5 days ago the Bank of Canada raised the benchmark interest rate by 0.25 basis points, as it was long expected to do and a continuation of what has been going on as the central bank in Canada does what is needed in the face of extreme inflation in the country and in North America as whole. This would not have any reason to be seen favourably from the perspective of the real estate industry or mortgage interests, but what is seen as good news is that BoC also stated at the same time that it was going to pause the interest rate hiking cycle.

This was done based on signs of a strengthening economy, although one that is still precarious and we’re certainly not out of the woods when it comes to onset of a possible recession in Canada. This is for economists to comment on and not anyone blogging about realtors and the real estate industry, but there certainly are some direct connection and predictions about the cycle pause will work to affect real estate and mortgages in the country.

Any uptick in the real estate industry isn’t guaranteed, and the ‘downturn’ is definitely what’s showing on the thermometer, but for real estate agents who find their business has cooled too then our online real estate lead generation system here at Real Estate Leads is an excellent and affordable resource to get your new client generation efforts creating the results you want from them. But with that understood, let’s segue back onto topic and look at the bigger picture significance of this recent news and what it may mean for real estate and mortgages in Canada.

Promoting Buyer Activity

The consensus seems to be that while no rate increase would have been most ideal, a point-25-basis point increase was where the bank needed to be in the big picture. And it’s also fair to say that this more marginal increase means that interest rates aren’t going to be in the news to the same extent. And these smaller rate hikes stopping or slowing should promote more of what are being referred to as ‘missing transactions’ where those with the capacity to buy but have remained on the sidelines will be getting back into the market.

It’s fair to assume that these buyers have been reluctant to do that to this point because they have been making the connection between rising rates and prices and – quite simply – they don’t want to buy a house that might be worth less than the purchase price in the potentially very near future. By giving them some price certainty it will be more conducive to them entering the market.

However, they’ll still need to be comfortable with paying 5 or 6% cent on their mortgages while other buyers that purchased before them are locked in at 2%. There are still plenty of relatively new homeowners out there with that type of mortgage rate and seeing you’ll be paying 5% is still going to put a damper on consumer confidence and this is why there won’t be the uptick in buyer activity that some might hope to see with the assurance that rates won’t be hiked again anytime in the foreseeable future.

Muted Recovery

This is lead real estate industry experts to be forecasting what they are calling a ‘muted recovery’, but what is also being foreseen is more enthusiasm for variable-rate holders who may be considering renegotiating their mortgage – and in some cases doing so to reorient their finances with an eye to purchasing more real estate.

Those with variable-rate mortgages or home equity lines of credit (HELOC) will see their rate increase by a quarter point, and that bumps up the sum of their total rate increases in the last 12 months to 4.25%. Seeing that rate hikes are going to be paused and perhaps halted provided inflation tracks in the right direction they may be more encouraged to make additional moves in the real estate market.

All of this is dependent of course on whether or not this latest rate hike hasn’t taken them to their trigger rate, the term used for when an existing mortgage payment is no longer covering a buyer’s monthly interest. But provided it hasn’t done that, they may have a more ambitious outlook if the rate cycle pause looks like it will be leading to a full cease in rate hikes if the economy starts doing better and inflation starts to be in check.

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The luxury real estate market in any country is going to by and large exist as its own separate market entity. That’s simply because those types of properties and accommodations are not in any way in line with what most average people can afford, or would choose to afford even if they could. People tend to buy homes exclusively on the criteria of what fits them and their family, and it is fair to say that the majority of luxury real estate buyers are making their decision purchases well beyond that.

Nonetheless, there is economic significance in it for the market and you also won’t find a single real estate agent who’s not keen to be listing a home that’s going to have multi-million dollar offers coming in on it. These types of listings and sales have always been available to a very small section of the purchaser demographic, and in truth it’s fairly standard that only certain realtors get a slice of that pie too. But it seems that may changing, on one end at least.

There is reason to believe that luxury real estate is following the general trend for the market in Canada where dropping median values can’t help but make it more of a buyer’s market. We’ll make that the focus of this week’s blog entry, but first we’ll mention as well that realtors who need a helping hand with generating clients of any sort – luxury real estate or otherwise – can take advantage of our online real estate lead generation system here at Real Estate Leads and have the power of Internet Marketing doing wonders for their new-client generation efforts.

Back to topic, let’s look at what is supporting this newer assertion that luxury real estate in Canada is becoming a buyer’s market.

Pandemic Recovery Connection

Sotheby’s is an International Real Estate Firm, and a report from their Canadian office is suggesting that luxury real estate may be shifting into buyer’s market conditions this year. It states that prices are readjusting from pandemic-related upheaval, and there is also some suggestion that the new federal government foreign buyer’s ban will also take some very-qualified buyers out of the picture to further cool prices somewhat.

