Real Estate

How Covid Has Reshaped Real Estate From New York to Singapore

 

The retreat from major cities has been the pandemic’s big real-estate story — but that doesn’t mean metropolitan house prices have suddenly got cheap.

 

From New York to London to Sydney, ultra-low interest rates and vast government fiscal support have limited distressed sales. Still, apartment rents have plummeted and suburban bidding wars have erupted as millions of workers have learned they can work from anywhere.

 

“There’s been a spatial shock, whereby you don’t have to go to the city to earn money necessarily,” said Andrew Burrell, chief property economist at Capital Economics. “We think cities will change a lot.”

 

As vaccine rollouts allow more cities to tentatively reopen offices, bars, restaurants and museums, here’s a look at what’s changing — and what’s stayed the same.

 

Rents are where the Covid-19 effect is most obvious. Widespread job losses in fields like hospitality mean big groups of renters simply can’t afford to pay what they did previously. International students are gone. Young people have moved back in with parents.

 

And at the upper end of the market — where the biggest price falls have been — wealthier renters have opted not to stay in virtually closed cities.

 

While the price drops have stabilized, landlords are still having to offer steep discounts and perks to encourage people back. Which is an opportunity for some.

 

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Detached Housing Market Update

Record Breaking Month in Greater Vancouver for Home Sale Prices & New Monthly Listings

Yet another record month for the Greater Vancouver housing market. The average cost to purchase a detached property inside of REBGV increased by $89,000. Bringing the average to $1.958M. This was aided by the continued high sales totalling 1,973. Accumulating the second largest sale total in the history of Greater Vancouver real estate. In attempts to capture the newly minted growth phase in home prices, sellers came to the market in droves. Setting the new record with 3,368 newly listed detached properties in March. The record amount of activity to kick off the spring market is likely to continue as March through May are typically the busiest months of the year.

Home sale prices continued their escalation beyond the previous market cycle. Amazingly, another $89,000 was added to the average sales price from the previous month. The new record price of $1.958M represents a 7% gain over a two month span. The 7% growth is the first increase above the previous market cycle which had held home values range bound for 5 years.

The biggest gainers this past month were Pitt Meadows up an incredible $233,000 month over month, representing an astonishing 20% increase. The average property in Pitt Meadows is selling for $1.44M. Vancouver West rose $500,000 up 14%, bringing the average price to $4.025M. The standout of the gainers over the past two months is Whistler. This past month over $600,000 was added to the average price. Couple that with the $900,000 increase from the month previous, and Whistler has increased over $1.5M in just the past two months. The recent spike in value has increased the averages price to over $4.325M for a detached property in Whistler. The massive increases to these areas have aided the REBGV average price to gain distance between the price point and the aggressive uptrend instigated during July 2020.

Breaking beyond the 5 year price boundary has been clearly aided by the supply demand imbalance. March 2021 just recorded the second largest imbalance between the two market metrics on record. The total gap between the supply versus demand during March was 3.6. Falling just 2 basis points below the all time high which occurred during March 2016 with a 3.8 gap. Interestingly, previous to the past month the second largest discrepancy occurred during April 2016. This implies buyers are unlikely to receive any reprieve in the short term.

As forecasted over the previous months, sellers are entering the market with full force. A record setting total of over 3,300 properties were listed in last month. March 2021 represents only the 4th instance where new listings accumulated over 3,000 in a single month. Should the high new listings count continue to rise through spring and into the summer months, home values will likely realize a near term price peak during the summer.

Even with a record amount of new listings, the total inventory continues to remain in the doldrums of the chart. A glimmer of hope would be the total inventory of 3,886 is attempting to break out of the 3 year immediate downtrend (Red trend line). Established during June 2019 when there was over 6,700 active listings. The enormity of new listings only resulted in a net of 880 total active listings compared to the previous month. However should inventory continue to grow a the 29% as was the case in March. The key figure of 5,700 active listings is well within reach by the late summer, or early fall.

Sales fell just short in completing a trifecta of records during March. The 1,973 sales were only 177 shy from the all time high achieved during March 2016 of 2,150 sales. With the abundance of new listings coming to market, the buyers snatched up the choice properties, and continued in the bidding war mentality which pushed the average sales price to over 101% of the asking price. This is only the 9th instance in which sales price was over 100% of the asking. Of those previous 8 instances they all occurred between December 2015 – July 2016. Implying the next several months of data could result in a continuation of the sales prices being higher than the asking prices.

Importantly, all subsections of the market are now selling. Over the past year the entry level homes have been selling at a frenzied pace, that has worked all the way up to the luxury market. March realized 49 properties that sold over $5M. The 49 sales is an increase of 250% compared to the preceding 3 year average of 14 sales per month. The prices of the luxury market is still not quite back to the peak conditions of 2017. As the averages sales price was $8.6M. However the average sales price in March of $7.6M, is up over $1.6M from the low recorded in May 2020 of $6M.

