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Pandemic accelerated value of home ownership at luxury price points to new heights in major Canadian centres in 2021

Demand for Canadian luxury real estate shifted into high-gear from coast to coast in 2021 as both domestic and non-resident consumption of tangible assets, such as homes, reached new levels, according to a report released today by RE/MAX Canada.

“The currency of home ownership has clearly taken on a new dimension in 2021,” says Christopher Alexander, President, RE/MAX Canada. “Canadians are moving to secure their future. The pandemic fuelled a run on real estate that has encompassed every segment of the market, and the value of housing has increased exponentially as a result–not only as a form of shelter but a desirable asset class that provides an attractive return on investment.”

The RE/MAX 2022 Luxury Market Report examined Canadian luxury real estate trends and developments in freehold and condominium sales over $3 million in Metro Vancouver and the Greater Toronto Area (GTA), and tracked sales over $1 million in 17 additional markets including Victoria, Kelowna, Edmonton, Calgary, Regina, Winnipeg, London, Kitchener-Waterloo, Hamilton, Barrie, Kingston, Ottawa, Halifax-Dartmouth, Moncton, Saint John, Charlottetown and St. John’s.

According to an analysis of sales provided by RE/MAX brokers and agents based on local real estate board data, RE/MAX Canada found that 18 of the 19 markets recorded percentage increases in the double and triple digits. The greatest appreciation occurred in smaller urban markets such as Barrie, London, Kitchener-Waterloo and Hamilton, where sales of homes priced over $1 million have climbed 517.8 per cent, 255.1 per cent, 208 per cent and 199.5 per cent respectively. Canada’s largest markets for luxury product – the Greater Toronto Area and Metro Vancouver – experienced increases of 112.8 per cent and 75.8 per cent respectively for homes over the $3-million price point, while transactions of homes priced over $10 million rose a substantial 156 per cent and 167 per cent respectively. The only outlier was Charlottetown, where sales over $1 million declined to four units, down from seven unit sales one year earlier.

“As high as these numbers are, we believe they just scratch the surface,” says Alexander. “In our view, these levels likely do not truly reflect what is happening in markets across the country, given an abundance of exclusive sales and in white-hot markets such as Toronto, instances of private sales where buyers approach sellers whose listings have expired.”

Last year marked the continuation of a pandemic-fuelled buying spree that started in 2020, shattering existing records for Canadian luxury real estate sales and in some instances, price points from coast to coast.

“Despite a third and fourth wave of Covid-19 in 2021, real estate markets continued to rattle and hum,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Tight inventory levels were prevalent in at least half of the markets we surveyed and contributed to an uptick in values across much of the country.”

RE/MAX brokers who were surveyed for the report attributed the increase in luxury activity to abundant economic drivers, as the national roll-out of the vaccines continued. Stock markets rallied, with the TSX, the S&P and the Nasdaq reporting some of their best years on record. Interest rates remained at historically low levels. GDP growth for the year is estimated at 4.5 per cent in 2021 as businesses returned to pandemic norms–including hybrid schedules—restaurants, bars, gyms, sports venues and theatres finally opened their doors.

Trade-up activity was brisk in most markets, as buyers cashed in on substantial equity gains realized when selling their existing properties.

“More so than ever before, it appears that buying a home is a retirement strategy, which many people believe will help the next generation achieve home ownership,” says Ash.

Real estate has traditionally been an essential asset class in the investment portfolios of ultra-high net worth individuals, usually comprised of multi-unit residential, commercial, industrial, and land. Residential performance, however, has been undeniable over the past decade, and that has generated global attention. Financial communities have also tapped into the trend, with Real Estate Investment Trusts (REITs) now investing in single-family residential housing in the US and to a lesser extent, Canada.

Canadian Luxury Real Estate Highlights

• Luxury home-buying activity is spilling into smaller centres where the dollar goes further. While the pandemic accelerated the trend, bigger bang for the buck is likely to continue to draw purchasers from larger centres, particularly in Ontario. Inventory is reaching critical levels in markets like London, Kitchener-Waterloo, Hamilton, Barrie, Kingston and Ottawa.
• Home sales are pushing into higher price points across the country. The luxury segment over $3 million represents approximately four per cent of total sales in Metro Vancouver and 1.8 per cent of sales in the GTA. Sales over $1 million in Halifax-Dartmouth represent 2.2 per cent of total sales.
• Records were broken for luxury sales over $3 million in the Greater Toronto Area in 2021, while Metro Vancouver fell short of 2016 record levels by just over 200 sales.
• Condominium sales over the $3 million price point in the GTA and Metro Vancouver have rebounded from 2020, setting a new record in the GTA and matching the existing record set in 2016 in Metro Vancouver. The GTA saw 106 condominium units sold in 2021, an increase of 82.8 per cent over 2020 levels, while 144 units changed hands in Metro Vancouver, up 44 per cent over the previous year.
• RE/MAX brokers have reported an upswing in non-resident buyers in Metro Vancouver and Halifax-Dartmouth in 2021, however domestic buyers continue to drive luxury sales in the Greater Toronto Area.
• An increase in young entrepreneurs has been noted in the GTA, with some utilizing crypto-currency gains to make their way into the housing market. Family wealth has also contributed to the increase in luxury home sales, with many parents freeing up the reins so the kids can enjoy the fruits of their labour.
• Non-resident buyers are returning to Canada’s residential housing markets, despite the existence of three taxes aimed at foreign ownership in Metro Vancouver – the 20-per-cent Foreign Buyer Tax, the two-per-cent Speculation and Vacancy Tax (SVT), and the three-per-cent Empty Home Tax and the 15-per-cent Non-Resident Speculation Tax targeting sales in Ontario’s Greater Golden Horseshoe Area.
• Sales of building lots have declined at the top end as buyers are reluctant to embark on construction when costs are unclear, labour is hard to find, and supply chain disruptions can add years to the custom-building process.
• Inventory is balanced over the $3 million price point in Metro Vancouver while just 200 such homes are currently listed for sale in Toronto proper. Supply levels are exceptionally low in 50 per cent of markets surveyed for this report, including the GTA, Victoria, Kelowna, London, Kitchener-Waterloo, Hamilton, Barrie, Kingston and Ottawa.

About the 2022 Luxury Market Report
The 2022 RE/MAX Canada Luxury Market Report analyzed 19 Canadian luxury real estate markets, using data and insights supplied by RE/MAX brokerages. RE/MAX brokers and agents were surveyed on market activity and local developments based on local real estate board data and market activity in 2020 and 2021.

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The REALTOR® Association of Edmonton is reporting a 27.6% decrease in month-over-month sales from November to December. Total sales in December hit 1319 compared to 1823 the month before. The average price declined slightly month-over-month, down 0.6%, and now sits at $382,000. Both months of inventory and days on market rose month-over-month, now sitting at 3.4 and 52 DOM, respectively.

Other RAE Highlights:

Total sales from January to June (Q1 & Q2) totaled 13,551 while total sales from July to December (Q3 & Q4) totaled 11,155.

