Affordability, low interest rates, and sound economic fundamentals were the primary factors contributing to ongoing healthy home buying activity in St. John’s in 2013. These favourable underpinnings supported relatively steady demand, despite a further upswing in inventory levels. As a result, home sales in St. John’s are expected to finish the year at 3,650 units—in line with traditional levels, though off the 2012 pace by just under six per cent. While momentum has eased, average price continues to make considerable gains, propped up, in part, by new home sales and strength in the upper-end segment. By year end, average price is forecast to reach $302,500, advancing six per cent over 2012’s record of $285,529. First-time buyers led the charge once again in 2013, seeking out single-family homes and bungalows priced between $200,000 and $300,000 throughout the city and its suburbs. Activity in this segment proved brisk, while the mid-range (priced over $350,000) experienced some softening, given a greater supply of inventory and a reduced sense of urgency.
Newfoundland’s economic engine fired on all cylinders in 2013, leading the nation and driving GDP growth ahead by six per cent, as crude oil production rose and conditions improved for large-scale mining projects. While growth is expected to return to more modest levels in 2014, several major developments will serve to prop up confidence and demand in both the resale and new home sectors. These include: ramped-up work at both Muskrat Falls/Lower Churchill and the Hebron Offshore Oil Field, supporting further employment growth; a strengthening natural resources sector, marked by the completion of the Long Harbour nickel-processing facility and subsequent upswing in production; as well as increased production at the Direct Shipping iron-ore project and the Iron-Ore Company of Canada’s Phase II Expansion. Conversely, the enthusiasm of those at the entry-level price points has been re-invigorated, as buyers impacted by tightened lending restrictions last year made their return to the market in a more positive position in many respects. The upper-end segment also proved quite vibrant, as St. John’s thriving oil and gas sector continued to support high-level jobs. Actual sales over $650,000 have posted double-digit growth, and even when adjusted for year-over-year price appreciation, the momentum has held steady with 2012’s respectable performance.
Overall, Newfoundland & Labrador should see unemployment contract in 2014, falling to 11.5 per cent. Strong gains in earnings continue to support buying intentions—a significant factor behind the highest provincial homeownership rate in Canada at 77.5 per cent (2011 Census). St. John’s, in particular, remains an attractive draw. The city recorded a 5.5 per cent increase in its population from 2006 to 2011. Significant announcements continue to improve the region’s prospects—from the proposed underground mine expansion at Voisey’s Bay to the extension to White Rose, as well as promising exploration discoveries that serve to boost confidence in the area’s long term potential. There’s no question the outlook is bright. In the interim, Newfoundland is expected to post a more tepid economic gain of 1.4 per cent in 2014, on the heels of 2013’s enviable advance.
Next year, buyers and sellers in St. John’s and surrounding areas should see similar conditions to those in place at year end. An oversupply of product will place greater consequence on setting fair value, as buyers become increasingly sensitive to pricing. Purchasers will need to be realistic in their pursuits, however, as most homes continue to realize 98 per cent of list price. Unprecedented inventory of new homes will necessitate a gradual correction in prices in that segment, if absorption rates are to improve. Condominium sales are forecast to ease in 2014, as the market approaches saturation. Many new projects have been delayed, re-worked or cancelled, as builders on the multi-unit side take pause. Investors were active over the past 12 months and will continue to seek out promising opportunities. The upper end of the market is anticipated to remain stable. Regardless of price point, market conditions will underscore the timeless adage ‘location, location, location,’ as sought-after pockets post better-than-average activity. Multiple offers, for example, were still evident on well priced product in Churchill Square and Paradise, where the Outer Ring Road has driven tremendous growth. Areas around the University will also prove buoyant as the student population continues to rise, while ongoing revitalization in the downtown core bolsters its appeal. Absorption should improve moving in to the second half of 2014, although buyer’s market conditions will persist through year end. Sales are expected to remain on par at 3,650 units, while average price rises five per cent to $317,600.
Once again RE/MAX leads the market share in the St. John’s real estate market for the first half of 2013. Not only does RE/MAX have the largest market share in St. John’s, but RE/MAX has the biggest share of the Canadian real estate market and is the most trusted real estate agency in Canada. RE/MAX Canada has over 18,500 agents working at more than 700 offices. So if you’re looking to sell, or buy, or both, look to the name that means success. Look to RE/MAX.
