May 2022 Real Estate Market.

In this blog post I will be highlighting these three (3) topics:

• Newly Introduced federal regulations
• Increased interest rates and the effects
• Overall health of the Real Estate Market

MARKET DYNAMICS
There's been a lot happening...
Despite all the stress and uncertainty created by the Pandemic, we all have been so busy for the last 2 years with interest rates being so low. BUT now, interest rates are quickly rising and generally, we can expect a change in the market (perhaps a "Watch and Wait Effect" which we will see over the next 6-12 months.)

 You see, during the lock down, we had 4 interest rate decreases... now within the first 4 months, we've seen 2 increases. Furthermore, we can expect another 50 basis points to move upward by June 1, 2022.

How this will affect prices?

Prices can be affected based on property type and area... each property behaves differently... how fast they moved up may determine how much, it will have to give back to the market... but we will see some price volatility for sure.

Inventory

Inventory was at historic lows at the beginning of the year and now it's spring and we are seeing more inventory. The weather is getting better and people want to put their homes on the market. Lots of people are still interested in buying homes and the market is turning out to be better than at the beginning of the year.

Less bidding wars

There's more choice, so less pressure on the market. In the first 60 days of the year, there was so much pressure on the market because there was just nothing to choose from...and people just needed homes + they are keen to buy. And with that...increased prices to another level (all new records).

NEW CHANGES
Double taxation on Assignment sales
Before the Seller could loophole this, and declare they were going to live in this unit, but their intention truly was not to (therefore not paying tax collected on the Assignment Sale Profit). BUT NOW intent does not matter, everybody is subject to the (2)taxes.

This is something the government has been looking at for a while. The objective? If there is a profit (selling the unit higher than what you paid for when purchasing from the Builder/Vendor), that it gets captured by HST AS well as the original PURCHASE PRICE (referred to as capital gains). In essence, the government ensures they get to collect the full TAX on the total cost from the New Buyer who is going to either live in it or rent it out...

WILL THIS AFFECT THE MARKET?
My gut feeling is it may have a short-term impact, but what we can expect to see with taxes...is they just get baked into your projected returns! So now Investors/Purchasers would conclude and think " Well... now I have to ACCOUNT FOR whatever tax in my buying decisions..."

I think it's just life and in about 6 months' time, people just come to terms that we just have the tax. All in all, returns were really high generally at the end of it all, you are still making a HEALTHY PROFIT.

BAN ON FOREIGN BUYERS FOR 2 YEARS
I do not agree with the concept of the government doing this because it simply sends the wrong message... Allowing people to invest here shows them it's a great place to live.

Foreign investment does not account for a significant chunk of our market. It's only 3.7% of our market! However foreign investment is valuable to any country. So, deterring such a small # of people is pretty silly and won't really have a MATERIAL EFFECT on the market.
Note: working with some of these buyers here at home you see a lot of clients purchasing units for someone else under their own name (evade paying foreign taxes).

-First Time Home Buyer Saving Program
-Multi-Generation Home Renovation Credit
(For Combining Family Residences for Immediate Family. Up to $7500 in credits)

Multi-generational home renovation credit
(Now that families are combining residents)

Our federal mandate is to invite over 400k people a year to come to Canada, and they need places to live. We are naturally creating a demand for housing for many people to move to Canada.

Under the new immigration stimulus program, (1.2 million people over the next 3 years plus the BACKLOG of like 600k), we are looking at 1.8 million people over the next coming years. Just look at the cranes in the sky... we are behind in the supply that's adding to the pressure on prices. We build about 25k suites a year with a shortage of about 40k because we need just over 60k, SO THERE IS A GAP!! So if we cannot catch up (in terms of the capacity of builders and the construction industry and their ability to build, how quickly they can get projects approved and built) we will continue to have pressure on prices.

IS IT A GOOD TIME TO BUY?

It's tough to time the market at this time... it's hard to determine what will happen in the next year.

Building costs have gone up, land costs have gone up... somebody has to pay for that, builders cannot build projects and lose money. This is not how things work. Overtime prices will absolutely go up due to costs, regulatory requirements, and demand. But everything seems expensive now until 5 years later when you look back!

Remember real estate creates generational wealth! It can be passed along but you need to get into the market.