Realestock Blog

The price of a new house in Canada rose slightly, prompting more and more people to worry that Canadian homes may be overvalued.  According to Statistics Canada, the housing price rose 0.2% in September, greater than the originally forecast increase of 0.1%.  Rapidly increasing prices over the past decade, including the 2009 recession had  increased speculation recently that Canadian housing could be caught in a bubble.

Montreal and Calgary lead the price increases, as developments in new areas brought slightly higher construction costs, which were passed onto the consumer.

In spite of bubble fears it's important to note that housing prices rose in only 10 of 21 Canadian cities, and housing starts fell 9.2% - the lowest rate in over a year, and the sixth straight month of declines.

In a move not typical for BC prices, Vancouver and Victoria actually contributed to keep the increase down, as both cities - typically known for their white-hot, and according to some skeptics, overvalued property prices - saw a 0.4% decline in housing prices between August and September. In Victoria, home of Realestock, prices have declined slightly both month over month, and year over year - a new home costs 0.6% less now than it did 1 year ago.

Overall though, the average price of a new house in Canada is still 2.7% higher than it was in September 2009, with the strongest year on year gains the cities of Toronto, Montreal, Oshawa and Vancouver.

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Since October 25, homeowners looking to sell in Canada have a lot more options under their belt. The Canadian Real Estate Association (CREA) has approved a sweeping change to the MLS system that they’ve so tightly controlled since its inception.

Under a new agreement between the CREA and the Federal Competition Bureau, Canadian realtors can now place properties on the MLS for a flat fee – and leave all the other work of actually selling a property to homeowners. This allows for much more consumer choice than the previous commission model. Homeowners will be able to pick and choose what they want realtors to do for them – instead of ordering the set dinner, you can order your realty services from the a la carte menu.

"By allowing [a realtor] to just post and not have to represent, then you inherently give your consent for them not to be full-service. It opens up the possibility for consumers to have a clear choice of services for different prices," said Tsar Somerville, Director of the Centre of Urban Economics and Real Estate at the University of British Columbia. 

What’s the incentive to go a la carte, or just have a realtor post a listing on the MLS for you? Big savings – buyers agents fees average at 2.5% of the property, and seller’s agents fees range from anywhere between 4 and 6%. Paying a flat rate up front can save many thousands of dollars down the line and allow homeowners to undercut their competition, knowing they’ll be keeping all the profit for themselves according to Garry Marr, Financial Post Columnist. 

Whatever the outcome, not everyone believes that the real estate game will change – some people are betting most homeowners will go with the expertise of full service realtors instead of picking and choosing their services. “Quite honestly, I think [the impact] is going to be quite minimal,” said Jake Moldowan, President of the Greater Vancouver Real Estate Board.

Sources: 

Real Estate Listing Deal Opens Doors for Sellers, Sympatico.ca; Sellers Skip Realtors for Flat MLS Fee, The Province; Real Estate Renovated, The Calgary Herald

Image: TheTruthAbout

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If the constant griping by renters wishing they could get into the home ownership game hadn’t tipped you off – in many parts of the country, people think that Canadian real estate is just too expensive. But are they right? Well, the complainers have won this round - venerated magazine The Economist has decided to agree with them. 

According to a survey of global real estate markets, housing prices in Canada climbed 4.5% over prices in 2009, making the average Canadian house cost a whopping 23.9% more than it’s worth – at least according to the Economist.  The magazine determined the “fair value” of a home by comparing the ratio of current house prices to current rents with the long term price to rent ratio – ie, the purchase price is divided by the rent it could earn per year.  If it is significantly more expensive to purchase a home rather than rent one, housing may be over-valued, a situation the Economist kept finding in Canada.

Think that’s not scary enough? The Economist also indicated housing prices in Canada had increased 70% between 1997 and 2010. Clearly The Economist isn’t the only source finding housing overvalued in Canada – one of the graphics above shows the Google instant result when searching for Canadian real estate news – the only other suggestion? “Canadian Real Estate Bubble.” 

While Canadian real estate prices were dramatically over valued, they weren’t the worst offenders. The dubious honor of most overvalued housing in the world went to Australia. According the magazine, anyone who buys in Australia is paying 63.2% more than it is actually worth. Countries like Hong Kong, Sweden and France also led – traditionally places that have high real estate prices. 