Year-over-year average price rose to $385,000 in 2021 from $363,000 in 2020.

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Confidence continues in Canadian real estate market, with the inter-provincial relocation trend likely to remain strong in 2022

• Migration between provinces expected to continue in 2022, potentially impacting local Canadian real estate conditions, according to 53 per cent of RE/MAX brokers (20 out of 38)
• 49 per cent of Canadians believe the housing market will remain steady in 2022 and view real estate as one of the best investment options over the next year
• Some of the highest outlooks are anticipated for Atlantic Canada, with Moncton and Halifax projecting average residential sales prices to increase by 20 per cent and 16 per cent respectively in 2022
• 97 per cent of regions (37 out of 38) surveyed are likely to remain seller’s markets in 2022

Toronto, ON and Kelowna, BC, December 1, 2021 – RE/MAX is anticipating steady price growth across the Canadian real estate market in 2022, with inter-provincial migration continuing to be a key driver of housing activity in many regions, based on surveys of RE/MAX brokers and agents, as reflected in the 2022 Canadian Housing Market Outlook Report. The ongoing housing supply shortage is likely to continue, putting upward pressure on prices. As a result of these factors, RE/MAX Canada estimates a 9.2-per-cent increase in average residential sales prices across the country*.

CLICK HERE TO DOWNLOAD THE FULL REPORT

“Based on feedback from our brokers and agents, the inter-provincial relocation trend that we began to see in the summer of 2020 still remains very strong and is expected to continue into 2022,” says Christopher Alexander, President, RE/MAX Canada. “Less-dense cities and neighbourhoods offer buyers the prospect of greater affordability, along with liveability factors such as more space. In order for these regions to retain these appealing qualities and their relative market balance, housing supply needs to be added. Without more homes and in the face of rising demand, there’s potential for conditions in these regions to shift further.”

Despite the global pandemic, many Canadians still feel confident in the real estate market. According to a Leger survey conducted on behalf of RE/MAX Canada, 49 per cent of respondents believe Canadian real estate will remain one of their best investment options in 2022 (59 per cent of homeowners vs. 34 per cent non-homeowners which included renters, those not looking buy, and those currently looking to purchase). Additionally, 49 per cent of respondents are confident the Canadian real estate market will remain steady next year.

“Canadians recognize the value and investment potential in their homes. However, market challenges such as rising prices and limited supply have impacted local markets from coast-to-coast, causing angst this past year among those looking to get into the market and those hoping to move up in it,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Despite this, it’s encouraging to see that many are feeling confident in the housing market in 2022 and view Canadian real estate as a solid investment.”

2022 Regional Canadian Real Estate Insights

RE/MAX brokers and agents in Canada were asked to provide an analysis of their local market in 2021 and share their estimated outlook for 2022. Based on their insights, 97 per cent of Canadian real estate markets are expected to favour sellers, impacted by limited housing supply and high demand.

WESTERN CANADA

The Calgary and Edmonton markets shifted from balanced conditions in 2020 to seller’s markets in 2021, which brokers and agents in the region expect to continue into 2022. This is attributed to heightened demand prompted by the inter-provincial migration trend that took place throughout 2021, which saw many homebuyers from Ontario and British Columbia driving demand high, while supply remained low.

In addition to an increase in out-of-province buyers flocking to Edmonton, the region has also welcomed investors who found themselves priced out of other markets. RBC’s provincial outlook for Alberta puts this province ahead of all others in terms of economic growth in 2022, which should bode well for homebuyers and investors alike 2022.

Regions such as Victoria, Nanaimo, Regina and Kelowna also experienced an influx of buyers in search of larger properties and greater affordability, which is likely to continue pushing demand and prices up in 2022. This trend has notably increased demand for single-family detached homes and in some regions, condos as well, which may continue in 2022.

Despite some buyers choosing to move away from urban centres such as Vancouver/Greater Vancouver in favour of suburban areas within British Columbia, or leaving the province entirely, Vancouver/Greater Vancouver has remained a quality place to live. The region continues to draw interest from Canadian and international buyers, a trend that is likely to grow next year, in tandem with rising immigration. Vancouver/Greater Vancouver is expected to remain a seller’s market in 2022, providing inventory stays tight and current demand continues, according to a RE/MAX broker in Greater Vancouver Area.

Winnipeg is anticipated to continue to be a seller’s market in 2022. Young couples enjoying the freedom to work from home have been driving much of the demand in the region, especially for one- and two-story detached homes. The appeal of Winnipeg has had less to do with affordability, and more with lifestyle shifts such as hybrid working environments.

Additional findings from the 2022 Canadian Housing Market Outlook Report

• Two-in-five Canadians trust their agent to advise them during the current real estate landscape (43 per cent)
• 23 per cent of Canadians now have a greater desire to build their own home or buy pre-construction
• 26 per cent of Canadians have the desire to purchase a home while mortgage rates remain low
• 62 per cent of Canadians currently own a home. This is higher among those ages 35+ (70 per cent) compared with Millennials, ages 18-34 (42 per cent)
• The majority of Canadians (72 per cent) said rising home prices did not impact their purchasing decisions in 2021.

About the 2022 Housing Market Outlook Report
The 2022 RE/MAX Housing Market Outlook Report includes data and insights from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on market activity and local developments. Regional summaries with additional broker insights can be found at REMAX.ca. The overall outlook is based on the average of all regions surveyed, weighted by the number of transaction in each region.

*2020 average residential sale price numbers were full-year, 2021 were from January 2021 – October 31, 2022.

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Calgary led Western cities as a destination during 2021, with Kelowna, B.C. close behind and Vancouver dropping far down the rankings

Alberta saw a 33 per cent increase in the arrival of U-Haul moving trucks in 2021, and Calgary was the top destination in the province.

Alberta is the No. 1 province people are moving to and Calgary is the top migration city in Western Canada, according to moving data compiled for the annual U-Haul Growth Index.

Alberta benefitted the most from this migration trend in 2021, netting more one-way U-Haul truck customers than any other province. British Columbia ranks second for growth, followed by Ontario.

Vancouver, which was ranked No. 7 among top city destinations in 2020, dropped to No. 23 last year in the move-to rankings. Calgary, meanwhile, moved to No. 5 in Canadian cities after failing to crack the top 25 list in 2020.

Part of the switch in rankings could be housing price. The December 2021 average home price in Calgary was $451,000, compared to $1.2 million in Metro Vancouver.

In 2021, Alberta saw a 33 per cent increase in the arrival of one-way U-Haul trucks year-over-year, while departures rose just 29 per cent. More than 50.8 per cent of all U-Haul traffic in Alberta was inflow.

“There are initiatives in Alberta that are creating more job opportunities and attracting residents,” said Naga Chennamsetty, U-Haul area district vice President of Western Canada. “In the last year, we have seen lot of movement into Alberta. More communities are developing in and around major cities. Not only that, but the Canadian Rockies are so accessible to residents here, and they offer a variety of recreational activities. Alberta is one of best places to make a home.”

