Demand for luxury homes intensifies amid rising Canadian and global wealth

Improved financial standing among high net worth individuals is the major factor driving strong sales activity at the top end of Canadian housing markets, according to a report released by RE/MAX. Record or near-record activity reported in most major centres from coast-to-coast

RE/MAX Ontario-Atlantic Canada and RE/MAX of Western Canada examined 12 major centres from coast-to-coast and found that luxury sales have surged in close to two-thirds of housing markets between January 1 and April 30 of this year, compared to the same period in 2010. Leading in terms of percentage increases over the four-month period were Greater Vancouver (118 per cent)—where foreign investment has also played a major role—Ottawa (59 per cent), Calgary (51 per cent), Halifax-Dartmouth (27 per cent), Winnipeg (24 per cent), Hamilton-Burlington (13 per cent) and Greater Toronto (nine per cent). Six of the seven major cities—with the exception of Calgary—are poised to set new records in top-end activity by year-end. Several are just short of peak levels reported in 2010, such as Victoria, Regina, and London-St. Thomas.

Three key factors—serious equity gains, stock market recovery, and improved economic performance—have been behind the push for luxury housing product across the country. The combination also continues to bolster the bottom line of high net worth individuals both nationally and globally. The impact of that wealth is being seen in the demand for all things luxury—from homes to cars, collectibles and fine wines.

While foreign investment has augmented sales activity in several Canadian markets, its influence was only significant in Greater Vancouver. The vast majority of regions reported that locals were the primary drivers of demand for luxury product. A number of factors position Canada as an attractive option, foremost that its real estate remains a bargain by international standards, given its ranking for quality of life, political and economic stability and the strength of its property laws. To those from abroad, it’s the perfect mix.

The strength of the upper-end segment continues to defy expectations. That demand remains largely domestic speaks to the solid underpinnings of the market, while underscoring the appeal of Canadian real estate on an international stage. Western Canada, in particular, will continue to see the upside benefit of investment from abroad.

The climbing wealth factor has played a role. The financial status and number of millionaires is rising once again—a fact supported by several recent studies released by notable institutions such as CapGemini/Merril Lynch, Citi Private Bank, Deloitte Centre for Financial Services, and Investor Economics—to name a few. While estimates vary, the studies concluded that the high net worth population in Canada and/or abroad—and its corresponding fortunes—is trending upward and will experience considerable expansion moving forward. Despite the impact of the 2008/2009 global financial crisis, most millionaire portfolios/assets have improved or exceed pre-downturn levels. Of particular interest, residential real estate holdings have increased among high net worth individuals, as they express a clear preference for tangible assets. This trend is expected to continue, and serve to boost high-end residential real estate in months ahead, as the move to diversify assets continues in 2011.

As Canada’s millionaire club swells in size, inventory will play an increasing role in future, as the existing upper end housing stock struggles to keep pace with growing demand in central core areas, particularly in Canada’s gateway centres. Infill, renovation and new construction are helping to some extent—while driving up prices in tandem. The building activity is also serving to create new prime areas in areas that were once considered high-end peripherals, as well as in suburban communities.

Limited inventory levels in Canada’s largest markets have hampered sales activity to some extent in 2011, given that demand exceeds available supply. Multiple offers are occurring in both Greater Vancouver and Greater Toronto, as buyers compete for quality product in prime neighbourhoods.

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Re/Max First Time Buyer Report

First-time buyers in major Canadian markets move to get in ahead of higher interest rates, says RE/MAX

Driven by the threat of higher interest rates down the road, first-time buyers are contributing to strong upward momentum in residential housing markets across the country, according to a report released by RE/MAX.

The RE/MAX First-Time Buyers Report, highlighting trends and developments in nineteen major Canadian centres, found that low interest rates and balanced market conditions have provided significant impetus in 2011, particularly at lower price points. Just over 30 per cent of markets are reporting sales in excess of 2010 levels as a result, while almost 70 per cent have experienced an upswing in average price. Leading the country in terms of percentage increases in the number of homes sold are Western Canadian markets, including Saskatoon (up close to 15 per cent), Greater Vancouver (up close to 12 per cent), and Winnipeg (up just over 11 per cent). With an average price hike of close to 20 per cent year-to-date (February), Greater Vancouver continues to show unprecedented strength, followed by Hamilton-Burlington (eight per cent), Quebec City (seven per cent), Winnipeg (close to seven per cent), Greater Toronto (five per cent), and Greater Montreal (five per cent).