Read the full article by The Economist here.

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The Royal Bank of Canada has raised serious concerns that for most people housing is simply too expensive in Vancouver.  

On Monday, RBC released its quarterly report on housing and affordability. According to the report, on average, the typical Canadian homeowner spends 48.9 percent of their household income on servicing the mortgage on a median two-storey home – an increase of 2.1 percent overall due to rising mortgage rates.  

However, in Vancouver it’s a very different story – the proportion of income required to service the mortgage on a median two-story home or a detached bungalow (a smaller starter home anywhere else in the country) has risen to an astonishing 70 percent.  The situation is not much better for owners of apartments or condominiums – servicing the mortgage on a condo consumes 43 percent of household income.

The report singled out Vancouver’s white hot housing market, but it wasn’t to pass around congratulations: "RBC housing affordability measures are very close to their all-time high, which points to significant underlying stress and raises a red flag," said RBC Economist Robert Hogue. “Generally we have dismissed the case of housing market bubbles in Canada, but the situation in Vancouver is probably the closest to one in the country.”

This means the market could take a big hit unless the pressures ease - "very poor affordability is likely to restrain demand in the period ahead," said Hogue. According to the report, BC and Ontario saw the worst deterioration in housing affordability as prices neared the record highs seen in 2008.

Photo: Even condos in Vancouver may be out of reach for most homeowners. Credit: Beaster725, Flickr

Sources: Bank Raises Red Flag Over Housing Affordability, The Vancouver Sun; House Costs Near Record High in BC, The Province; Housing Becomes Less Affordable, The Globe and Mail.

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Will the bubble burst or won’t it? The Canadian Centre for Policy Alternatives is suggesting Canada’s housing markets could be poised for a big crash akin to the US housing meltdown, but the Canada Mortgage and Housing Corporation is painting a rosy picture and predicting more starts and modest price increases in 2011.

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To say the HST has upset realtors and real estate professionals would be a bit of an understatement. They’re mad. According to a recent survey conducted by Royal Lepage, 43.9% of realtors felt that the HST was playing a big part in the cooling housing market.

Who could blame them? Both Vancouver and Toronto, the biggest markets in the provinces where HST has gone into affect have seen big downturns. In Toronto, sales fell 34% in July, to sit at their lowest point since 2002. The drop was even sharper in Vancouver, with a 45% drop in home sales.

However, the question remains for many people – how does the HST affect me? Both the BC and Ontario provincial governments are quick to point out that previously owned homes are exempt from the HST – it only applies to new construction over a certain price point. However, the story isn’t so simple. The HST affects people looking to buy and sell their home in a lot of different ways – from realtor’s commissions to the materials used to do repairs.

So – how does the HST really affect real estate – from top to bottom? We made you a chart of all the changes because of the HST. If the price stayed the same, it’s not on the chart – we’ve only listed products and services that will be more expensive now.

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Is it the HST? Creeping interest rates? High prices? Something is killing the Canadian real estate market - Canadian real estate sales have dipped sharply – and expectations should be following suit.

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What do you get for a million?
A lot! For $999,900 dollars you can pick up a two level penthouse suite with spectacular downtown views. A spacious 1860 sq feet offering puts similar priced Vancouver offerings to shame. Better yet, this property is in the heart of downtown - a few blocks from Queen Street, incredible night life, world class restaurants, and the Bay Street financial district.
Downtown Toronto Penthouse
Size: 1860 sq ft
Bedrooms: 2 + den
Bathrooms: 3
Price: $999,900 CAD

What do you get for a million?
A spacious three double bedroom, 2 bathroom apartment overlooking the water in Auckland’s Viaduct Basin – which sounds sort of unappealing, but the Viaduct Basin is one of the swankiest parts of Auckland’s Central Business District (or CBD to the locals) housing the newest, most upscale apartments and best restaurants in the city.
Auckland Ocean View CBD Apartment
Size: 2260 sq ft
Bedrooms: 3
Bathrooms: 2
Price: $1,055,000 NZ Dollars, approx $787,053.25 CAD