The belief is that buyers and sellers retreated from the luxury market in 2022 as the housing market flexed with interest rate hikes, high inflation, and regulatory challenges, and this set the stage for prices to cool this year despite demand for housing continuing. This is countered by the fact of course that demand for luxury housing is never going to exist to the same extent that it does for more conventional housing. Some of these buyers will also have a greater interest in property and buyers are always going to have their own individual prerogatives when it comes to buying and selling real estate.

What we do know is that luxury housing segments in some Canadian metropolitan areas were approaching buyer’s market conditions by the end of 2022, or were already in that territory well in advance of that. Many industry insiders are predicting another adjustment with regards to pricing coming in the first half of 2023 here.

It is likely that we may be at a point now where home sellers are starting to realize the impact of the changing market on the market values of their properties, and that pricing is going to start to shift because of it. It is possible that this may unlock certain opportunities for buyers and those looking to up-size and purchase a home that is more in line with what they envision for themselves.

Luxury Sales Down Year-Over-Year

Sotheby’s report found luxury sales fell year-over-year in major Canadian cities. For the GTA, residential real estate sales over $4 million went down nearly a quarter from 2021 to 2022, and homes that sold for over $10M fell 29%. It was in Vancouver that the sharpest decline in high-end real estate sales was seen, particularly in the first quarter of the yea. Sales of residential properties over $4 million fell by 30% as of the end of 2022 and homes that changed hands for $10 million+ dropped 46% from 2021 levels.

It was more tempered for Montreal, with residential sales over $4 million close to 2021 levels and an 18% annual decline in sales activity for homes over $1 million. The outlier of sorts was Calgary, with sales of homes over $1 million going up 16% from 2021 to 2022. Sales over $4 million increased by nearly half, with six properties selling in that price range. Higher rates of inter provincial migration almost certainly contributed to growing demand for this type of housing.

We’ll conclude by saying that housing deficits will continue to challenge housing markets in major cities in 2023. Yes, prices will go down, but pent-up demand and immigration population gains will continue to prop up housing values in the long term.

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Continuing with our blog entries early in 2023 here, this news may come as too much of a surprise to some given the nature of existing trends we were all aware of as the market moved through the last part of 2022. But the reason that it is notable is primarily because of the amount of time that has passed since this happened last, and related to some of what has occurred during those 14 years that is still either true or relevant today.

We’ll explain more, and to preface some we’ll mention as well that median home prices are not moving back upwards to the extent many would have hoped since the chill of later summer / fall 2022. Again, as we’ve stated many times that was overall a plus as the market had been extremely overheated over the last 3 years. There are many who would go so far as to say it was grossly overheated, and there were real estate industry pros and economists among them.

There will always be interest groups with opposing views with anything related to the market, and we can all agree that prospective first time home buyers are certainly happy to see median values come down. Problem there being of course the majority of them continue to hope to buy in markets like Vancouver and Toronto where demand / supply imbalances have insulated homes against declining median values. That is always going to be the case. But for realtors there has definitely been fewer homes going on the market, and detached homes especially.

Our online real estate lead generation system here at Real Estate Leads is ideal to make up for any slack when it comes to the supply of new clientele, and we’ll detail more about it at the end of this blog entry. For now let’s stay on topic with the Q4 Home Prices Decline in Canada for 2022.

2.8% Down

Canada’s housing market correction ended the year with the first year-over-year decline for quarterly home prices in nearly a decade and a half, as per a new Royal LePage report. It states the aggregate price of a home in the fourth quarter of 2022 was $757,100, down 2.8% cent for the same Q4 for 2022. Some markets had steeper declines than others.

In the Greater Toronto Area, the aggregate Q4 2022 price for a home was $1,068,500, a drop of 4.6% annually. For Vancouver it was a  3.5% decline year over year to $1,208,900.

Calgary and Montreal actually had modest price growth in the fourth quarter but on a quarter-to-quarter basis, the national aggregate home price continued to decline for a third consecutive time.

All of this needs to be framed in the overarching picture of rising interest rates from the Bank of Canada rapidly cooling housing markets across the country after a flurry of activity during the COVID-19 pandemic.

The CREA’s most recent data indicates that the average, non-seasonally adjusted price of a home has gone down 19% since a Feb. ‘22 peak. Again in a wider context though 0.68% of all homes in Canada were sold during the high point for prices in February and March. This meant the actual exposure most homeowners would have had to the peak would have been fairly limited.