Dane Eitel
Founder & Lead Analyst
EitelInsights.com

Thirst for Property in the Private Market “Extraordinary”

There have been clear success and failures in the real estate market during the pandemic but the general backdrop is good according to Vision Capital CEO Jeff Olin.

“Not withstanding the increase in interest rates, the spread between the capital yields in REITs and in investment grade bonds has been almost double the long-term trends,” Olin said. “And when you can make little or no money on bonds, the thirst in the private market for property is extraordinary.

“According to Citi, there is $345 billion of dry powder funded in Blackstone, in Brookfield, and in pension funds that are increasing their weights to real estate from five to 10% to 15% to 20%. Private equity funds that have been fully funded are looking to invest in property, and so that’s a very good backdrop for the public markets.”

To illustrate his point, Olin highlighted Vision’s participation with Blackstone on an investment in Tricon – focused predominantly on… CLICK for the complete article

You can also watch Jeff Olin’s 2021 World Outlook Financial Conference presentation HERE

Free Investing in Real Estate Guide – The Green Mortgage Team

A typical real estate investment can easily produce a return of 15% – 25% depending on the appreciation and the mortgage pay-down (these are generally the two that recognize the highest returns). There aren’t a lot of investments that can say they generate these kinds of returns, especially with relatively low risk (if done right!).

CLICK HERE to download the FREE Investment Guide from the Green Mortgage Team

Escaping the Urban Lockdown – Rural Property Demand Booms

The decade long term trend of urban home owners taking advantage of the price differential between city and small town pricing has been further accelerated by the desire for more space and land in the pandemic and post-pandemic age.

As Frank O’Brien detailed in his recent Business in Vancouver article, the data is clearly showing a surge in urban buyers seeking BC acreage, waterfront and small community living.  In addition, some buyers are also seeking recreational and income-generating properties – and a key market driver being that these buyers are coming from across Canada.

The fact that this is not a new, but an accelerating phenomenon, can be seen from some fascinating 2019 data reported by Better Dwelling. Of the 45,000 people who left Greater Vancouver that year more than 70% moved to smaller communities in BC.

So the big question for those still considering a move or purchase to escape the trials of packed city life – where are prime properties still available and are there reasonable values to be had?

One answer is the East Kootenay’s and the communities of Cranbrook, Kimberly, Fernie and Creston. Tucked away in the south east corner of the province this part of BC has lagged behind it’s Okanagan neighbour when it comes to attracting tourism and recreational visitors. Of course the benefit is that it has not suffered the price surge, development or growth woes of the Okanagan valley either. But it only takes one trip to discover that the East Kootenay’s are an amazing combination of the best of BC wine country and the best of the Rocky Mountains combined.

Whether you’re considering retirement, a second home in the country or an investment property – you’d do well to look at this area. For more details and some specific opportunities currently available CLICK HERE.

Nina Parente is a broker and real estate advisor with Rennie & Assoc.

Housing market boom prompts mea culpa from CMHC head

 

CMHC released forecasts last May saying Canadian home values could plunge between 9 and 18 per cent

The head of Canada’s national housing agency defended his organization’s prediction that the COVID-19 pandemic would cause a sharp decline in the residential real-estate market after it unexpectedly boomed instead.

“I’ve been taken to task for pessimistic housing forecasts last spring,” Evan Siddall, president and chief executive officer of Canada Mortgage and Housing Corp., said Monday in a thread of posts on Twitter. “At the time, I felt responsible to share what my colleagues were predicting. Times were uncertain and I felt that a warning about house prices was responsible. Indeed, I don’t recall anyone predicting accurately what actually transpired.”

CMHC released forecasts last May saying fallout from the pandemic could cause Canadian home values to plunge between 9 per cent and 18 per cent. The market instead powered to a record year for sales and prices.

In his posts, Siddall said the earlier forecasts didn’t anticipate how pandemic-related job losses would be concentrated among low-wage workers more likely to rent their homes than buy. He also said they’d failed to predict the sudden surge in demand for larger properties from more affluent people forced to work from home, and able to avail themselves of record low mortgage rates.

Siddall said policy makers remained concerned about what could happen if some of these trends reverse, particularly when combined with elevated levels of household debt among Canadians and continued economic adjustments to a post-pandemic world.

“We never pretended to have a crystal ball,” Siddall said. “Nor are we all-knowing on housing. We meant to contribute to a discourse, even though it was hard to be precise about future. In hindsight, we could have made that clearer.”