Calgary is the top landing spot for do-it-yourself movers coming to Alberta, but smaller markets like Red Deer-Lacombe, Medicine Hat-Redcliff and Airdrie are also attracting more residents.

Calgary ranked No. 5 nationally as a move-to destination, just behind Quebec City and just ahead of No. 6 Kelowna-West Kelowna. Of the top 25 cities to move into, Vancouver ranked third to last place at No. 23.

The top city for move-in hauls in Canada in 2021 was North Bay, Ontario and two other Ontario cities, Belleville and Sudbury, came in at No. 2 and No. 3, respectively.

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Okanagan realtors, insurance agents confirm that buyers are getting a “hard no” on coverage for homes in alert zones and it is difficult to get within 25 km. of wildfires

Buyers purchasing homes or commercial property in B.C.’s interior where wildfires are raging may find it difficult, if not impossible, to get fire insurance on the property, at least until the smoke dies down,

“It’s true, it’s an issue” said James Palanio, a real estate broker with Royal LePage in Penticton, who said his office recently met with an insurance representative on the problem.

“It is a hard no for insurance for property in an alert area, an evacuation zone,” Palanio said, but added that fire insurance can be decided on “case-by-case” basis for property within 25 kilometres of an active wildfire, depending on the insurance provider.

“There may be a lake between or other factors,” he said.

Without the insurance, it is impossible to arrange mortgage financing on a home purchase,

Palanio said his office is adding a subject clause to its sales contracts related to delays in getting fire insurance.

“Any home within 25 kilometres of an active wildfire is uninsurable,” said Emma Fraser, an insurance agent with Underwriters Insurance Ltd. in Penticton, even property, she added, that has fire hydrants and a fire department close by.

Fraser said that is the strict policy of the insurance firms she represents. She said agencies with their own underwriters may have some leeway in a case-to-case basis, but she believes it is not likely.

“I have turned down 30 people trying to get insurance on a home purchase,” she said. “Even people who are selling a home and buying another one are affected. I haven’t written a home insurance policy in the last month.”

Meanwhile, the Insurance Bureau of Canada is urging people to get fire insurance and for governments to find ways to reduce risk.

“The time has never been more clear that we do need to build more resiliency and we do need to work together to find a way to reduce or minimize our potential exposure to these threats that we’re facing,” said Rob De Pruis, director of consumer and industry relations with the Insurance Bureau of Canada.

He points out there are no easy answers, but said wildfire policy may need a rethink.

When questioned by Castanet about the cost of insurance for people who live in wildfire zones with no fire department coverage, De Pruis says a lot of factors go into calculating a premium, but said it’s very unlikely you would be fully turned down.

“Fire insurance has been around for hundreds of years, and fire insurance is readily available in B.C. and throughout the rest of the country,” he said.

This is currently not the case in most of B.C.’s interior where wildfires remain active.

Fraser said the current insurance restrictions are temporary and will end with the fire season, though no one knows exactly when that will be.

De Pruis adds, “We need to do better to prepare for wildfires, floods, hail, windstorms. These perils are having just a huge impact on people and property.”

Unfortunately, major natural disasters are becoming all too frequent.

Between 1983 and 2008, the insurance industry was paying out on average about $425 million annually for severe weather costs. Over the past decade, the number has increased 360 percent, to almost $2 billion a year. Six out of the 10 costliest events in Canadian history have been in the last decade.

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“Has the market peaked” or “is the bubble nearing its burst” are questions that are dominating the housing market of Canada.

But more than these, investors must watch rental yields closely. Not every non-institutional buyer in residential real estate is purchasing to move in. Despite weak macroeconomic indicators, many reasons existed for Canadian households to invest in real estate assets. Mortgage rates fell sharply on the back of near-zero benchmark rates. Data also suggests that families are sitting on a record-high cash pile despite job losses and negative GDP growth after the pandemic struck.

The average selling price peaked at $716,000 in March, according to CREA. In March 2020, the figure was $575,000. Now, compare this house sales activity with the average monthly rent. The National Rent Report by Rentals.ca suggests average rent in Canada steadily declined between November 2020 and April 2021 on a month-over-month basis. It was only in May 2021 that an uptick was observed.

How the rental market behaved in 2020
Canada Mortgage and Housing Corp.’s 2020 Rental Market Report has some interesting findings. Data indicate rent arrears across Canada increased in 2020. But what also rose was the overall vacancy rate, from two per cent in 2019 to 3.2 per cent in 2020. Canadians were reluctant to move out and switch homes. Also, population growth in Canada was the slowest since 1945 because very few immigrants entered the country due to COVID-19 restrictions.

The CMHC report also reveals how the pandemic dealt a blow to renter households. Nearly 58 per cent of renters reported an uptick in arrears, clearly reflecting the stress in the rental market. Over six per cent of rented apartment units were in rent arrears, and Toronto topped in the category with over 10 per cent of units reporting arrears. Cumulatively, renters owed nearly $150 million in arrears in 2020.

The findings must be read against the backdrop of the federal government’s subsidy programs, including the emergency wage subsidy, recovery caregiving and recovery sickness benefit. Finance Minister Chrystia Freeland announced that these will continue until October 2021, calling them “lifelines” for many. If not for these support programs by the government, which burned a hole in its pocket and raised Canada’s debt-to-GDP ratio, the rental report could have been worse. Subsidies helped many families pay their rents amid the high unemployment rate.

One can also recall forecasts about Canada’s rental economy by Rentals.ca in January 2020. It predicted a year-over-year growth of three per cent in rents in 2020. For Toronto, the average rent was expected to increase seven per cent. Despite negative forces that gripped the rental space in the latter half of the year, average rent across Canada grew 3.6 per cent, according to CMHC. In Toronto, rent grew by 4.7 per cent. However, the vacancy rate also soared, indicating that the market had inventory, but the demand was lacking.

Prudence suggests rental growth must be in proportion with growth in the sale price of houses, at least when not everyone is graduating from renter household to ownership. Canada has a sizeable rental economy for students and new immigrants. Considering this, rents must grow for landlords to justify the purchase of property as an investment. Homeownership data suggests not more than 70 per cent of households own homes in Canada. This places it behind emerging markets like China and Vietnam, where ownership is approximately 90 per cent. For reference purposes, nearly 66 per cent of households in the U.S. own homes.

It is irrefutably true that new owners in Canada spent heavily when they recently acquired a residential real estate asset. It was only after March 2021 that average house prices began to fall. However, on an annual basis, prices were still up a whopping 25 per cent in June 2021.

The housing market has dominated headlines for much of the post-pandemic period. The biggest worry now is not whether it has peaked. The biggest question is what will become of rental yield?

Macroeconomic indicators in Canada
Here’s a cursory look at some facts about the economy. According to Statistics Canada, the economy is yet to bounce back to the pre-pandemic level in GDP terms. The economy contracted by 0.3 per cent in May 2021, a second consecutive monthly fall. The jobless rate still stands at 7.8 per cent, and 336,000 more full-time jobs need to be created to take employment to the pre-COVID level. In June, the inflation rate was 3.1 per cent. It is quite clear that macroeconomic indicators have yet to rebound. The Delta variant further threatens any quick recovery.

