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Here’s the rising number of condo projects expected to flood Greater Vancouver’s market in 2019

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Developers in BC’s Lower Mainland are expected to launch more condo projects this year than they did in 2018 despite evaporating demand as the market corrects from previous highs, a new report suggests.

In a 2019 forecast, MLA Advisory, the research department of condo-marketing firm MLA Canada, anticipates developers are going to launch 73 projects across the Greater Vancouver this year, up from the approximately 50 that were brought to market in 2018.

The expected launches for this year encompass a total of 13,975 homes, compared to the 11,584 pre-sale units introduced to the market in 2018.

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The numbers only include new concrete developments, which are typically high-rise towers, from Squamish to Abbotsford.

Almost half of all new launches anticipated this year are in the municipalities of Richmond, Coquitlam and Central Surrey. It’s expected to be a quieter for homebuilders in Burnaby, the busiest market for concrete product in recent years.

“As inventory levels rise and projects take longer to sell, we anticipate some of these projects to be delayed due to market conditions,” writes MLA Advisory in the forecast.

Dampening demand is already been apparent when looking at existing condo sales. This past December, sales of existing condo apartments plunged 34 percent to a total of 535 units, according to the Real Estate Board of Greater Vancouver.

Meantime, prices are declining. The benchmark price of a condo apartment was $664,100 last month, down 0.6 percent from November (although that’s still 0.6 percent above December 2017 pricing).

So why are developers launching more and more projects at a time when homebuyers and investors are pulling back?

Speaking to heightened launches late last year, MLA executive director Cameron McNeil told Livabl that home prices were still up considerably from two years ago, which is likely around the time when developers bringing projects to market now purchased their land.

It also takes at least two years for a developer to start selling pre-construction units as they must go through a process that includes municipal approvals, acquiring building permits, and marketing.

“These long timelines commit a developer years ahead of time to move forward with a project and in most cases they can’t afford to just sit and wait and watch, they have to bring it forward and do their best, given the market conditions — within reason,” McNeil explained.

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What Is A Housing Bubble? And Are We In One?

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What is a housing bubble? You’ve undoubtedly heard the term, but what does it actually mean, and is Canada experiencing one? Whether you already own a home, are considering buying one in the near future, or you’re waiting for the right time to sell, here we answer what is a housing bubble, what causes it, and how it may affect you.

What is a Housing Bubble?

A housing bubble happens when the price of homes rises quickly, at an unsustainable rate. Typically, a price-growth rate that’s in the high single-digits is considered to be healthy and sustainable. Under healthy conditions, homeowners continue to earn equity over time, sellers can make a profit on resale, and buyers can still afford to get into the market. This type of price growth can usually be explained by economic factors, such as an employment boom and favourable interest rates.

On the other hand, a housing bubble can happen as a result of non-organic growth. For example, if speculators were flooding the market, buying up homes to take advantage of rapid price growth, with the intention of selling in the near term for a hefty profit. When prices are deemed to have hit a high point, speculators list their properties for sale. This massive influx of listings, coupled with stagnating demand, causes prices to plummet and results in a “housing market crash.”

A housing bubble is a temporary event and prices eventually return to normal levels, when demand rises again and home-buying activity resumes.

What Happens When a Housing Bubble Bursts?

During a housing bubble, homes become overvalued. When the bubble bursts, prices fall. Homeowners who have no intention of selling are unlikely to feel the direct impacts of the bursting bubble. However, these market conditions often indirectly impact other aspects of the economy, so to call homeowners who aren’t selling “free and clear” would be misleading. The ripple effects of a bursting housing bubble would likely touch most of us, in one way or another.

Homebuyers who purchased a home during a housing bubble likely paid considerably more than it is worth. Properties bought by end-users as a residence, with no intention of being sold in the short-term, will eventually rebound closer to “normal” values and at some point, return to positive growth.

A housing bubble poses the biggest risk to home sellers. Those who purchased in the bubble, but now find themselves forced to sell their home, will come up short on resale. They bought the home at a price that exceeds what they can recoup, putting them in the red with no asset to show for it.

For example, someone purchased at peak market prices, but due to circumstances such as a job loss or the inability to carry the costs for any reason, now has no choice but to sell in a down market. The seller still owes money to their mortgage lender on a home that they no longer own.

Are We in a Housing Bubble?

The Canadian housing market took a surprising upward turn during the COVID-19 pandemic, after coming to a grinding halt in mid-March. The slow-down was short-lived, and what followed through the remainder of 2020 was a a spike in demand for homes met by a shortage of supply. With 2021 well underway, there appears to be no end in sight.

There are a number of factors that indicate we’re not experiencing a bubble caused my market speculators, contrary to some media reports.

A recent online survey of RE/MAX brokers and agents in Western Canada, Ontario and Atlantic Canada found that speculators are not a factor in the Canadian real estate market at this time. In fact, more than 96% of RE/MAX brokers and agents supported this finding, confirming that the majority of homebuyers are end-users. Speculators tend to wait out hot markets, buying when prices are down and selling when they’re up again. The short-term investment opportunities they’re generally looking for are hard to find under current market conditions. Bully offers and bidding wars are commonplace, and we continue to see demand outpacing supply with the release of the monthly housing market data. These factors are generally inhospitable to speculators and investors.

