purchase, but it seems that is not much of a discouragement at this time.

The vibrancy of the market doesn’t seem to be hindered at all as we move closer to the rate hikes which are expected to come as soon as the end of March. Buyers are apparently not discouraged at all right now, and how much of that can attributed to FOMO – fear of missing out – is debatable. The fact is the value in property ownership in many areas of Canada continues to be both desirable and attainable for a lot of people, and there are plenty of stats that support that reality.

A market that continues to have momentum to it is always going to be good if you look at it from the business end of things, and realtors in Canada are definitely in the business. More and more new realtors enter the profession all the time and for good reason as the commissions on home sales in Canada are considerable based on what houses are selling for. Our online real estate lead generation system here at Real Estate Leads is an excellent way to get a leg up for yourself if you are a realtor who is struggling to make a name for yourself.

Moving back to our topic for this entry, let’s look more at how homebuying activity isn’t really missing much of a beat at all here in the early part of 2022.

Full Steam Ahead

Optimism about the nation’s housing market is as high as it has ever been, and that is despite warnings from the Central bank and regulatory officials that borrowing costs are set to increase and higher interest rates could make some real estate purchases regrettable in the near future. The fact that most prospective buyers go ahead with home purchases can be connected to many points, but none is more relevant than the fact that people see the homes increasing in value in a big way with a short timeline.

A survey found that nearly 64% of Canadians expect increases in value for real estate in their neighborhoods to increase over the next six months. The number of qualified buyers has gone down with the mortgage stress test increases of 2020, but there are still plenty of Canadians who have the means of buying a home and aren’t hesitant to do so despite the cost of borrowing money going up.

This really isn’t a surprise to anyone who knows of all the many different factors that go into the housing market in Canada, but this level of continued willingness is at least a little surprising considering it comes a week after the Bank of Canada made clear its plans to start raising lending rates soon. What might actually be more noteworthy are efforts to quell speculative expectations in the nation’s housing market. One that has seen prices make up to 40% jumps since the start of the pandemic.

Faith in Rising Values

The 64% number for an average of the number of Canadians expecting real estate values to go up in their area is on that has only been that high for two years. Before that it never went much higher than 40% according to the pollsters who do this kind of research. Interesting to note as well that only less than 6% of respondents to the survey said they though prices would fall.

The one thing we do know is that the BoC has no choice but to raise rates to combat inflation in Canada, which everyone will know is very real right now. Higher rates DO present the possibility of a housing market correction, but we are all fairly certain that certain markets – Greater Vancouver and Greater Toronto most notably – will be by and large immune to any correction.

Another thing to consider is that the central bank’s decision to wait until March at the earliest to start its hiking cycle may actually be fueling the housing market. Something which has benefits or drawbacks whether you’re a homeowner looking to move or if you are someone who is looking to get into the housing market for the first time.

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It’s no secret that many of the people who are buying the most expensive real estate in Canada have extremely deep pockets, and that is equally true of both foreign and domestic buyers. Luxury real estate is always evaluated as a different entity when looking at housing prices and the extent to which they are affordable – or not – for prospective homebuyers. Many of the homebuyers who might be able to afford a more standard family home that is selling for way over asking price wouldn’t even be able to consider purchasing luxury properties.

Luxury real estate is also not as common in certain areas of the country, although it is not exclusive to areas of the country where the housing market is at its hottest either. Plus, unlike homes purchased as investments that may not be earmarked for living in the home, most luxury real estate is purchased with the intention of living there. That’s not to say it is not possibly being bought as an investment, but it is not nearly as common.

What we’re going to look at with our entry this week is a review of the Re/Max 2022 Luxury Market Report and highlighting all of the main points that would be of interest to realtors and / or clients they are working with who would like to be best informed before buying very expensive real estate. Realtors will want to take note too, as these clients will be ones that they will want to work with for obvious reasons. Here at Real Estate Leads our online real estate lead generation system is an excellent choice for any realtor who wants to get that leg up on the competition in a big way when it comes to generating new clientele.

Looking at the report, this is what we feel is most noteworthy and what you might want to see for yourself or perhaps include in any report communication that you might be forwarding to certain types of buyers.

More Activity in Smaller Centres

The extensive and active buying of luxury homes is spilling into smaller centres where the buyer often has more purchasing power. The COVID pandemic has accelerated that trend, and this is something that has already been discussed at length. This is very true for Ontario. Iand a noteworthy buyers’ trend for markets like London, Kitchener-Waterloo, Hamilton, Barrie, Kingston and Ottawa.

Home sales are pushing into higher price points across Canada. The luxury segment over $3 million represents is now making up about 4% of total sales in Metro Vancouver and 1.8% of them for the GTA. The East Coast factors in too with sales over $1 million in Halifax-Dartmouth representing 2.2% of total sales for the region.

Previous records for luxury sales were broken for the Greater Toronto Area in 2021, while Metro Vancouver fell short of 2016 record levels by just over 200 sales.

Condominium sales over the $3 million price point in the GTA and Metro Vancouver have bounced back firmly from 2020, setting a new record in the GTA and matching 2016 numbers for Metro Vancouver. There were 106 luxury condominium units sold in 2021 in Toronto, and that is up 82.8% over 2020 levels, while 144 luxury units had new owners in Metro Vancouver for 2021, and that is a 44% increase from the previous year.

As expected there was an upswing in non-resident buyers in Metro Vancouver area, but seeing the same for Halifax-Dartmouth in 2021 was not as expected.

Role of Young Entrepreneurs

An increase in young entrepreneurs making these types of big money purchases has been seen in the GTA, and a good number of them have realized crypto-currency gains to make their way into the housing market. Family wealth also continues to contribute to the increase in luxury home sales as it always has, with many parents utilizing their own equity assets to help children get into the luxury real estate market.

There are also greater numbers of non-resident buyers returning to Canada’s residential housing markets, even though taxes aimed at foreign ownership in Metro Vancouver – 20% Foreign Buyer Tax, 2% Speculation and Vacancy Tax (SVT), and 3% Empty Home Tax and the 15% Non-Resident Speculation Tax aimed at Ontario’s Greater Golden Horseshoe Area.

Sales of building lots have declined at the top end, and this is likely due to buyers being reluctant to embark on construction without cost clarity and difficulties in finding labour, plus the realities of supply chain disruptions due to the pandemic and other factors that are now adding a lot of time to the custom-building processes that are common with luxury home builds.

The $3 million price point is where luxury home inventory is balanced in Metro Vancouver and there are only 200 such homes homes meeting the same criteria that are currently listed for sale in Toronto. Lastly, supply levels are exceptionally low in about half of markets surveyed for the Re/Max report. Locations including the GTA, Victoria, Kelowna, London, Kitchener-Waterloo, Hamilton, Barrie, Kingston and Ottawa.

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