It’s hard to believe the first quarter of 2017 is behind us. After a slower than usual start to the year our market is heating up. What’s interesting to us is the shift in the market which is now favouring strata properties after single family homes dominated much of the headlines until Q3 of last year. The price acceleration of single family homes peaked in August of 2016 and has declined since the introduction of foreign purchase sales tax and tougher mortgage qualification guidelines. Since the peak in value, we’ve seen fewer single family homes listed so their prices have stayed relatively firm in spite of fewer sales. There is a stickiness on downward prices due to fewer homeowners listing after our market peaked. This self-correcting behavior delays downward price adjustments, or causes existing homeowners to adapt. We’ve experienced an increase in single family homeowners inquiring about refinances to add secondary suites or laneway homes to boost their re-sale value and potentially give future listings additional appeal.
A Seller’s Market
Conversely to single family sales, strata property sales have been robust with many multiple and no subject offers, similar to what we experienced last year at the peak of the single family market. So, why is this happening? Demand continues to outpace supply with available inventory at its lowest level since 2003. When you combine fewer listings with record low vacancy rates you create a competitive market that favours sellers. The downside to such a hot market is continued attention by policy makers who are focused on slowing our housing market by limiting demand through tougher lending. Our view is that supply continues to be the issue with the current imbalance created through NIMBY-ism, lengthy approval delays and housing starts that are mostly pre-sold and don’t satisfy the current demand. As noted in previous blogs, investment property mortgages became very challenging several years ago and since then there have been very few purpose built rental buildings to supply that market. We do take heart that both the Provincial and Federal Governments have allocated some of their recent budget to build rental housing to address the demand. We are also still lobbying for a comprehensive land use plan with our Mayors, Provincial and Federal Governments to address the issue of affordability in our region.
Let’s Talk Economy
On the economic front 2017 is off to a great start! The Canadian economy is gaining momentum with better than expected job creation, economic growth, exports, manufacturing, and housing. Inflation is right at the Bank of Canada’s target rate of 2% and is expected to remain in this range for the rest of this year. So, what can possibly go wrong? The elephant in the room is geopolitical risk. We, along other analysts, are waiting to see if trade with the US will continue or if revisions to our economic growth will be required after softwood lumber, a Border Adjustment Tax, or NAFTA are renegotiated. We’re hoping these items will not be a factor and that the current momentum will continue.
Our interest rate forecast remains positive for borrowers with little change in best available rates. Please keep in mind best available rates will differ by as much as 0.60% based on the following criteria:
The complexity of arranging a mortgage that’s been created by recent changes need not concern you. Our relational approach will guide you and your clients through the process ensuring you get the best financing
possible. For our best available rates OAC click here. Thanks again for your amazing support and have a fantastic rest of the week!