From here on, watchers must carefully study rental yield to understand better whether investors in real estate paid too much. Renter households will shape how the rental economy behaves. If demand rises and vacancy rates fall across provinces, rents will go up. But if the slowdown in immigration continues in 2021 and tenants find it difficult to pay like last year, the rental economy can become a cause of concern for all stakeholders. On a separate note, since the average house price is falling month-over-month, one can rarely expect to gain capital by selling the asset.

It will also be a lesson for investors that park money in real estate assets when prices are at a record high.

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Even for those who have a full understanding of what a mortgage is, the term “reverse mortgage” may be unfamiliar to many Canadians. This article intends to provide the high-level basics.

What is it?
Like regular mortgages, a reverse mortgage is simply a loan secured against your home. But unlike regular mortgages, it allows you to draw money based on the equity you have in your home, without having to sell your home. You can take the money out in a lump sum, or in smaller amounts spread out over time.

Especially if you are an older person, a reverse mortgage can be an attractive alterative to more conventional forms of short-term debt, such as personal loans, lines of credit or credit cards. It can be an easier way to get access to funds, compared to having to downsize to a smaller home, or move to a rental property.

Your loan must be repaid at the time you sell your home, move out, or die (and in the latter case your loan is repaid by your estate). If you and a spouse, partner or common-law spouse, parent or a child are the borrowers, the loan does not need to be repaid until the earlier of the last borrower dying, or the last borrower moving out of the property.

What are the benefits?
One of the most appealing things about a reverse mortgage loan is that repayment can be entirely deferred until you sell. Although you are entitled to repay some of the interest or even all of the principal at any time, you can use the borrowed money freely and without restrictions as you choose, without having to make any repayments at all. Plus, you get to keep your home, as owner.

You also pay no tax on the money you borrow, and it does not affect any old age security or guaranteed income supplement benefits you are receiving.

What’s the down-side?
Due to the unique and flexible nature of a reverse mortgage, the administrative costs and interest rate you are charged by the lender will tend to be higher than that for traditional mortgages. Also, since payments on the reverse mortgage needn’t be made at all until the earlier of the last borrower moving out, or the eventual sale of your home, the total interest you will pay at the end will possibly have accumulated to a significant amount.

By extension, this means that when you do come to the end of the term of your loan, you will have chipped away at your home equity and will have less equity remaining.

Who is eligible?
Aside from financial eligibility requirements, which are set by the lender, there are only a few stipulations for obtaining a reverse mortgage. Naturally, the first is that you must own your home; the second is that you must be using it as your primary residence – which means you occupy it for at least six months each year. Also, you must be at least 55 years of age at the time you apply.

Note that if you co-own the home with others, you must indicate that on the loan application.

Is there a limit to how much I can borrow?
The general rule under a reverse mortgage is that a person can borrow up to 55 per cent of the current value of his or her home (this amount is sometimes referred to as the “equity release”). However, your own personal borrowing limit may be less than that, depending on factors such as your age, as well as your lender’s own rules and threshold factors (such as your home’s location, condition and appraised value).

What about my existing mortgage?
Before you can get a new reverse mortgage from a lender, you will first have to pay off any existing loans, mortgages or lines of credit that are secured by your home. But the good news is that you can use some of that “equity release” money from the reverse mortgage to retire those debts.

What can I do with the money?
The beauty of the reverse mortgage is that you can borrow against your home’s equity to live out your remaining years in your own home, in enhanced financial comfort. You may want to use the borrowed money for home repairs, unforeseen health care expenses, for finally getting rid of some lingering and longstanding debts, or to take a trip around the world!

What can go wrong?
As with a traditional mortgage, you can default on a reverse mortgage by failing to meet your obligations to the lender either before or during the application. For example, you can default by being dishonest on your reverse mortgage application, or by not adhering to the terms of the loan contract – such as using borrowed funds for an illegal purpose. The lender may have additional stipulations outlining what events constitute default in the reverse mortgage scenario.

Where do I get one?
There is a very small number of Canadian lenders who are willing to offer a reverse mortgage. These currently include the HomeEquity Bank and Equitable Bank.

Is it right for me?
A reverse mortgage can be a very attractive solution for getting access to funds that you can enjoy during your “twilight years”. However, it’s not right for everyone. Talk to your financial advisor to see if it could be the right solution for you.

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Finance Minister overrules officials to rule new legislation to level playing field when transferring a business within a family is now in effect.

Finance Minister Chyrstia Freeland has overruled ministry officials, and cleared up confusion, by ruling that Bill C-208, new legislation that levels the playing field for business owners who transfer ownership to members of their family, is now in effect.

Previously, under Canada’s Income Tax Act, those who sold the shares of their business to a company owned by their children or grandchildren were taxed at a significantly higher tax rate than if they had sold their business to a purchaser at arm’s length. The result essentially amounted to a tax penalty for keeping the family business in the family.

Bill C-208 received Royal Assent on June 29, which traditionally means it becomes law immediately.

However, in a June 30 statement, senior Department of Finance officials has said the federal government proposed to introduce legislation to make the ruling effective January 1, 2022.

On July 19, Finance Minister Chrystia Freeland dismissed that decision, ruling that Bill C-208 is now in effect.

“The law is the law,” Freeland in a statement.

Prior to the passage of the bill, when small business owners and owners of family farms or fishing corporations sold shares of their incorporated business to a non-family member, the sale was generally considered a capital gain, which may have been eligible for the lifetime capital gains exemption. This option was not available when the sale of shares was to a corporation controlled by a family member, explained Dino Infanti, partner, national leader, enterprise tax for KPMG LLP in Canada, in an exclusive column for Western Investor, published July 6 and since updated.

For example, if the husband and wife who own a successful auto repair company sold shares of their business to a third party, the increase in the value of the company was considered a capital gain for tax purposes. If the shares qualified for the lifetime capital gains exemption, the owner might not be required to pay any regular income tax on the sale.

In contrast, if the parents sold those same shares to a corporation controlled by a daughter or son, they could have been hit with a steep tax bill when they retired or exited the business. Canadian tax law treated the difference between the sale price of the shares and the cost to the owner of those shares as a dividend, rather than a capital gain.

“As a result, the business owners would lose out on the capital gain tax treatment and, if they qualified, the lifetime capital gains exemption, and be taxed at the higher dividend rate. Depending on the province they live in, the type of dividend and their overall income, they could have been taxed at a rate of 49 per cent. For example, on a $900,000 sale, the parents’ tax bill would have been a whopping $441,000 more to keep the business in family hands,” Infanti said.

Bill C-208 addresses this by amending a section of the Income Tax Act to essentially treat a business owner’s child or grandchild as being at arm’s length from them.

“Now, families can better plan for their retirement, without necessarily having differences in after-tax income affect their decision to pass the business on to the next generation,” Infanti noted.

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Massive deal involved three multi-family portfolios, dozens of apartment buildings and three real estate brokerages.