Condos Coming Later

The report also details how the market peaked for some Canadian cities and property types arrived at different times for 2022, and that for condos the price high mark arrived much later in the year. Included as well were modest fourth-quarter decline data that should be understood within the perspective that prices 2 years back in Q4 for 2021 were close to their own peak.

All of this among the general consensus that home prices should decline modestly by about an additional 1% in 2023, and let’s remember there have been plenty vocal groups who are expecting home prices to bottom out sometime in early 2023. If so, that will be attributable to activity picking up once again as interest rates stabilize and buyers return to the market, along with growing demand from Canada’s expanding population and the ongoing shortage of homes nationwide that doesn’t seem to have any solution on the immediate horizon.

We can be fairly sure that there are many sidelined buyers who are waiting patiently for the bottom to be revealed. Provided interest rates stabilize and consumers adapt to their new normal, many of them will be back and this may be occurring much sooner than expected. That bodes well for realtors across Canada, as well for homeowners who have been patient in not putting their home on the market to weather this dip in median home values.

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British Columbia continues to be one of the most popular Provinces for Canadian to reside in, and the Lower Mainland in particular is one region of the Province where housing is always in short supply in the face of the number of people who want to own homes there. As a result property values are always going be higher than they really should be, but that is a reflection of market forces that would apply to any consumer good anywhere in the world.

And when you get right down to it, homes are consumer goods even though the nature of what they provide for people may make it difficult to see them that way. It is probably fair to say that realtors have a more natural conceptualization in line with this, but without segueing too far off topic it’s also fair to say there are too many realtors in Vancouver the same way there aren’t enough quality homes to go around. That said, there’s nothing stopping anyone from getting their real estate license and beginning work as a realtor, and there shouldn’t be.

New realtors do need to be prepared for thing to be fairly lean in the beginning though, and again that’s in large part due to just how many agents there are in the city and how competitive it is because of that. But our online real estate lead generation system here at Real Estate Leads is an excellent way for new realtors to gain a concrete advantage when it comes to generating new clientele in a place and a time when it’s not easy to do that.

Due to rising home values, the B.C. Government is increasing the B.C. Homeowner Grant threshold, and that’s what we will look at briefly with this week’s entry here.

12% Rise Provides the Initiative

The grant threshold has been increased to $2.125 million for 2023 in response to average property values increasing by 12%. The official statement backing this move cites the initiative being the rise and that resetting the threshold from $1.975 million will now mean around 92% of residential properties will be eligible for the grant.

For anyone unfamiliar with how the homeowner grant works, the simple explanation is that it reduces property tax on a principal residence. Something which can be very important given how many homeowners will be spread very thin with finances each month if they own a detached home in Vancouver.

The basic grant for those who live in their homes in Metro Vancouver, the Fraser Valley and Capital Regional District is $570 and can be up to $845 for people aged 65+, veterans who have served in Canada’s military or who have a disability. Northern and rural area homeowners will have their basic grant being $770 and then $1,045 for veterans, those with a disability or people 65+.

Big Gains from July 2022

BC Assessment says in a statement the valuations released Tuesday show estimates from July of 2022, with the total value of real estate assessed in the province being $2.27 trillion at that time. The aim here is to soothe concerns for folks who are worried about their taxes going up if they’ve had a large hike in the value of their home. That is very often the primary most important factor in how much the value has changed relative to the average increase of other properties owned in their metro area.

This list is the average assessed values of single-family homes in 2023 for B.C. areas plus the individual percentage change:

• Vancouver, $2.125 million, 7% increase
• Whistler, $2.902 million, 11% increase
• Surrey, $1.609 million, 13% increase
• Victoria, $1.157 million, 8% increase
• Duncan, $591,000, 13% increase
• Tofino, $1.616 million, 20% increase
• Port Alice, $261,000, 1% decrease
• Kelowna, $988,000, 14% increase
• Osoyoos, $685,000, 14% increase
• Merritt, $475,000, 14% increase
• Castlegar, $497,000, 18% increase
• Nelson, $675,000, 5% increase
• New Denver (Village), $361,000, 26% increase
• 100 Mile House, $405,000, 26% increase
• Fort St. John, $343,000, 4% increase
• Fraser Lake, $204,000, 31% increase
• Prince George, $450,000, 31% increase
• Valemount, $345,000, 28% increase

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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. These leads are generated from Internet Marketing platforms and a proven to be effective in producing leads that put realtors in touch with individuals, couples, or families that are genuinely considering making a move in the market. It’s a great way to supercharge your client prospecting efforts, and speed the development of your real estate business as well as letting you establish yourself as a leading real estate agent in your area.

