It’s not just Toronto and Vancouver – Canada’s real estate bubble has gone national
When people imagine booming real estate markets, they probably think of the soaring condo prices that dot the Vancouver skyline. They could also bring up the bidding wars for huge mega-mansions in and around Toronto.
But they’re probably not thinking about Barb Armstrong’s quiet bungalow properties in quaint Perth, Ontario, about an hour southwest of Ottawa.
Despite this, Armstrong’s four-bedroom, three-bath home was embroiled in a bidding war worthy of any big city this month. It sold for $ 150,000 above its asking price of $ 529,900 – and the offer was unconditional.
“It was a shock to see that this amount of money was coming to us for sure,” she said. “It was above our expectations and we were truly blown away.”
Armstrong and her husband were lukewarm to sell at first, but a realtor friend explained how hot the local real estate market has become, with families from Ottawa and even as far as Toronto drawn to Perth for its affordability. and its bucolic lifestyle.
“We thought, ‘Well jeepers maybe we should go now,’ Armstrong said. The couple listed their house in mid-March. Thirty-five visits later, they had 11 offers on the table. She says she feels like they won the lottery.
WATCH | Barb Armstrong describes the frenzy of the night of the offerings:
Half a country on Vancouver Island, Lars Reese-Hansen is not surprised to learn that buyers are doing their best to enter the market as best they can. He sold his 60s single-family home in the Comox Valley last fall and planned to buy elsewhere in British Columbia this spring.
He’s looking to downsize into something newer with less maintenance as he heads into retirement, but he can’t find anything that fits the bill, even though he’s throwing a wide net and is ready to go. compromise.
“Most of the places I asked to visit are sold out before I step out the door,” he said.
Reese-Hansen recently lined up four newly listed homes to see that he felt they had potential. Just as he got in the car to walk down the freeway to see them, his real estate agent called to say they were already gone.
The Canadian housing market is overflowing with liquidity right now, with the national average selling price hitting an all-time high of $ 678,091 in February. It’s over 25%. 100 compared to the same month last year, before the pandemic.
Against all odds, the pandemic appears to have sparked a shopping spree among Canadians who are spending more time at home than ever before.
While it seems like high prices are mostly an issue in big cities like Toronto and Vancouver, sales are booming pretty much everywhere with bullying offers becoming the norm.
Paul Martin, president of the Rideau St Lawrence real estate board which covers Perth, Ont., Where the Armstrongs live, said “the market just took off” last year.
“We have seen our real estate prices go up by almost 50 percent in the region,” he said.
About a third of new buyers come from Toronto, he says, although the area is about three hours from the city. About half are from Ottawa, which is closer but still an hour’s drive away.
One of the main draws to the area is the extra space, as more and more people are considering working from home all the time.
At the root of the frenzy are historically low interest rates, which are lower than they have ever been, building on support from Canada’s central bank which reduced its lending rate to virtually zero to stimulate the economy from COVID-19.
The pandemic has exacerbated pre-existing problems
Economist Mike Moffatt, senior director of the Smart Prosperity Institute, an Ottawa-based think tank, says low mortgage rates are the key to what’s going on, but they’re not the only factor.
If these were just cheap loans, markets should warm up fairly evenly across the country. But they are not. Some small towns located an hour or more from the orbit of major urban centers do better in real estate than some large cities.
Although he lives in Ottawa, Moffatt is originally from southwestern Ontario and he says accessibility issues were an issue there even before the pandemic due to supply and demand issues. The region’s population was growing in large part thanks to new immigrants and international students, and now the low rates of the pandemic era have spilled gasoline on these fires.
“Rural cottages in southwestern Ontario – Woodstock, Ingersoll, Tillsonburg – these are the places where prices are rising dramatically,” he said.
The numbers confirm this. According to data from Canadian Real Estate Association, the prices in Owen Sound went up 29%. During the year until February 2021. They have increased by 39%. 100 in Tillsonburg, 36 p. 100 in Woodstock and 26 p. 100 in Guelph. All of these markets fared better than the Greater Toronto Area, where the ACI home price index rose about 14 percent over the same period.
“It’s fueled by this pairing of professional white collar workers who have lots of money right now and generally low interest rates.”
WATCH | Mike Moffatt explains why a hot real estate market is bad for the economy:
Small town buyers find themselves overpriced in their own markets because local wages cannot compete with the purchasing power of people living outside.
“We’re going to have a lot of problems both political and economic if we exclude a whole generation of young families from owning homes,” Moffatt said.
Back in British Columbia, the frenzy is so great that some people resort to buying without ever setting foot in their new home. This is what happened to Ean Jackson and his wife Sibylle Tinsel. They recently sold their house in Vancouver and were looking to downsize somewhere further.
The couple settled in the small community of Powell River, British Columbia, about 100 kilometers from the coast. They have friends in the area so it was always a long-term plan, but selling their house has sped up their timeline.
There were few homes available when they started looking, and what there was was difficult to see given the pandemic restrictions. “We couldn’t even get there in time to see the place,” Jackson said in an interview.
So they did what millions of Canadians did by buying consumer goods this year – they shopped online and hoped for the best.
Their real estate agent was able to give them an inside and out look via video, and they liked what they saw enough to place an offer.
Although they are excited about this new chapter, “it all seems very awkward,” Jackson said.
“It’s really weird. And we look at each other at dinner time pretty much every night and we’re like, ‘Did we do the right thing? … did we get ripped off? Or is it? that it will work? “
Ultimately Jackson says he knows the answer to that last question is yes because they love what the area has to offer, but he feels for new young families trying to acquire at the current level. .
“You save for three or four years, you get the price you think it is, and then the house gets twice as expensive,” he said.
“I can’t see this last, though. It has to end someday.”