Brooks-born and Calgary-based Avenue Living Asset Management has “pounced” on the Edmonton multi-family market with the rapid-fire acquisition of 1,566 rental apartments in dozens of buildings in Alberta’s capital.

“Avenue Living saw an opportunity and it pounced,” said Bradley Gingerich, head of the Institutional Property Advisors team at Marcus & Millichap in Edmonton, one of three brokerages involved in the transaction.

The three-portfolio deal also involved agents from BMO Brokers and Jll Canada.

Gingerich said Edmonton opportunities for rental investors include an improving economy, rising tenant demand and some of the lowest-priced multi-family real estate of any major city in Canada.

Marcus & Millichap brokered the Huntingdon portfolio sale, from private family owners based in Alberta, that includes 361 townhouse and apartments in low-rise buildings across a 20-acre site in north Edmonton.

The Avenue Living transaction also includes the purchase of Avalon Court and Amberwynd Apartments (Spruce Grove) from the British Columbia Investment Management Corp.(QuadReal), and the 874-unit Maclab portfolio that includes apartments and townhomes in seven separate complexes.

Dave Smith, CEO of Avenue Living US Real Estate and the chief operating officer of Avenue Living Asset Management Ltd., said the latest transactions doubled Avenue Living’s Edmonton rental holdings to more than 2,900 units. Edmonton is the company’s largest market and it now holds 25 per cent of Avenue Living’s residential rental assets.

“We’ve always had a long lens on the Edmonton market . What we see in Edmonton is a lot of stability through the last 18 months. It looks like a large transaction at one point in time but really we’ve been very active in the market, looking at opportunities, underwriting opportunities, developing relationships with the brokerage community and our peers,” Smith told the Real Estate News Exchange.

The company specializes in what Smith calls “workforce housing” rentals.

Smith said Avenue Living is also looking at a few additional, smaller transactions in Edmonton and will continue to source investment opportunities in the market.

Since 2015, Avenue Living has invested $340 million in capital expenditure projects, repositioning buildings across the Prairies. The company said it is able to buy assets below replacement costs, renovate those assets, and then reposition them for the same demographic, but ensure they remain cost-effective for that tenant base.

Avenue Living was founded in 2006 with the purchase of 24 rental units in Brooks, Alberta. Today the company has more than 12,500 units across its portfolio, primarily in Alberta, Saskatchewan and Manitoba. In the past two years it also entered the U.S. market, where it now owns more than 800 rental units.

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Planned 600,000-square-foot distribution facility near Edmonton will dwarf similar Amazon facility planned at Port of Vancouver.

U.S. retail commerce giant Amazon will open a giant distribution facility in Acheson, Parkland County, about 20 kilometres west of Edmonton, next year, the company has announced.

The 600,000-square-foot centre, Amazon’s first robotics facility in Alberta, will be the largest in Western Canada, dwarfing a similar 450,000-square-foot robotics hub planned for the Port of Vancouver in Richmond, B.C.

Despite the Parkland County warehouse’s use of robots, Amazon expects to hire more than 1,000 full- and part-time staff to work at the facility.

“Parkland County is an ideal location for fulfillment centres. It is part of the Edmonton Metropolitan Region, offering easy access to 1.4 million customers. Its strategic location along the CanaMex corridor and the Trans-Canadian highway, allows companies to cover, via truck, all of Western Canada within one-day drive,” said Rod Shaigec, Mayor of the Town of Acheson.

The Acheson build is being developed in partnership with Parkland County, Panattoni Development Company and QuadReal.

Meanwhile, Amazon plans to build five new distribution centres in Metro Vancouver, including the robotics fulfillment centre at the Port of Vancouver’s Richmond Logistics Hub.

Two years ago, Amazon secured 450,000 square feet at the Delta IPort industrial park, which is on land leased from the Tsawwassen First Nation, for a large distribution facility.

Amazon estimates that the new centres will create up to 2,000 jobs, half of them at the Port of Vancouver site.

Other sites are in Vancouver, Pitt Meadows, Delta and Langley, the e-commerce giant announced May 7.

Amazon employs more than 3,600 people in the Prairies and has invested more than $600 million in Alberta, Saskatchewan and Manitoba, according to company statements.

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Staging a house before selling can be tiring, but it can help you sell properties much faster. The effort you’ll put into this process will help you become a successful real estate agent who consistently gets the asking price and impresses potential buyers with every property.

Great staging should show off the home’s best assets, making it appealing for a wide range of prospective buyers. Creating a visually pleasing space where every single buyer can imagine their future should be your goal. Here are five ideas that will make a big difference.

1. Depersonalize it:
Potential buyers need to enter a house that will boost their creativity and one they can imagine as their own. The property shouldn’t feature personal items, and your job is to depersonalize it. Once the buyers come inside, they will have a vision about how they want to decorate the space and create new memories there. Items from the owners can be too overwhelming and sway them away from the idea. If there are any objections from the owners, you have to explain why this is a smart move.

Removing all personal items is a professional tip that you have to do right from the start. This includes personal hygiene products, framed photos, decorations, toys, travel souvenirs and even clothes, if possible. Try to put away religious items if the client agrees.

2. Work on the windows:
Guests should be impressed with the house you’re selling right away, and one of the factors that most real estate professionals forget about is the windows. Everyone knows that floors and walls should be clean, but did you remember the windows? They should be squeaky clean and sparkling because it’s one of the first things clients will notice when they arrive at the property.

Next, don’t forget about quality window treatments. Everyone wants a room filled with light during the day and privacy at night. Also, a bright room will appear more spacious. Keep in mind that window treatments for condominiums will be different than for houses and townhouses, and often can make or break the deal. Many condos have lots of windows, often floor to ceiling. A great investment is blackout window coverings. This can be a great selling feature as it provides privacy and adds a beautiful esthetic.

Another smart idea is to make the ceilings appear taller with curtains and drapes that start from the ceiling and reach the floor.

3. Remove the clutter and clean the gutter:
Decluttering should be your next step. When a prospective buyer sees a home that is too cluttered, they simply can’t imagine living in a space like that. They also won’t be able to paint a picture of a potential home because they will be overwhelmed with everything that’s going on around them. Clutter makes the entire space appear smaller, and that’s the last thing you want. Advise the owners to remove all the items they don’t need and to store them in boxes.

Taking care of the gutter means preventing roof, foundation, wood damage, pest infestation, basement flooding and interior damage. Gutter cleaning and ensuring that the gutter system works properly will also enhance the appearance of the home. Who knows, maybe this will lead the clients having a “love at first sight” moment. Remember, the outer appearance is just as important as the inside of the property you’re selling.

4. Opt for neutral:
Not everyone is a fan of bold, striking colours. That’s why it’s recommended that the space you’re selling features neutral tones. This is the most appealing palette for potential buyers because it makes the rooms appear larger, gives a fresh look and helps the space look sophisticated.

Neutral shouldn’t mean boring. Although the home shouldn’t be personalized and feature bold colours, it should still have cool accessories that make it stand out. You and the owners can implement bold hues via flowers, vases, pillows, throw blankets, towels and other decorations.