We’re officially into the New Year, 2023 now, and as we talked about briefly last week we’re leaving quite the upheaval of one behind us with 2022 when it comes to the Real Estate Market in Canada. With the first blog entry of the year here at Real Estate Leads we always provide something of a Real Estate Market and Housing Outlook for the year and so that’s what we’ll be doing again with this first 2023 entry.

The biggest overarching theme is the one you’ll hear from anyone who is a real estate industry insider or even casual overseers who have a strong understanding of its workings. And that is the market cooling that was the primary characteristic for last year is expected to continue. And quite possibly continuing well into the coming year at that. Not surprisingly, we can also expect to see the major demand-centric markets in cities like Vancouver and Toronto continue to be insulated against too much cooling.

It is for this reason in part that it may be realtors in other parts of the country who see potential clients be more hesitant to put homes on the market, and for these agents our online real estate lead generation system here at Real Estate Leads can be a very good aid when it comes to expanding your reach into what may be a reduced client base in the area of the country where you are working as a real estate agent.

Let’s get into it.

Rates, Inventory, and Cycle Factors

The bulk of market economists and experts say that prohibitively high mortgage rates, low inventory on the market and uncertainty about where the Bank of Canada’s interest rate cycle will peak are going to continue to fuel a cooling real estate market. At least through the earlier part of the coming year.

Recently available data from the Canadian Real Estate Association (CREA) shows that home prices in Canada went down 19% from a February peak to November, adjusted seasonally, when the average sale price came in at just under $637K. The overall belief is that the slowing pace of decline in both home sales and prices are indications that the early signs the correction are approaching a final stage.

Any low points reached in the early part of 2023 would vary from market to market as a result, and most of them would be coinciding with the Bank of Canada stabilizing its benchmark interest rate. The biggest takeaway there is that this point -whenever it comes – might be where affordability is best for prospective buyers.

Re/Max Canada’s Housing Outlook 2023 has aggregate home prices dropping 3.3% in the year, but other agency surveys have it expected to be lower than that. So we can work with just over or under 3.5% as the likely highest point it will be for the decline rate.

Cities in Ontario that are expected to be more vulnerable for these declines in 2023 are Greater Toronto Area (11.8% lower), Barrie (15% lower) and Durham (10% lower). For B.C. they are Greater Vancouver (5% lower), Kelowna and Nanaimo (both 10% lower)

Growth for Some Markets

Conversely, some markets may see growth. Cities across the countries that are predicted to have gains in median home values are Halifax (+8%), Calgary (+7%), Ottawa and Kingston (+4%) St. John’s NL (also plus 4%) and Saskatoon (+3%).

Another very noteworthy part of the forecast is that condo sales in major urban markets are expected to be more robust than the 2 year prior. In most big cities condos and downtown properties didn’t see major price inflation during the pandemic, and they have further to fall as the market cools because of that.

Realtors working in all major urban centres in Canada can expect there to be strong demand for condos, and especially among first-time homebuyers as has always been the case.

Foreign Homebuyer Ban Now in Place

The last newsworthy development we’ll touch on with our market forecast – at least for this entry in the interest of not stretching it out too long – is that the new foreign homebuyer ban took effect yesterday on January 1^st. The aim of course is to prevent the extent of housing market speculative investment in hopes that it will counter housing unaffordability.

There is much to suggest that this is yet another example of the Federal Liberal Government dressing windows yet again and enacting legislation for the simple aim of appearing to be ‘doing something’ while knowing full well this will do next to nothing in as far as making more homes more affordable. Par for the course for a government that is all about optics and nothing more when it comes to pretty much everything, but opinions aside let’s look at this from a substantially critical angle instead.

New Zealand enacted almost the exact same federal legislation in 2018 that banned foreigners from buying homes in their country. The median prices of homes in Auckland, Christchurch, and elsewhere all remain above $1 million dollars with further value appreciations expected moving forward. These types of attempts at market control always fail spectacularly, and it’s unfortunate that people believe these types of pandering moves will do anything to improve housing affordability.

The ONLY way to improve housing affordability is to increase supply. It is as simple as that. And all of this doesn’t even begin to touch on how this will make it more difficult for realtors to work with clients AND make buying a home more expensive for the few that do find a more affordable home resulting from a foreigner not being able to buy it.

Despite what some people want to believe, foreign buyers do not factor into the real estate market to nearly the extent they’re made out to. The majority of homes sold in Canada are sold to Canadians, and that has always been the case. Including Vancouver, Toronto, Montreal, Halifax, Edmonton, and Calgary.

Happy New Year Everyone

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