What do you get for a million?
Property is at a top premium in Washington DC, so for those wanting to live closer to where the political action is happening, an apartment in Dupont Circle, part of the “Old City” would be more to most people’s liking. Dupont Circle is home to numerous Embassies, countless historic residences, and the Capital Pride LGBT pride Festival.
Dupont Circle Apartment
Size: 1416 sq ft
Bedrooms: 2
Bathrooms: 2.5
Price: $998,000 USD, approx $1,053,249.50 CAD

What do you get for a million?
A two bedroom apartment, overlooking the Thames River, across the way from Canary Warf, in Rotherhithe – a district in inner southeast London. Although quiet and suburban in nature, Rotherhithe used to be the site of the Surrey Docks, which were largely filled in during the 1980s, to be replaced by modern housing and apartments.
Thames Riverfront Apartment
Size: 904 sq ft
Bedrooms: 2
Bathrooms: 2
Price: £595,000, approx $956,385.63 CAD

What does a million get you?
A 1910 apartment in Berlin’s 4th borough, Charlottenburg-Wilmersdorf featuring oak floors, high ceilings and incredible period details. Charlottenburg was the commercial centre of West Berlin during the Cold War, and is still the main shopping centre of Berlin, offering major hotels, theatres, bars restaurants and attractions for tourists such as the world famous Berlin Zoo.
Period Luxury Apartment in Berlin
Size: 1367 sq ft
Bedrooms: 2
Bathrooms: 1
Price: €785,850, approx $1,073,958.30 CAD

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Luxury real estate sales in Canada are soaring, breaking pre-recession sales records as buyers are capitalizing on low interest rates and increasing economic confidence.
RE/MAX released its first quarter Upper End 2010 Report on Monday, showing a marked increase in luxury home sales in markets across Canada. The report noted that, "Canada's sound banking system, political stability, and strong dollar are attracting foreign investment -- and that is spilling over into high-end residential real estate.”

According to Wayne Schrader, a RE/MAX Broker/Owner and specialist in luxury properties on Vancouver Island, consumer confidence is playing a big part in the rallying sales.
“Markets are picking up and turning the corner,” said Schrader. “People are realizing the big recession didn’t materialize in Canada, and at the same time, prices have come down and are much more attractive.”
The Conference board of Canada echoes Schrader’s sentiments - its economic forecasts predict the Canadian economy will grow at a healthy 3.2% in 2010. An upswing in the economy makes the current market conditions even more attractive, as buyers take advantage of the current low interest rates, noted Schrader.
But why have sales increases have been so sharp, in some cases bettering years that were fueled by the white-hot real estate markets of the time? According to Schrader, and the report, they key is balance.
High end property prices have softened from their previous peaks explained Schrader, which can make luxury real estate look like a better investment for some buyers.
“Ample opportunity and a good selection of product exists, and savvy purchasers are taking advantage of favourable conditions,” said the report.
According to the Elton Ash, Regional Executive Vice-President of RE/MAX in Western Canada. the luxury “segment of the market was hardest hit when the recession took hold, yet its comeback has been fast and furious.”
Comparative sales figures back up Ash’s statements. In the first quarter of 2009, high end property sales had slumped - only 411 properties classified as “upper end” were sold by RE/MAX across Canada. This year, the number has leapt to 1,111 - an increase of more than 170%.  Comparing that to 2008’s first quarter sales of 894 high end properties shows overall sales in Canada are still up almost 24% over pre-recession numbers.

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For the first time of what will now be a monthly feature on the site, we are proud to share with you this list of the 10 most viewed property listings on Realestock.com. Each month, we will be bringing you this list of properties which have achieved great popularity and exposure on Realestock to motivated buyers.

1. Mountain Spirit Resort and Spa, Kimberley, BC

Mountain Spirit Resort & Spa in Kimberley, BC is your four season Rocky Mountain playground. Combining a four season skiing mountain residence with the luxuries of a world-class spa and spectacular slope-side restaurant; Mountain Spirit allows easy access to Trickle Creek’s championship golf courses, 1800 acre natural park with over 100km of trails to explore, fly fishing, mountain biking, horseback riding and much more. The nearby Canadian Rockies International Airport makes travel to and from Salt Lake City, Calgary and Vancouver convenient and accessible.