5. Furniture placement:
The way furniture is placed in the rooms is quite important. Each room should have a purpose. The space shouldn’t be too cramped with furniture, and it shouldn’t be too empty. Remove all pieces that are too big and limit the moving space around the home.

If the furniture in the house won’t do the job, rent some furniture. Talk with the owners and let them know why you are recommending this. Educating the owners on what’s best and what will sell their house faster should be your priority.

Once you’re on the same page, you can declutter the home, work on the windows and window treatments, implement neutral colours as the basic palette, choose the best furniture placement and depersonalize the space. These five tips might sound simple, but you’ll soon see how beneficial they are.

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St. Albert says the 55-acre, 15-megawatt solar array could power 25,000 homes and generate $2.4 million for the city each year

St. Albert, Alberta, will be host to a 15-megawatt solar farm in just two years, city council has decided — one that will power 25,000 homes and generate some $2.42 million a year.

St. Albert council voted 6-1 June 21 to approve the project charter for the $26.1-million solar farm that would be built on 55 acres of city-owned land, known as the Badger Lands.

Council also voted 6-1 on first reading of a bylaw to borrow up to $33.7 million to fund the project (the estimated cost plus 25-per-cent contingency).

Sheena Hughes was the only council member opposed to both motions.

City administration hired the energy firm ATCO to craft plans for the farm. ATCO’s design would see approximately 34,350 rack-mounted, double-sided solar modules, and recommended the city build it all in one go.

“You want to install the biggest solar farm you can afford to achieve economies of scale,” explained ATCO engineer Rachel Si.

Si told council the Badger Lands were a good site for a solar farm as they are flat, accessible, city-owned, salt-contaminated (meaning they would require expensive cleanup for most other uses), and close to an electrical substation.

ATCO officials told council the farm would produce about 21,800 megawatt-hours of electricity a year — enough to power some 25,000 homes, or 96 per cent of the homes in St. Albert, which is located close to Edmonton in north central Alberta.

Studies suggest this would prevent some 15,449 tonnes of greenhouse-gas emissions a year — equivalent to not burning 205 tanker trucks’ worth of gasoline.

Council heard the farm would cost about $110,000 a year to run. Power sales, carbon credits, and other revenue sources would result in net annual revenues of about $2.42 million a year, or $41 million over the 30-year life of the farm. The array would pay for itself in 12.8 years, provide stable electricity costs, and reduce the city’s carbon emissions. These predictions did not account for potential grants.

City environmental manager Christian Benson said solar has been a proven technology since the 1970s and is easy to use and maintain. Alberta has about 35 large solar farms in operation and in production, including projects in Innisfail and Fort Chipewyan.

“The economics are solid,” Benson said, with solar farms drawing considerable foreign investment to Canada.

Hughes criticized ATCO’s projections as overly optimistic, as they assumed Canada’s carbon tax and energy prices would ramp up considerably in the coming decades.

“I’m not going to assume [Prime Minister] Trudeau is going to raise the carbon tax to $170 a tonne over time as a business model,” she said. (The federal government has said the tax would reach that level in 2030.)

Hughes said this project would merely break even if carbon taxes and energy prices stayed flat, which she argued was not worth a potential $33-million investment.

The borrowing bylaw was scheduled to return to council August 30. If approved, the farm would start construction in July 2022 and be operational by April 2023.

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Rents are low, wages are high and investors are buying apartment buildings for around $120,000 per door

Edmonton, Alberta’s capital where the average annual income is almost $10,00 higher than Vancouver, has become a paradise for renters, with some of the lowest rents in the country.

A national survey, released June 16, found that while rents across Canada had increased 2 per cent in May from a month earlier to an average of $1,708 per month, tenants were still paying less than $1,000 for a one-bedroom in Edmonton.

Edmonton finished 30th on the list of 35 cities for average monthly rent in May for a one-bedroom home at $992 and for a two-bedroom at $1,215, according to the National Rent Report from Rentals.ca and Bullpen Research & Consulting.

“Average rents in Edmonton for a one- and two-bedroom home in May saw little change monthly or annually, “ the report found.

In comparison, Vancouver leads Canadian cities for average monthly rent, with a one-bedroom rent in May at $1,981 and for a two-bedroom at $2,760, the National Rent Report found.

Calgary finished 27th on the list of 35 cities for average monthly rent in May for a one-bedroom home at $1,216 and for a two-bedroom at $1,530.

Edmonton also has plenty of rentals to choose from, with an 8 per cent vacancy rate, and more than 6,808 new rental units built or nearing completion in the city, according to commercial real estate agency CBRE.

The big supply and low rental prices are reflected in prices and demand for existing apartment buildings.

The second half of 2020 saw $121 million in multi-family investment in Edmonton, down significantly from the $367 million in the first half of the year, with just 21 buildings sold.

The largest multi-family transaction in the second half of 2020 was Westlawn Village transacting 144 units at an average price of $155,903 per unit.

This June 15, a two-building rental complex in Edmonton with a total of 58 units sold for $6.8 million, or less than $118,000 per door, based on the transaction brokered by the Marcus & Millichap team in Edmonton.

Capitalization rates for the 12 low-rise Edmonton apartment buildings sold so far in 2021 averaged 4.92 per cent, according to a survey by the Network and released to Western Investor by Avison Young. The median per-door price for the buildings was $113,440. Mid-rise concrete apartment buildings in Edmonton generally sell at lower cap rates, in the sub-4 per cent range, Avison Young noted.

Edmonton, as in all of Alberta, has no rent controls. This compares with B.C., which has among the most rigid rent legislation in Canada.

Higher average incomes in Edmonton are also substantially higher than the national average, and well ahead of Vancouver.

In March 2021, average weekly earnings in Alberta remained the highest in Canada at $1,226, an increase of 3.1 per cent from March 2020. Nationally, average weekly earnings were $1,132 in March 2021, according to Statistics Canada.

The average salary in Edmonton in the first quarter of 2021 was $97,220, compared to a national average of $89,596 and an average of $88,223 in Vancouver, based on a study from the Average Salary Survey, an international research study based in the U.K, released this June.

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The locally built, 72-square-foot Yocto comes with full appliances and doesn’t require a building permit

In Greater Vancouver, where the average detached house sold for $1.8 million in May and a typical condo apartment for $737,000, a small-house builder is offering perhaps the least expensive—and smallest—house in Canada.

“Our core business is for granny flats and homes for First Nations,” said Chase Lefneski, a spokesman for Dwelltech, based in Maple Ridge, B.C., where the May benchmark house price was up 34 per cent from a year ago to $1.1 million.

Dwelltech makes three different small houses.

Its latest offering, the Yocto, is the tiniest—72 square feet.

“We think it is the smallest complete house in Canada,” Lefneski said.

Despite its compact space, the Yocto comes with full-sized appliances, a closet and a built-in bed and mattress.

“The bathroom works perfectly. It’s a residential toilet and shower, not a small RV-type fixtures,” Lefneski said. “It’s a little hard to believe all that fits in 72 square feet.”

