FINANCIAL SAVVY: Buyer’s market looming?

A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his recent Third Edition of The Smart Canadian Wealth-Builder.

At the beginning of 2018, major Canadian residential markets were still clearly in seller’s market territory, with sales-to-listing ratios of 40 to 50 per cent. As the year unfolded and the full effect of new mortgage stress tests, foreign buyers’ taxes, vacancy taxes, and the imminent implementation of BC’s Speculation Tax emerged, the sales-to-listing ratios plummeted.

In Greater Victoria for example, the sales-to-listings ratio in March 2018 hovered near 50 per cent. By December it had dropped to around 20% – technically, still a balanced market. The rapid rate of decline however, has threatened the emergence of a Buyer’s market in 2019.

One of the primary drivers of residential real estate has always been the first-time home-buyer. A recent survey of its members by the B.C. Notaries Association confirmed not only fewer such buyers in 2018, but also that those buyers were relying on significantly greater external assistance than in past years, toward their down payments.

Having lost some 20 per cent of purchasing power due to new stress tests and rising interest rates, many first-time buyers, without extra family assistance, are now faced with major delays in their ability to enter the market.

An October, 2018 CMHC report revealed that 85 per cent of first-time buyers already spend the maximum they can afford on their first home purchase; this leaves little room for absorbing the impact of new lending regulations and higher rates.

When the pool of first-time buyers shrinks, new construction slows as inventory of unsold strata units increases; and existing strata owners are delayed in their ability to sell before moving up to a higher-value home. The upward-ripple effect on re-sales and purchases is felt at all price levels – impeding sales volumes, and eventually triggering a seller’s market until the downward cycle once again begins to reverse, and affordability increases.

Other than in the over-million dollar segment of Canadian residential markets in which prices have plummeted, prices nationally have not experienced significant declines. The full impact however, of new regulations and higher rates, will only be felt in 2019.

Regardless of how residential real estate fares in 2019, one thing is clear. In every major Canadian market, the spectacular price increases of the last decade will not be seen again for some years. That does not make residential real estate a poor long-term investment; however, in the shorter-term, we should be happy if we achieve even inflation-only levels of price increases.

A retired corporate executive, enjoying post-retirement as an independent Financial Consultant (www.dolezalconsultants.ca), Peter Dolezal is the author of three books, including his recent Third Edition of The Smart Canadian Wealth-Builder.

Just Posted

Central Saanich changes incentives for housing developments

Changes shift incentives for some developments from development cost charges to building permit fees

VIDEO: Saanich resident shocked when trespasser licks security camera, rummages through mail

‘I found the situation really bizarre,’ said the Gordon Head resident

BC Ferries crew member taken to hospital after getting struck by bow doors

Two sailings between Horseshoe Bay and Departure Bay were cancelled

Goldstream Food Bank on the search to fill Christmas Hampers with toys

Volunteers are looking for new toys for infants to 11-year-olds

Black Press Media celebrates women who are making a difference

Helping others is the cornerstone of the work Shannon Drew does in… Continue reading

VIDEO: Explosion, fire sends woman running from Saanich home

Heavy smoke in the area, crews on scene

Jack’s Devils beat Quinn’s Canucks 1-0 in NHL brother battle

New Jersey youngster scores first career goal against Vancouver

Two charged after owner’s wild ride through Kamloops in his stolen truck

Crystal Rae Dorrington, 37, and Derrick Ronald Pearson, 32, facing multiple charges

Judge orders credit union’s bank records for Kelowna social worker facing theft allegations

The man is accused of negligence, breach of contract, fraud and a conspiracy with Interior Savings

Leaders pour it on with rallies, boosts for candidates as campaign reaches peak

The federal election campaign has reached a crescendo

Allegations of racism lead to ministry investigation at Vancouver private school

St. George’s School was contacted over what the school describes as ‘deeply offensive behaviour online’

Not a political question: Thunberg calls for climate action in Alberta

Edmonton police estimated the size of the crowd at about 4,000

Zantac, the over-the-counter heartburn drug, pulled in Canada, U.S.

Health Canada also investigates possible carcinogen in some ranitidine drugs

B.C. public safety minister says cannabis edibles not in stores til January

Mike Farnworth says he wants regional issues considered when it comes to licensing

Most Read