What To Expect In The Collingwood – Blue Mountain Real Estate Market for 2017
Can you see my hands shaking and the sweat dripping from my brow? That’s because it’s the time when I make my predictions for the year ahead and it’s always slightly terrifying to me. So far, I have a surprisingly accurate track record but was that just dumb luck?
Nonetheless, I’m going to take a deep breath and get started. As always, I’ve been poring over reports, articles and studies to see what everyone else thinks. Sadly, there isn’t a great deal of consensus and it ranges from predictions of the greatest real estate crash in history to glowing expectations of a banner year.
Here is What We Do Know:
Real estate prices have been enjoying a pretty steady rise in values since the early 1990’s outside of a small blip in 2008/09. They have reached a frenzied pace in the last two years. Here are some possible reasons
Economy: The Ontario economy is healthy and growing, benefits from a low dollar and steady immigration in-flow. No immediate threats on the horizon.
Demographics: Millennials are moving into their prime home buying years. This group is one of the largest generations in history and their influence will reshape the economy.
Immigration: To grapple with the reality of an aging population and to help support economic growth, the government is increasing the number of immigrants allowed into Canada next year to 300,000 and potentially more.
Foreign Investment: Canada is known around the world as having one of the most stable economic and banking systems. People moving their money around in international markets feel there is nowhere in the world safer than Canada. The banking system and legislative controls over financing and banks, combined with our resource rich asset base in this country, make Canada top of the list for foreign investors.
Land Scarcity in Ontario: Due to the Provincial Places To Grow legislation which protects land belts from future development, builders complain that there is a shortage of land available for development thereby driving prices up
Interest Rates: rates remain historically low and are expected to continue to stay low in the foreseeable future. Any increases would be small as a rapid rise in rates would wreak havoc in the economy and there is no political appetite to do so.
Here is What We Don’t Know:
The Trump Effect. Please don’t ask me to explain. I think you know that nobody knows what he knows.
Affordability: Prices climbed very fast in 2016; over 15% in Ontario and 17% in our Southern Georgian Bay area. The profile of the home buyer is changing. First time buyers are getting shut out of the market. Investors are buying up multi-residential units, GTA migrants make up the bulk of single family home buyers now in the area
Legislative Intervention: The Feds jumped in last year with policy changes making it harder to qualify for mortgages. B.C. also brought in a foreign buyers tax. Ontario doubled the land transfer tax rebate for first time buyers. In other words, governments are always having a hand in the real estate and banking world. Somehow I doubt they’ll watch prices continue to soar at the levels we’ve been seeing without further intervention. IN addition, foreign governments may introduce rules that restrict outflows of dollars form their own countries which would impact our real estate markets,
Supply and Demand: This is the key factor impacting our market. People don’t want to sell for fear they will not be able to find anything to buy and this has created its own vicious cycle. With real estate prices soaring, sellers don’t yet see the ceiling and potentially some are also hanging on to see where the market heads later this year. No matter the reasons, the supply and demand factor will affect our market more than any other factor in 2017.
Impacts in Southern Georgian Bay
No matter what we read about national or provincial trends, real estate is always local. The market in Vancouver is entirely different than in St. John’s. For that matter, the market in Collingwood compared to Owen Sound, Barrie or Orangeville – all just one hour away, is also very different.
Our market here is changing:
- Considering the average wages of the local population and, considering the average house prices, first time buyers are being shut out of the local housing market. With the increased stress on qualifying for a mortgage at the posted rates, buyers are also qualifying for mortgages at a lower amount. This has increased the competition for low priced homes which have given way to price increases above the norm. As a result, more people are having to rent but that also means more investors are snapping up lower price d properties and, rents have been climbing almost as fast as the housing market. This is not sustainable or healthy. First time buyers will have to start looking at new solutions to afford a home such as lowering expectations, considering other areas than their prime choice, buying properties with built-in income, house sharing, etc.
- Many of our buyers come from the GTA where home values have soared allowing for early retirement. It appears the common threshold for buyers “downsizing” to our area is about $600,000 and as a result, homes up to this price level have been scarce and often sell with competing offers if they appeal to this demographic. Homes with main floor master bedrooms, full basements and double car garages in good neighbourhoods are top of the heap.
- We’ve seen real growth in the upper tier of the market. The top 10% of the market in this area starts at about $650,000 and the top 1% at about $1.6m. Sales over $1m grew 71% last year and for the first time, we had 2 residential sales in the region topping $3m. As the wealthy retire or, as they seek a vacation playground, the Southern Georgian Bay region has become THE place to be in Ontario.
I don’t see any significant economic or regulatory changes on the horizon that should impact the market over the first half of 2017 or even beyond. What I do see happening is the continued Seller’s market with a shortage of properties for sale which will mean two things: The number of sales will actually decline in 2017 over last year merely because there is nothing to buy and, prices will climb a minimum of 6% for the same reason. I expect we’ll see a run up in prices similar to 2016 over the next six months but by the latter half of 2017, we may start to see buyer fatigue and pull back resulting in a stabilization of prices and potentially some balance in the market. Any benefit to buyers may be offset by a slight rise in interest rates later in the year. I expect to see further government policy intervention in an attempt to cool the market.
So there you have my two cents. What do you think? I’d love for you to share your thoughts here on the blog.