The houses come with a 20-year warranty on roof, walls, doors and windows.

“It is built like a tank. They are made for rough use and to be easily moved as many times as you want,” according to Lefneski.

The small houses sell for $24,900, he noted, and do not require a building permit.

The tiny homes do need water and power access and hookup to a septic or municipal sewer system.

The Yocto may provide another option for municipalities and community groups trying to house the most vulnerable residents.

In Victoria, a tiny-house village, which converted standard 20-foot shipping containers into 160-square foot homes, opened May 12 as temporary homes for Victoria’s homeless population.

The 30-unit project, by Aryze Developments, was partly financed by $550,000 raised during a three-month crowdfunding campaign.

The little houses come equipped a bed, side table, a small fridge and armoire, but village residents share communal bathrooms.

In Alberta, the Homes for Heroes Foundation has opened a small-home project meant to house homeless veterans who served in Canada’s armed services.

Some of the 300-square-foot homes, designed with the help of trailer manufacturer Atco Structures, were set up in a 2020 Calgary project.

A second village is being finished in Edmonton. Scheduled to open this fall, the Edmonton village consists of 18 small homes, two accessible homes, an office and an amenity building.

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Make sure your A/C can handle any heat wave this summer with these tips and how to know when to call in the pros.

Soaking in the summer sun is part of the fun of the season. But if you don’t have a cool home to retreat to, that heat can start to feel overbearing. Make sure your A/C (or swamp cooler!) can handle any heat wave this summer with these 12 tips, plus guidance on how to know when to call in the pros.

Before beginning preparation steps for either an air conditioner or swamp cooler, make sure the unit is turned off and disconnected from power.

Prepping Your Air Conditioner
1. Clean the filters
Remove the filter from the unit and vacuum away dust and buildup. If there’s more buildup than your vacuum can handle, you can wash the filter in the sink or with a hose. If the filters are very dirty, or it’s been longer than three months, you’ll need to replace them.

2. Clean condensate lines
The condensate lines draw water from the evaporator coils and run it into the drain pan. You can make sure these lines are clog-free using a vacuum to suck out any debris and then pour a mixture of vinegar and water through the lines.

3. Check coolant lines
Examine the lines that carry the refrigerant to ensure there aren’t any signs of leaks. If you do see signs of leaking, you may want to call an HVAC professional to repair the unit.

4. Remove debris from around condenser unit
Sweep away any leaves and debris from around the condenser unit and vacuum or hose debris from the walls of the unit itself. This allows your A/C to efficiently release the heat that it draws out of your home.

5. Check the ductwork
Ducts don’t often need cleaning, but it’s important to take care of the situation quickly when they do. If you see pet hair emerging from your ducts or notice a foul smell coming from any of them, it’s time to call in an HVAC professional.

6. Clean supply and return vents
Ensure your A/C can efficiently pump cold air into your home and pull hot air out by cleaning the supply and return vents inside the house.

7. Test the unit
Do a test run of the unit on a warm day to determine if air is blowing from all of the vents and the house is cooling adequately.

If after that first-day test run, your A/C is not adequately cooling your home, or it’s turning off when it shouldn’t or making loud noises, it’s time to call in the pros. Keep in mind that an A/C unit lifespan is only around ten years. After this age, you may want to consider replacing the unit. You’ll almost certainly see some savings on your electricity bill with a more efficient model, and you’ll stay cooler through the hot days of summer.

Prepping Your Swamp Cooler (Evaporative Cooler)
Preparing your swamp cooler for summer involves similar steps to preparing an air conditioner.

1. Clean the exterior
Remove the cover or clear any debris from the swamp cooler and wipe down the outside of the unit to remove any dust.

2. Clean the interior
Open the sides of the cooler and vacuum out any debris. Wipe down the sides and base of the interior.

3. Replace pads
Especially if they’ve hardened, it’s essential to change the pads that absorb water within the cooler. It’s advisable to replace these at least every year.

4. Connect the water line
Reconnect the water line to the unit and check the pipes to ensure they’re in good condition.

5. Test the unit
Turn on your swamp cooler and verify that the pump and blower are working and that you don’t see any leaks.

If your swamp cooler isn’t blowing cold air, isn’t wetting the pads, or is making strange noises, it’s time to call in the pros. The lifespan of a swamp cooler is also around ten years, so if yours is older than that, it might be time to consider a replacement.

A broken or under-functioning air conditioner or swamp cooler can make summer miserable. Make sure yours is ready to help you beat the heat of the season!

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Homeowners would be able to make energy-efficiency upgrades to their homes for no money down, with the cost of those upgrades repaid over decades through property taxes.

St. Albert residents will be able to put up solar panels and new insulation next year for no money down under a new $5-million program approved by city council.

St. Albert council voted unanimously May 17 to approve third reading of the Clean Energy Improvement Tax bylaw.

The law lets the city borrow up to $5 million over four years to fund a Clean Energy Improvement Program (CEIP). Under it, St. Albert homeowners will be able to have certified contractors install certain energy-efficiency upgrades to their homes for no money down, with the cost of those upgrades repaid over decades through property taxes.

St. Albert environment manager Christian Benson said in an interview this program would help residents save energy and add value to their homes while also reducing the city’s contributions to global heating.

“I’m really excited as a resident for CEIP,” Benson said.

Green potential
CEIP is known as Property Assessed Clean Energy (PACE) outside of Alberta, and is seen by many economists as a way to encourage energy-efficiency upgrades to buildings that otherwise would not happen due to their high up-front cost. It also hooks the bill for those upgrades to the building, not the building’s owner, so the owner can sell the place before paying off the upgrade without fear of “losing” their investment.

The U.S. has done some $6.4 billion in upgrades through PACE in the last five years, Leigh Bond of the advocacy group PACE Alberta told council.

A January 2021 market study by the Municipal Climate Change Action Centre found a St. Albert PACE program would likely draw about 254 applicants over four years who would make some $5 million in home improvements. This would save the city $4.1 million, add $17 million to its economy and prevent about 30,700 tonnes of greenhouse-gas emissions over the life of the improvements – equivalent to taking about 6,700 cars off the road for a year, the U.S. Environmental Protection Agency reports.

Steven Ottoni, who oversees Alberta’s CEIP/PACE programs through the Alberta Municipal Services Corporation, told council St. Albert’s program would let homeowners make up to $50,000 in approved improvements (which typically include solar panels, heating systems, and insulation) to their homes for no money down. Owners would do a home-energy evaluation to figure out which upgrades have the best paybacks, then have an approved contractor do them. The city would pay the contractor and place a special tax on the property to recover that cash over about 25 years.

Benson told council the city plans to borrow the $5 million from the Federation of Canadian Municipalities to fund PACE, and to apply for a $2.45-million grant to offset the program’s administrative costs. Council could also enhance PACE with the proposed Home Energy Retrofit Accelerator program, which is now under development.

