Time for your weekly cheat sheet on the most important real estate stories.
There are over 552,000 families with over US$10 million in assets, and 87% of them have second homes. The wealth analysts at New World Wealth (NWW) released their annual update on where those second homes are, and London, New York City, and Hong Kong topped the list in that order. The fastest growing cities for wealthy second homes were Sydney, Australia and Miami, USA.
The New York metro area, that is New York City and its surrounding area, is seeing low-rent units rapidly disappear. These low-rent units are being replaced with high-end luxury units. Homes under $1200 per month showed declines of 16.8% from 2005 to 2015. Meanwhile, properties above $1200 per month showed a massive 40.69% increase during the same period. The shift is putting pressure on the average household, where the median household income for the region is only $68,740.
The latest numbers from Statistics Canada show that Canadian wages growth is stalling. The average hourly wage in May was $25.88, a 1.29% increase from the same time last year. You may have noticed that number is lower than inflation. This means the average Canadian has less buying power than last year. Canadians have epic amounts of debt, but how exactly are they going to pay it off with stagnant wages?
Low-ratio mortgage borrowers, also called traditional mortgage holders, are great for real estate markets. These are people with over 20% down, and represent minimal risk for the lender. However, the Bank of Canada highlights they aren’t without risk. Low levels of income documentation, and an increasing number of low-ratio borrowers who are borrowing more than 450% of their income, are adding up to significant risks. These aren’t risks for the banks since the large down payments are likely enough of a cushion to absorb losses. The risk is on home values in the neighbourhoods these borrowers are clustered in.
BC home prices are still increasing, but less people are buying. The average sale price across the province was $752,536, an increase of 4.2%. Even though prices are higher, sales volume declined by a total of $10 billion dollars YTD. This is a pretty big decline, that marks a much cooler market. If dollar volumes continue to decline, expect prices to follow.
Toronto Real Estate Board (TREB) stats show that a surprising number of people have been busy flipping. More than 7% of homes sold in the first five months of 2017 were bought just 12 months before. To give some context, these flippers are almost twice the size of the city’s booming luxury market, and represent a larger number than Vancouver’s foreign buyers.
AirBnB’s rapid growth is great for hosts that are looking to make a bit of extra money, but what happens when real estate speculators get in on the action? The company argues that the number of homes being used are a tiny portion of the city’s housing stock. A study from FairBnB however, points out that AirBnB units aren’t scattered around the city’s stock, it’s largely located in one neighbourhood – Toronto MLS C01. If you’re not in the real estate business, that’s the city’s downtown core. In 2016 there were 3,696 rentals in that neighbourhood that operated as full-home rentals, meaning the host was not present at the time of rental.
Detached inventory in Toronto showed a spike, but prices still moved higher. New listings in Toronto increased to 14,036 across the Toronto Real Estate Board, a 64% increase from the same time last year. The benchmark price is now $1,049,500, a 28.76% increase from the same time last year.
One of Toronto’s most affluent suburbs just saw prices make their biggest single month drop since 2008. Oakville-Milton, where 77% of detached homes go for over a million, saw a 3.09% drop on benchmark prices. Benchmark prices are the price of a typical home, so the number of this decline is fairly conservative. Yes, this does have an impact on Toronto real estate, and how professional real estate investors will likely move.
Vancouver real estate paused for a few months at the end of last year, but is now pushing past last year’s record prices. Detached homes now have a benchmark price of $1,561,000, a 3.1% increase from the same time last year. It’s not last year’s 36.9% increase, but it’s still a decent climb. The benchmark price of detached homes are now on par with June 2016.
We take a look at historical peaks and troughs to see if there are any patterns. Turns out over the past decade Vancouver real estate has been pretty cyclical, with year over year price increases falling into negative territory 26 months or more from peak. Once in negative territory, they stayed there for about a year. If the prices follow this pattern into the future, we’re still about 16 months from seeing price growth fall flat year over year.
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