Despite homeownership rates approaching 70 per cent, there is clearly room for growth as entry-level buyers make their moves from coast-to-coast, undeterred by higher housing values and changes to lending criteria. Many purchasers intent on realizing homeownership are scaling back on expectations or are willing to sacrifice location, quality and/or size to make their dream a reality – not unlike generations before them.

Inventory levels, while tight in several larger centres, are more balanced overall, giving first-time buyers a good selection of housing product from which to choose. Not surprisingly, condominium apartments and town homes have become the first step for many entry-level purchasers, especially in Greater Vancouver, Victoria, Kelowna, Edmonton, Calgary, London-St. Thomas, Hamilton-Burlington, Greater Toronto, the Island of Montreal, and Halifax-Dartmouth where average prices have risen unabated in recent years.

With the Canadian economy on firmer footing overall, residential real estate is well-positioned moving into the traditionally busy spring market. Consumer confidence is climbing in conjunction with economic performance, and concerns over a secondary recession fade with each passing day. The mood is cautiously optimistic, as first-time buyers enter the market.

Changes to recent financing criteria have not created the anticipated run up in activity in most markets. From a financial standpoint, most rookie home buyers remain quite prudent. Those making the leap are not doing it lightly, buying within their means. While this most recent round of policy tightening will likely have a negligible effect on demand, the message is getting across.

Affordability remains a growing concern in most markets, and—aside from first-time purchasers—no one is more in tune with that than housing planners and developers. In fact, the growing demand for reasonably-priced product is creating a shift in the country’s housing mix. That trend is expected to gain traction in coming years, as builders look to create greater options for those seeking to realize homeownership. In recent years, builders have helped ease the move to homeownership by concentrating on intensification—condominium buildings with smaller suites and small-lot subdivisions offering detached, compact homes at a fraction of the cost of a traditional single-family home. On the flip side, the affordability factor is also breathing new life into tired older neighbourhoods, and that, in turn, is contributing to rising values.

As prices escalate, first-time buyers are indeed spending more—some out of necessity, but others are simply in a position to do so. Unlike in years past—a greater percentage of today’s first-time buyer pool is comprised of dual-income, college or university-educated couples with solid earnings. They’re spending close to average price or slightly more to secure—in most cases—a better location or a home that will grow with them. Yet, the fact remains that those on a tighter budget can get in for considerably less, with reasonable choices in every major market across the country. While some may feel discouraged by eroding affordability levels, the underlying confidence in the concept of homeownership is rising.

While market conditions are one thing that influences first-time buyers, few things trump the fundamental belief in homeownership. Today’s entry-level buyers are steadfast in their mindset. They know they have to live somewhere, but they simply don’t want to pay someone else’s mortgage. Savvy or practical, they remain a driving force. The bottom line is that the demand for entry-level product will remain steady. The role of starter homes in the marketplace is becoming ever more vital.

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10 Common Myths To Choosing A Buyers Agent

Myth #3:

I can find all properties for sale on my own.

As more and more first-time buyers search for and preview properties online, the myth has grown that they can find every property they may be interested in on their own.  But not all available properties are advertised, or have a sign.  Overnight updates to many online listing sites can lag real-time developments, particularly during hot markets.  Buyers don't really understand how the MLS works, nor are they plugged into their local real estate markets to the extent that agents are.

Searching for and hiring a realtor in your area is imperative to understanding the value of properties, keeping yourself safe and finding the perfect piece of real estate for your family. 

 

'Wild card' props up Canadian housing markets

over past decade

 

Inventory remains key to stability in 2011

 

 

Tighter inventory levels helped to make the last decade one of the healthiest periods on record for Canadian real estate, insulating markets in major centres from the peaks and valleys characteristic of past decades, according to a report released by RE/MAX.

 

The RE/MAX Housing Barometer Report measured monthly sales-to-new listings ratios in 18 major centres across the country from January 2000 to December 2010.  The report found strong seller's/balanced conditions prevailed for much of the time frame, prompting significant gains in housing values.   The lone exception was when the market dipped into buyer's territory during the latter half of 2008 and early 2009.  However, fewer listings served to offset diminished demand and provided greater stability.Average price increases from 2000 to 2010 ranged from an annually compounded rate of return of 4.82 per cent in London-St. Thomas to a high of 9.56 per cent in Regina. The national average was 6.82 per cent.  By far the tightest market in the nation was Winnipeg, where seller's ruled the roost for 85 per cent of the decade, followed by Hamilton-Burlington (67 per cent), Regina (63.6 per cent), Kitchener-Waterloo (59.8 per cent) and Edmonton (57.5 per cent).