2. Cannery Lofts Condominium, Astoria, OR

Cannery Lofts Condominium has the best river view in Astoria! Walk along the beautiful river walk or watch the ships pass by while lounging on your deck; Astoria has been named the best town to retire to, with its scenic views, quaint shops, historic homes and amazing restaurants. The brand new unit offers: 10’ ceilings, loft design, granite counters, bamboo floors, gourmet kitchen, glass window wall and gas fireplace. The identical unit is currently under construction in Phase II.

3. The Ellington, Oakland, CA

The best address in the Bay Area, The Ellington offers a lifestyle that is anything but the usual. Homes feature elevated nine and a half foot ceilings, hardwood flooring, open kitchens with Bosch stainless steel appliances, sprawling balconies and broad floor-to-ceiling window walls framing impressive Bay views. The high-rise contains an attended lobby with daily concierge services with nighttime security- in addition to a state of the art fitness center, heated pool, spa and community room with a full chef’s kitchen.

4. Dockside Green, Victoria, BC

Dockside Green is a name synonymous with environmental living and is a LEED® Platinum-targeted project. The development is an innovative community of one and two bedroom luxury condominiums, townhouses and penthouses all of which feature environmentally-friendly materials such as renewable bamboo floors, low-flow toilets and energy efficient appliances. The community features solar water heating, small-building wind turbines, a car share program, mini-transit system and a launch area for canoes and kayaks.

5. 1235 East Lake Drive, Fort Lauderdale, FL

This exquisite Fort Lauderdale estate features 20,753 square feet with 9 bedrooms, 9 full and 4 half bathrooms. A gated entry is monitored by a state-of-the-art security system with camera surveillance and infrared sensors to ensure you sleep well at night. Fabulous amenities include a state-of-the-art nightclub, putting green, gym, massage room and spa, wine cellar, infinity pool and 9-car garage. Limestone floors, a clay barrel title roof and Pecky Cypress balconies embellish the luxurious feel of this home.

6. Highbury-Tower Residences at Fish Creek, Calgary, Alta.

Like all three towers, Highbury² gets its inspiration from classical modernism. Quality building materials blend with simple contemporary forms to convey a certain level of sophistication. Highbury² offers a wide range of one and two bedroom suites on its 12 floors, all with den/media room or home office. Highbury’s private amenities building features spa and fitness facilities, theatre with tiered seating, entertainment lounge, hobby and conference rooms, plus an in-building car wash.

7. Prado, Richmond, BC

A stunning landmark in the heart of downtown Richmond, Prado is located across from Lansdowne Centre and mere steps away from the RAV Line Lansdowne station. Each unit features caesarstone countertops, hardwood laminate floors and contemporary wood cabinetry. The units contain fireplaces with granite surround and entertainment-size patios, balconies and roof decks.

8. 987 SE MacArthur Blvd.-Hutchinson Island, FL, Stuart, FL

Located on private Hutchinson Island, this fabulous, charming beach home boasts 75 feet directly on the ocean and 75 feet on the Indian River Intracoastal, with a boathouse and dock situated minutes from the Inlet! With three bedrooms, three bathrooms and 2,800 square feet, this home is private and sunrise to sunset; is the best of both worlds.

9. Colonnade at Kentlands, Gaithersburg, MD

The Colonnade at Kentlands is a luxurious new condo surrounded by shops and entertainment opportunities. Floor plans are remarkably spacious with some offering 20-foot ceilings, staircases to lofts, fireplaces and computer niches. Kitchen islands and large walk-in closets are standard features in each unit, while the building features amenities such as a pool, sauna, wine room, fitness centre, cinema lounge, pub and courtyard.

10. Kanata Ecovillage, Mont-Tremblant, QC

Kanata Ecovillage is an exclusive village offering elegant homes that include all the modern amenities such as a wine cellar and energizing spa. Located just a few kilometers from the Mont-Tremblant resort, residents have easy access to all sorts of outdoor activities, including on-site dog sledding excursions, snowmobiling, fishing, wildlife observation trips and horseback riding.

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