Canadian real estate is turning from a seller’s to a buyer’s market. And this trend will continue through mid-decade, predicts Warren Jestin, senior vice president and chief economist, Scotiabank.
This is the result of low interest rates, which the central bank likely won’t raise until mid-2015, unless unemployment declines or inflation rises, he says.
“We don’t think there’s a housing bubble out there,” adds Jestin, who spoke at the Scotiabank Real Estate Market Outlook Conference in Toronto.
Adrienne Warren, the bank’s senior economist and real estate specialist, notes the market is correcting.
“Home sales have dropped more than 10% from last spring, and are now running below historical averages in most major cities,” she says. “Prices in turn are leveling out with the return of balanced market conditions.”
Regionally, adds Phil Soper, president and CEO, Brookfield Real Estate Services, the housing market is expanding in Alberta, Saskatchewan and Newfoundland.
“Markets like Winnipeg are also doing fine,” he says. “No one’s talking about a slowdown there. The rest of the country is going through a cyclical correction, and the hardest hit is the lower main land of British Columbia.”
He estimates buyers could purchase seven standard two-storey homes in Moncton, NB, for the same price as one in Vancouver.
Demographic shifts in Canada, particularly our aging population, will play a role in the housing market, according to Warren.
“Contrary to some dire predictions, population aging will not fuel a demographically induced selloff,” she says. “However, an aging population does point to a lower level of housing turnover, sales and listings.”
Meanwhile, the rapid growth in the number of one-person households should continue over the next two decades, she says. In particular, more widowed women will be living alone.
“Immigration also will have a profound impact over the next two decades, being the dominant source of new household formation,” says Warren. “The majority of new immigrants initially move into rental units, though most eventually become homeowners.”
And new home construction will decline as a result of oversupply, particularly in the condo market. Annual housing starts are currently at 220,000, but Warren predicts building will taper to about 170,000 new homes by year-end. This is lower than the average of 185,000.
So as the tables turn in favour of buyers, what do they want?
A majority of Canadians (85%) use real estate agents and most agree they have regional expertise and simplify the process, but 60% say they withhold information, says Soper.
Buyers want agents to do more than just find houses, he adds, because consumers can do this themselves.
“Today’s consumers use search tools every day, including on desktops, at work, and mobile devices,” he says.
Homebuyers are spending 16 weeks doing research before employing real estate agents. A decade ago, he says, this figure was closer to three or four weeks.
So while finding potential homes isn’t a problem, the rest of the home-buying process is — from finding the right real estate agent, to knowing the right time to get into the market, to understanding all the expenses associated with homeownership.
An agent’s price can vary depending on her services, regardless of whether the client’s buying or selling. For instance, says Soper, an agent who simply lists homes for sale can charge a seller less than $1,000, while a top agent could cost upwards of $10,000. And price varies by agent, not just by company.