Demand for housing in St. John’s remains healthy, particularly among first time buyers, despite a decline in year-to-date sales. Buyer’s market conditions and the best choice of product in years have buoyed the entry-level segment, along with wage gains, economic growth and rising consumer confidence levels. Affordability continues to be favourable, with increased earnings offsetting the more moderate price growth of late. Most young home buyers are now active from $200,000 to $250,000. Those buying new construction will have to ante up more—typically between $230,000 and $280,000 to start—as the price of new construction has risen at a greater rate. Those on a tight budget will find that homes listed below $200,000 are few and far between and tend to sell for close to full price, if listed at fair market value. Some even generate a rare multiple offer.
To illustrate the supply issue, only 34 homes have sold year-to-date under $175,000, accounting for just 10 per cent of all sales, and only 39 listings under that price point are currently available. Given that, buyers at the lowest end of the price spectrum will have to act more quickly. The housing mix in St. John’s continues to favour the single detached home, particularly in the first-time buyer segment.
Of the 34 homes sold under $175,000, only three were condominiums. Entry-level condominium product remains limited in St. John’s, as builders continue to focus on the mid-range—units priced between $250,000 and $350,000. While condominiums are gaining traction with younger buyers, they remain only a small portion of entry-level sales. Condominiums now start from $165,000 to $175,000 for an older, 650 to 750 sq. ft. walk-up unit on Thorburn Rd., Dalton Ave., and in Pleasantville.
With the current oversupply of homes listed for sale in St. John’s, buyers remain in the driver’s seat. That, along with historically low interest rates, continues to serve as a significant impetus.
Detached homes can be found from $169,000 for an older bungalow requiring work, located on the peripherals. Older homes are most popular. Most sought-after are properties priced between $210,000 and $250,000 in established neighbourhoods such as Cowan Heights, Mount Pearl and Paradise. Most buyers are realizing their choice location, with little need to compromise. Those that must choose are opting to spend a little more, if necessary.
Solid demand among first-time purchasers is expected to carry over in to the spring market, with new financing criteria expected to have little impact. In fact, look to sales in the entry-level segment to prompt greater activity in the move-up range in the months ahead. February year-to-date sales were 11 per cent off year-ago levels, with 359 sales recorded, while average price continued its ascent at $255,512, up just over five per cent.
Full RE/MAX Media Release for the First Time Buyers Report 2011
First-time buyers entering home ownership throughout Canada ahead of higher interest rates, says RE/MAX
Driven by the threat of higher interest rates down the road, first-time buyers are contributing to strong upward momentum in residential housing markets across the country, according to a report released by RE/MAX.
The RE/MAX First-Time Buyers Report, highlighting trends and developments in nineteen major Canadian centres, found that low interest rates and balanced market conditions have provided significant impetus in 2011, particularly at lower price points. Just over 30 per cent of markets are reporting sales in excess of 2010 levels as a result, while almost 70 per cent have experienced an upswing in average price. Leading the country in terms of percentage increases in the number of homes sold are Western Canadian markets, including Saskatoon (up close to 15 per cent), Greater Vancouver (up close to 12 per cent), and Winnipeg (up just over 11 per cent). With an average price hike of close to 20 per cent year-to-date (February), Greater Vancouver continues to show unprecedented strength, followed by Hamilton-Burlington (eight per cent), Quebec City (seven per cent), Winnipeg (close to seven per cent), Greater Toronto (five per cent), and Greater Montreal (five per cent).
Despite homeownership rates approaching 70 per cent, there is clearly room for growth as entry-level buyers make their moves from coast-to-coast, undeterred by higher housing values and changes to lending criteria. Many purchasers intent on realizing homeownership are scaling back on expectations or are willing to sacrifice location, quality and/or size to make their dream a reality – not unlike generations before them.