For a housing bubble to burst, there needs to be a steep incline in inventory and new listings, and a decline in demand – neither of which is likely to happen any time soon.

Housing Crash 2021? It’s Highly Unlikely.

The Canadian housing market is still feeling the impacts of the pent-up demand from 2017, when the government introduced the foreign buyer tax and the mortgage stress test as a means to cool the overheating market. These policies prompted many homebuyers to move to the sidelines, opting to wait and save, with plans to re-engage in the housing market in a few years.

Now fast-forward a few years to 2020. COVID-19 had a similar impact on the market, whereby many homebuyers delayed their purchase plans due to pandemic-related uncertainties. That pre-existing pent-up demand for homes continued to swell. With Canadians subject to stay-at-home orders with nowhere to go and spend their hard-earned money, they collectively saved historically high sums, which was injected back into the housing market once consumer confidence returned. The spending came in the form of record-high home sales and for those who were unwilling to face the competitive resale market conditions, renovations to existing dwellings. In fact, Canadian real estate was said to be the driving force behind the Canadian economy in 2020.

Savings, low interest rates and low inventory continue to put pressure on the housing market.

Now, consider the housing needs of the 1.2 million people who are expected to immigrate to Canada through 2023, per the government’s 2021-2023 Immigration Levels Plan.

Given all this, it’s highly unlikely that we’ll experience the influx of real estate listings needed for a housing market crash – and if we did see those listings suddenly come on stream, there should be plenty of buyers to absorb them.

Homebuyers and Sellers, Do Your Due Diligence

Challenging market conditions and a still-present global pandemic have added some personal risk on the part of homebuyers and sellers. It’s important to remember that conditions vary across Canada, and can be dramatically different between provinces, cities, and even from one neighbourhood to the next. Now more than ever, it’s important to work with a trusted, experienced professional Realtor who can guide you though the buying and selling process.

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CIBC poll shows majority of homeowners have no plans to sell amid a tight housing market and low rate environment

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TORONTO, April 21, 2021 /CNW/ – As supply remains tight in key regions of the Canadian housing market, a recent CIBC survey finds that most homeowners say the pandemic has not changed their intentions of staying put, with many choosing to use their accumulated savings to renovate their current property rather than list it.

With only six per cent of homeowners polled saying they planned to sell pre-pandemic, the majority (77 per cent) say the pandemic has not impacted their housing plans. Most (63 per cent) agree that low interest rates haven’t motivated them to sell and upgrade to a bigger home either.

Many homeowners (34 per cent) have renovated their homes over the past year, while a similar number (31 per cent) say they plan to make upgrades in the next twelve months. Of those who have renovated, most (71 per cent) funded this with savings.

“As a potential homebuyer, these results suggest that supply won’t be improving in the near term, which makes it essential to understand what you can comfortably afford within your budget, and work with an advisor before you start looking at homes to have appropriate financing options in place,” says Carissa Lucreziano, Vice-President, CIBC Financial and Investment Advice.

“It’s a positive sign that many homeowners are using cash versus debt to fund renovations – we’re seeing prudent financial behaviour from this group. But whether you’re looking to sell or buy a home, or invest in renovations, these are big decisions that would benefit from the advice of a financial expert.”

Renters continue to be outpriced
For renters, the story has also been more of the same. Half (47 per cent) say they are still unable to own a home due to housing prices, with 34 per cent citing an inability to save for a down payment as the major hurdle. Many (66 per cent) say low interest rates due to COVID-19 have not motivated them to look at purchasing a home with the majority (91 per cent) saying the pandemic has not impacted their ability to pay rent.

Of those who co-habit with family or others, 46 per cent have no immediate plans of moving out, but close to a third (32 per cent) are saving for a down payment.

A lack of knowledge when it comes to purchasing a home may be contributing to the hesitancy of some potential homebuyers:  Four-in-ten (41 per cent) of all the respondents admit they need help understanding all of the costs associated with home purchasing, and a similar number (37 per cent) need guidance on  obtaining a mortgage in the current environment. A quarter of Canadians (27 per cent) say the fear of a recession/economic uncertainty is impacting their decision to buy or sell a home and 31 per cent claim they will only be able to afford a home with an inheritance or gift from their family.

“It appears for those looking to get into the housing market, financing and a lack of understanding remains an issue. With the help of an advisor, you can get an assessment of your financial capacity for a clear picture of what you can afford as a new homebuyer to achieve the ambition of homeownership,” added Ms. Lucreziano.

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The Rule Of 3 When Buying A Home (VIDEO)

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When it comes to buying a home, there are many factors to consider and the decision is likely not going to be an easy one.

In this episode of All Things Money (ATM), host Nicole Victoria provides her advice for being successful with regards to purchasing a property.

One major component the Money Coach highlights is the importance of separating what is nice to have against what is a must-have.

In order to help navigate the tradeoffs, Victoria utilizes a rule-of-three system, using the factors of price, size and style, and location where “what the rule says is that you get to be sticky on two out of those three things.”

For more on this and other money-related tips and advice, check out the full ATM series here.

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