August 21, 2010
Real Estate Market | Predictions Are For A Slowing Real Estate Market In Canada
Contingent on who you question, you will find varying viewpoints on when and how the Canadian housing market will cool down from its recent meteoric climb. For instance, TD Bank economist Pascal Gauthier bluntly stated in an interview with “Globe and Mail” this month that even though housing prices will carry on increasing by 9% over the 2009 figures until the middle of 2011, they will then sharply fall — possibly as low as 2.7 percent. But economist Sal Guatieri of BMO Capital Markets is somewhat hopeful, telling “The Montreal Gazette” that the overvaluation that resulted in the real estate bubble will just affect large cities, and should not bring about the kind of nationwide collapse anticipated in the US market. However they both agree that the Canadian housing sector will need to cool down, but just how soon it will take place and how quickly it will fall is the question still up for debate.
Guatieri indicated that the price for a family residence should be “about four or five times income,” however the current market in Toronto and Vancouver is closing in around $700,000, which averages 10 times the earnings of the home owner. Even though TD Bank had at first forecast 1.6% gains in 2011, this kind of real estate hyper inflation in the middle of economic recovery has in fact compromised the market, and they are already seeing the signs of cooling this year derived from the surge of new housing starts and new listings. places like Mississauga are still seeing an escalation in new Mississauga condominiums but sales could start to cool.
In their discussion with “The Vancouver Sun,” TD admitted that their forecasts have been off in the past, because their late 2009 forecast did not anticipate the rise in first quarter sales for that year that was an unpredicted “move by buyers and sellers to pre-empt regulatory and interest-rate changes”. The looming harmonized sales tax due to take effect in July in Ontario and British Columbia definitely impacted markets in those provinces. In expectation of this July time limit, the Bank of Canada has now declared its intention to lift their overnight target rate by July to counterbalance the recent record breaking low rate of 0.25 percent. Higher borrowing costs should act on cottage country with deduced values for places such as Wasaga Beach real estate and this could constitute an opportunity for buyers.
As family incomes catch up with the level of inflation — a whopping 8 percent over the past 8 years — TD predicts that overvalued housing prices will continue to fall from 15 to 10 percent by the end of next year. This is bolstered by a decline in MLS sales, that as well includes Toronto MLS listings, over the last 6 months that the Canadian Real Estate Association has observed. But everyone can spot signs that the whole housing market has been affected by the high percentage of boosted values in the cities — how far this influence will spread is the primary question.
Gauthier describes his forecasts are a consequence of the “stronger supply response,” and that the “market balance is now expected to be somewhat softer next year, consistent with market conditions more favourable to potential buyers and a mild depreciation in home values”. But Guatieri thinks the approaching slow down period does not automatically mean that housing prices will indeed fall, however predicts it as a gentle adjustment after the recent surge. One fact both Guatieri and Gauthier do foresee on the horizon, though, is that regardless of when it strikes, the calming trend will not last forever, and inside of 3 years the average real estate price in the country should find a equilibrium and return to its fair market value.
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5 Comments on Real Estate Market | Predictions Are For A Slowing Real Estate Market In Canada »
April 9, 2011
John P @ 1:55 am:
John L. Scott real estate has a interactive search feature; including a check box for selecting sold properties: it's probably your easiest and least troublesome "Comp" research tool. Beyond that, most of the counties (King, Pierce, Kitsap) in the Seattle area have GIS info on property sales and assessments – see the link for "eReal property" at the King county website. You can get exactly what sold/when/for how much.
Happy hunting.
May 13, 2011
Jill B @ 11:22 pm:
The person who paid $250,000 for a home will now have a home that can only be sold for $100,000.
People will owe more on their home than what they will make selling the home.
It think the demand for homes will decrease and with that the amount of money people are willing to pay for a home will decrease. People will not be able to make a killing by 'flipping' houses (buying and selling to make a profit.)
I have seen it in the area where I currently live. For a long time, people were frantic to buy a house because the market was so hot and they paid hundreds of thousands for a 'shack'. Now, the home sales are declining (just a bit) and the shack that sold for $200,000 will no longer sell for that much.
May 20, 2011
*Dude* @ 2:24 pm:
Itunes.
September 21, 2011
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September 27, 2011
Claudia @ 5:36 am:
Contrary to what you may have been told, investing in real estate the right way doesn't take capital or credit. It's basically a three step process.
1) Find a discounted property
2) Find an end buyer
3) Put them together
Now the actual practicalities of that are harder than it may seem. However, if you do real estate investing the right way, your end buyer actually provides the capital and credit.
One of my best friends Matthew David started The Investor Today website which will show you for free how to invest in real estate and fix your credit for free in your situation. I also had quite a bit of input on the site.
There's also a good real estate investing FAQ available on the site to help you with some of your questions.
Most people buy a 2nd property because it's a "nice house in a nice area." While that's all fine and dandy, real investors buy property to make money. "Nice" isn't always "profitable." You wouldn't buy stocks because you can drive to the company. So in short, if you learn the techniques of how to buy property at a discount, you find infinite capital sources.
Because I'm a real estate investor and I know lots of actual investors, I can tell you that it's possible. Of friend of Matt and mines owns 200 properties and he has never used his capital or credit even one single time. It's ironic that he has good credit and doesn't use it. LOL.
The real key is in knowing what to do. The masses will tell you that "location, location, location" matters most. However, how many of those people are rich investors? Not too many. The mantra really ought to be "great deals, great deals, great deals." That's what any of the really successful investors would tell you.
Would you rather have a $5 million mansion in a great area that you paid $5 million for or a $200,000 property that you purchased for $100,000 in your average suburb? If you pay full market value for properties (like most people do who by the way aren't rich) than you should think about location but if you're serious about doing it successfully for the long term, then you really need to learn how to buy real estate with large discounts.
It's all about knowing how to acquire discounts whether through short sales, negotiation or other means. I'd highly suggest you check out his materials (they're free) and start learning. The difference between a successful investor like me (PS I still have bad credit and I don't care) and someone starting out like you is simply in I know. Take the time to learn for free. The choice is yours.