Inventory levels, while tight in several larger centres, are more balanced overall, giving first-time buyers a good selection of housing product from which to choose. Not surprisingly, condominium apartments and town homes have become the first step for many entry-level purchasers, especially in Greater Vancouver, Victoria, Kelowna, Edmonton, Calgary, London-St. Thomas, Hamilton-Burlington, Greater Toronto, the Island of Montreal, and Halifax-Dartmouth where average prices have risen unabated in recent years.
With the Canadian economy on firmer footing overall, residential real estate is well-positioned moving into the traditionally busy spring market. Consumer confidence is climbing in conjunction with economic performance, and concerns over a secondary recession fade with each passing day. The mood is cautiously optimistic, as first-time buyers enter the market.
Changes to recent financing criteria have not created the anticipated run up in activity in most markets. From a financial standpoint, most rookie home buyers remain quite prudent. Those making the leap are not doing it lightly, buying within their means. While this most recent round of policy tightening will likely have a negligible effect on demand, the message is getting across.
Affordability remains a growing concern in most markets, and—aside from first-time purchasers—no one is more in tune with that than housing planners and developers. In fact, the growing demand for reasonably-priced product is creating a shift in the country’s housing mix. That trend is expected to gain traction in coming years, as builders look to create greater options for those seeking to realize homeownership. In recent years, builders have helped ease the move to homeownership by concentrating on intensification—condominium buildings with smaller suites and small-lot subdivisions offering detached, compact homes at a fraction of the cost of a traditional single-family home. On the flip side, the affordability factor is also breathing new life into tired older neighbourhoods, and that, in turn, is contributing to rising values.
As prices escalate, first-time buyers are indeed spending more—some out of necessity, but others are simply in a position to do so. Unlike in years past—a greater percentage of today’s first-time buyer pool is comprised of dual-income, college or university-educated couples with solid earnings. They’re spending close to average price or slightly more to secure—in most cases—a better location or a home that will grow with them. Yet, the fact remains that those on a tighter budget can get in for considerably less, with reasonable choices in every major market across the country. While some may feel discouraged by eroding affordability levels, the underlying confidence in the concept of homeownership is rising.
While market conditions are one thing that influences first-time buyers, few things trump the fundamental belief in homeownership. Today’s entry-level buyers are steadfast in their mindset. They know they have to live somewhere, but they simply don’t want to pay someone else’s mortgage. Savvy or practical, they remain a driving force. The bottom line is that the demand for entry-level product will remain steady. The role of starter homes in the marketplace is becoming ever more vital.
Full RE/MAX Media Release can be viewed here.
St. John’s real estate market spent much of the past decade fluctuating between buyers and balanced market conditions. These conditions characterized the resale residential sector 72 per cent of the period from 2000 to 2010 (36 per cent respectively). Sellers held the cards just 28 per cent of the 11-year period—a fact that may come as a surprise, given the strong run up in average price in recent years. The compounded annual rate of return for homeowners in Newfoundland Labrador, based on average price from 2000 to 2010, was 8.14 per cent—ranking it fifth among Canada’s major centres and first among the Atlantic provinces ($99,525 vs. $235,341). Newfoundland’s sales-to-new listing ratio hovered at 54 per cent during last decade. Home buying activity has been solid at the outset of 2011, as Newfoundlander’s steadily regain confidence in Canada’s economic recovery and the brightening outlook for the province.
Several positive developments of late have bolstered optimism, the most substantial of which has been the Lower Churchill announcement. Business confidence is high and non-residential building activity is up considerably. Buyers have taken notice, moving off the sidelines, secure in the belief that the tide is turning. Affordability continues to play a role in Newfoundland. First-time buyers are leading the charge, with sales between $150,000 and $250,000 most active in Newfoundland, accounting for 36 per cent of all activity.
In St. John’s, entry-level purchasers are driving the $250,000 to $350,000 price point. The city’s newer subdivisions on the peripherals are most sought-after, including areas such as Paradise. Move-up buyers remain active. However, in this category, many transactions are conditional on the sale of another property. Upper-end purchasers continue to make their moves, with sales in the $500,000 to $650,000 price range relatively brisk. Luxury homes in Clovelly Trails and King William Estates remain very popular with affluent purchasers.
Days on market had been on the upswing across all price points post June 2010, but should begin to fall as absorption rates improve.