 

Housing markets have been remarkably hearty over the past decade and the stage is set for a better than expected 2011.  Inventory has proven to be an effective form of market self-regulation, providing both an ideal climate for price escalation and a shelter in periods of softer home-buying activity.  As a number of city centres are already reporting stronger than usual activity out of the gate, it's clear supply will continue to be the wild card in 2011.

 

First-time buyers comprise the vast majority of purchasers, with move-upbuyers in close pursuit.  Demand and supply are on relatively even keel at present in most areas, but the traditionally busy spring season is expected tokeep the market at a perfect equilibrium in the days and months ahead.  However, there may be some exceptions to the rule.  The country's largest markets—Greater Toronto, Greater Montreal, and Greater Vancouver—are expected to head into the second quarter with fewer listings overall.  Two centres—Newfoundland & Labrador and Kelowna—are still firmly entrenched in buyer's markets.

 

An improved global economic picture, lower unemployment rates and rising consumer confidence levels have buoyed home buying activity since November.  While sales figures are expected to be slightly off 2010's heated pace, housing values are forecast to continue to climb in Canadian real estate markets in 2011—with most a direct result of lower listing levels.

 

Western Canada experienced some of the highest rates of return for real estate over the 11-year period.  While values in Regina posted the greatest percentage increase (9.56 per cent), Edmonton, (9.25 per cent), Saskatoon (9.2 per cent), Winnipeg (9.01 per cent), Kelowna (8.42 per cent), Greater Vancouver (7.8 per cent), Calgary (7.7 per cent) and Victoria (7.59 per cent) all outperformed the national average.  

 

Equally strong gains were posted in Quebec.  While solid balanced market conditions prevailed for much of the decade, housing values in Quebec City and Montreal rose 9.2 and 8.48 per cent respectively on an annually compounded basis.

 

Increases were more moderate in Ontario and Atlantic Canada—with the exception of Newfoundland & Labrador, where values escalated 8.14 per cent on average.  Ottawa led in terms of price appreciation in Ontario at 6.78 per cent, followed by Hamilton-Burlington at six per cent, Kitchener-Waterloo at 5.69 per cent, the Greater Toronto Area at 5.35 per cent, and London-St. Thomas at 4.82 per cent.  

 

There's no question that price growth has been solid over the past decade, but history tells us that exceptional growth supported by sound fundamentals is healthy.  Concern is only raised when the underpinnings are insufficient to justify the trajectory.  By all accounts, Canada's real estate market measures up to conventional wisdom and the faith in homeownership has not been misplaced.

 

While the statistics are impressive, they alone cannot tell the tale.  The gains realized over the past decade speak to the tremendous resiliency of the Canadian residential housing market.  Considering catastrophic events, both natural and manmade, that occurred throughout the period—SARS, forest fires, ice storms, 9/11, a recession—the performance of the real estate sectorproved that much more significant.  It remained a consistent bright spot supporting economic growth and ancillary spending, and subsequently helped lead the nation out of the greatest downturn in recent memory—its hardy nature heightening its appeal as a long-term investment.

Re/Max 2011 Housing Outlook Press release

Residential values expected to climb further in 2011 as housing sales stabilize in most major centres, says RE/MAX

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Special Monthly e-Report: Spread Good Cheer Without Overspending

Myth #2

The agent on the For Sale sign will look out for my interests.

You would think that all the changes in agency disclosure laws over the years would have altered the way consumers approach buying a home.  But in my experience, most buyers, and especially first-time buyers, still don't understand the concept of representation and mistakenly believe that a listing agent will watch out for their interests.  Unfortunately, buyers are still more likely to shop for homes rather than shop for an agent who will assist them in finding a home.

I've tried to help dispel this myth.

In order purchase a home, you should determine your needs as a buyer, and subsequently find an agent that matches your needs.

Are you looking for an agent with superior negotiating skills? An agent that has the experience in the marketplace?  An agent that comes highly recommended from friends and family? Whatever it is, you need to pinpoint and refine your needs and make that a clear directive for yourself while on the hunt for a great agent. 

In any event, I recommend you ask agents for a list of references and and letters of recommendation that they have recently received.  If they cannot produce any, I suggest you continue your search for an agent that displays the qualities that are important to you.