Bond said St. Albert should start with a commercial PACE program instead of a residential one. Commercial owners require less administrative support, as they have their own engineers, and commercial buildings tend to be energy hogs with more opportunities for cheap savings.

“(Commercial) PACE programs cost way, way less to administer and have a bigger impact,” he said.

City utilities and environment director Kate Polkovsky said the city wanted to practice with a smaller-scale residential PACE program before rolling out a bigger commercial one.

Bond also said the city had vastly underestimated demand for PACE – he estimated there is demand for about $154 million in upgrades in town between now and 2030 – and should up the size of its program to $50 million.

Ottoni said demand for PACE in Alberta is unclear, as it is a new idea here, and said his group had settled on $5 million based on the experience of other communities.

“We do think there is pent-up demand,” he said of energy efficiency, and $5 million could be an under-estimate.

In an interview, Benson said staff would work out the details of St. Albert’s CEIP/PACE program and hope to launch it next year.

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Canadians opt for more affordability and new lifestyle, flocking to recreational property market
57 per cent of markets offer properties below $500K, according to RE/MAX brokers and agents

-Average sale price anticipated to rise up to 30% in some recreational property markets, according to RE/MAX brokers and agents.
-44 per cent of recreational property buyers are budgeting $200,000-$500,000 in the next 12 months.
-57 per cent of Canadian recreational markets include at least one property type within the $200K-$500K price range.

Kelowna, BC and Toronto, ON, May 18, 2021 – The red-hot demand seen in Canada’s urban centres has migrated into recreational markets, as interest and activity in suburban and rural properties continues to grow. Despite rising demand, 57 per cent of Canadian recreational markets still have at least one property type with an average price below $500,000, according to the 2021 RE/MAX Recreational Property Report. Furthermore, 57 per cent of RE/MAX brokers and agents in recreational markets anticipate single-digit price growth over the remainder of 2021.

According to a Leger survey conducted on behalf of RE/MAX, more than half of those who plan to purchase a recreational property in the next year (59 per cent) are first-time recreational property buyers. Twenty-one per cent of Canadians are looking to recreational markets after being priced out of an urban centre. Low borrowing rates are working in their favour, with 22 per cent saying the lower rates have increased their ability to buy.

The survey also found that 11 per cent of Canadians were searching for a recreational property prior to the start of the pandemic and are still searching, and 15 per cent of Canadians who were not searching for a recreational property prior to the pandemic are now looking.

Shifting home-buying trends, as prompted by the pandemic, are exacerbating inventory challenges in a majority of recreational markets across Canada. The growing demand in these regions is also putting upward pressure on prices which is impacting affordability in many recreational markets, which RE/MAX brokers anticipate will be a long-term trend. Tofino, Ucluelet and Niagara regions, to name but a few, are experiencing low inventory levels, bidding wars and sky-high prices.

“There’s intense competition among buyers in Canada’s recreational property markets and inventory is stretched thin,” says Christopher Alexander, Chief Strategy Officer and Executive Vice President, RE/MAX of Ontario-Atlantic Canada. “But Canadians recognize that recreational properties remain an affordable option in such a turbulent market. There are still many recreational markets across Canada that are deemed affordable, despite the growing demand and rising prices.”

Affordability Outlook
According to RE/MAX brokers and agents, sellers’ market-like conditions are anticipated to persist for the remainder of the year in 97 per cent of regions examined in the report. These conditions are typically accompanied by rising prices, which has been a trend in 2020 that is expected to continue through 2021. RE/MAX brokers report that 57 per cent of Canada’s recreational markets include at least one property type priced in the $200,000 – <$500,000 range. This is down from 87 per cent in 2019.

The most affordable recreational regions for waterfront properties across Canada include Thunder Bay ($425,805), Charlottetown ($334,447) and the Interlake Region of Manitoba ($363,833), while Okanagan ($2,430,434), Barrie-Innisfil ($1,841,217) and Niagara region ($1,546,561) are the most expensive recreational property markets for waterfront properties.

Regional Market Highlights
Western Canada
A majority of Western Canada’s recreational markets are sellers’ markets, including Whistler, Shuswap, Canmore, Tofino, Ucluelet, Central Okanagan and Interlake Region of Manitoba. Most regions are seeing multiple offer scenarios, driving prices up for most property types. Out-of-province buyers – typically from Ontario – are looking to Canmore in pursuit of recreation and achieve greater work-life balance. With work-from-home conditions, demand has spiked and prices of non-waterfront properties in Canmore have increased by 26 per cent since 2019. Out-of-province buyers from the Lower Mainland and Vancouver Island are eyeing Tofino and Ucluelet, as well as out-of-country buyers from California. Both are looking to the region for the desire to relocate from urban centres and for a secondary residence.

With low inventory in Manitoba’s Interlake Region, prices of waterfront properties have increased by 43 per cent since 2019. Most activity is driven by buyers from within the province, typically families, millennial couples or investors looking for an affordable option outside of urban centres. With most buyers working from home in the region, good Wi-Fi access has become a top priority.

About the 2021 RE/MAX Recreational Property Report
The 2021 RE/MAX Recreational Property Report includes data and insights from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on market activity and local developments. Average sale price prediction range is reflective of all property types in a region and varies depending on the region. Regional summaries with additional broker insights can be found at RE/MAX.ca.

READ THE WHOLE REPORT HERE   

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Some may try to buy a home before the deadline.

As of June 1, 2021, homebuyers applying for an uninsured mortgage—those with more than a 20 per cent down payment—will need to qualify as if their mortgage rate was 5.25 per cent, or two per cent higher than their actual contract rate, whichever is higher.

In reality, Canadians can access five-year variable rate mortgages as low as 1.24 per cent at HSBC Bank Canada and 1.4 per cent at the Royal Bank of Canada, the largest mortgage insurer in the country, according to April 30 data from RateSpy.

Currently, Canada’s mortgage stress test has a minimum qualifying rate of 4.79 per cent—nearly 50 basis points lower than it will be affective June 1.

The Office of the Superintendent of Financial Institutions (OSFI) superintendent Jeremy Rudin has said that the change was necessary to ready the market for the end of the pandemic.

“The main thing we have to be ready for is an increase in mortgage rates to the pre-pandemic range,” Rudin told reporters on April 8. “We have interest rates that are extraordinarily low, even by recent standards.”

He warned lenders “OSFI will be looking for heightened vigilance in applying to income verification and debt servicing, combined mortgage-HELOC loan plans and risk governance.”

The OFSI rules apply to federally-regulated lenders.

In other words, mortgage qualifications could get much harder for those with high home equity loans, disruptive income and related debt. Due to COVID-19, many Canadians may fail to meet the tougher standards.

“Increasing the qualifying rate by another almost 50 basis points will only serve to disqualify more aspiring middle-class Canadians and would-be first-time buyers,” Paul Taylor, president and CEO of Mortgage Professionals Canada told Canadian Mortgage Trends.

It’s estimated that this change would reduce purchasing power for uninsured borrowers by between 4 per cent and 4.5 per cent. This is enough, according to real estate agents, for some buyers to close deals before the June 1 deadline.