Time for your weekly cheat sheet on the most important real estate stories.
Last year Mainland Chinese buyers became the largest buyers of international real estate. Up and coming markets like Toronto, Auckland, and Sydney saw significant price increases as a result. Over excited locals sent prices soaring as they took it as a sign of international validation. Then China rolled out new capital controls in January 2017.
The result? Those same up and coming markets around the world are starting to note an absence of Mainland buyers. Now those same overexcited locals that sent prices soaring hoping to cash in on their city’s newfound status as a global hub, are trying to figure out how much their homes are worth. Auckland is complaining that their markets are cooling faster than they anticipated. Australia’s leading property analyst is telling locals to prepare for a 10% decline. Toronto is seeing listings soar, and buyers are just sitting on the sidelines.
US homeowners experienced massive property value losses during the Great Recession. 10 years later, some buyers still haven’t broken even. A CoreLogic analysis show that 3.1 million mortgages have owners that are underwater. For those that don’t know, underwater is when someone has less than 0% equity in their home due to falling value. Most of them are in booming cities like New York, and Chicago too.
Every day less and less homeowners are filing for bankruptcy. Awesome! Canada’s debt problem is better than we thought, right? Not exactly. Much like defaults hitting an all-time low is a sign of bubble-like liquidity, an artificially low number of bankruptcies is a warning flag as well.
The debt experts at Hoyes Micalos have noticed an increasing number of Canadians are reorganizing their debt. By taking on a second mortgage, or using a home equity line of credit, Canadians are able to delay filing for bankruptcy. Homeowners that take this option become more vulnerable in the event of a correction. This may lead to a super cycle of bankruptcies in the event of even a small correction.
Developers may be ramping up advertising Canadian real estate overseas. Housing activists in Vancouver have been finding ads giving overseas buyers incentives like guaranteed rental income. It’s unclear if these incentives are even available to locals, since we were unable to find the terms advertised domestically. Which is a surprise considering they’re being advertised on the side of buses in Hong Kong – literally.
The cost of taking out an $800,000 mortgage has declined rapidly over the past decade. The same sized mortgage would have actually cost 20% more than in 2006, when compared to 2016. Did buyers take the savings, or did they take that as a sign that they can spend more? Hm…
Bad policy decisions are being made using bunk data on Vancouver real estate. Statistics Canada’s New Home Price Index gives a higher reading in 2008 than in 2017. What does this mean? The federal government likely thinks that the cost of a new condo is about the same as 2008. Anyone in Vancouver can tell you that they likely made a wrong turn somewhere in that math.
Did you hear that Vancouver real estate is cooling down? You’ve been grossly misinformed. Despite less sales, and listings – buyers are sending prices higher. Nope, it’s not foreign buyers making a triumphant return. It’s first-time buyers competing with deep pocketed…BOOMERS that are downsizing.
How many Toronto locals make enough to support million dollar home prices? A lot. One of our data sherpas crunch the numbers to find out how much of Toronto can actually buy a million dollar home. Turns out a huge number of families in Toronto can afford the steep price tags. This number is also increasing. Are these the families buying? That remains to be seen.
Toronto’s having a cooler than normal spring, and it had nothing to do with the weather. New listings are soaring as homeowners try to realize some of their profits. Unfortunate for them, buyers aren’t showing up in strong enough numbers to absorb the inventory. This could provide downward pressure on home prices in the future. Despite that, home prices still showed strong gains year over year. It just might take a little more marketing to realize these price gains.