REAL VALUE » Real Estate News

The Influence of the U.S. Fed Statement on the Canadian Real Estate Portfolio

Marcus Assalone — Fri, 27 Jan 2012 00:54:20 +0000

The U.S. Federal Reserve borrowed a play from Bank of Canada governor Mark Carney on Wednesday when they promised to keep interest rates low until at least the end of 2014. This is a good indication that Canadian rates will stay low as well, thus continuing the support of the real estate market here.

In Canada last year, the number of sales increased 2.2% over 2010 and the price of an average Canadian house increased 7.1%! In the GTA, the average house increased 10.8%. Low interest rates will only cause this upward pressure to continue, just as our Bank of Canada has been warning that some real estate markets are overvalued.

This concern that low interest rates are increasing house prices beyond their reasonable value, will force Jim Flaherty, the Canadian finance minister, to make it harder for Canadians to qualify for a mortgage. He may have to reduce the CMHC insured amortization to 25 years or tweak the mortgage qualification in other ways to reduce the amount of new homebuyers.

I have seen clients choose to look for homes outside of Toronto, or even outside of the GTA, even though they work in Toronto because they consider the prices that homes are selling for inflated. However, even on the fringes of the GTA house prices have ballooned to the same as they are here in Toronto. A big drawback is the increased commute and plus out there you don’t get all the amenities like public transportation and availability of shopping like you would in Toronto. Is there a winner in this situation?

The U.S. Fed also said they are considering printing more U.S. dollars, so expect the Canadian Dollar to raise above parity once again. This will once again allow Canadians to take some of the equity out of their homes and purchase retirement homes in the sun. Places like Arizona, Texas and the Mayan Riviera are sure to benefit.

UK Property – a Tale of Two Markets

Isabella Woods — Sun, 04 Dec 2011 14:34:20 +0000

The UK housing market has seen some turbulent times over the last few years. Since the economic crisis that saw the UK Government bail out the banking industry, year-on-year house prices around the country have plummeted, with the exception being the nation’s capital. UK property is, and has always been, two different markets. According to the UK Land Registry, the government department responsible for keeping and maintaining the Land Register of England and Wales (Scotland has its own system), the average house price outside London is £159,999 ($251,294), while the average price in the capital is £340,308 ($534,487).

London has survived the economic turmoil over the last few years, which has seen the rest of the nation’s house prices fall by almost 10% from their 2006 high. Prices in the capital have continued to creep up, albeit at a fairly slow pace, and any investor looking for property in the UK needs to understand the extremely diverse market and the importance London plays in house prices in the other regions. Property around the country varies by over 300% and the farther from the nation’s capital you go, the lower the price. The lowest prices can be found in the North East, where high unemployment, poor infrastructure and lack of investment have seen the average house price dip below the £100,000 mark. And things are only going to get worse.

Housing boom

UK house prices boomed from the late eighties and many housing experts agree that property was just too unaffordable. Of course, as mortgage lenders were offering 100% mortgages with nothing more than a few hundred pounds required to secure a home, easily available on 0 credit cards, nobody minded the high prices. The banking crash changed all that. Now, first time buyers need to find 10 to 15 percent of the asking price before they’ll even be considered for a mortgage. The result – cascading property prices throughout the UK as fewer and fewer homes are being sold. The reason London has survived is pure economics. London is the heart of the UK economy, with all investment banks, the stock market and other financial markets crammed together in the city. Its growing population of 7 million is continuously jostling for room in a city, as a result, many London workers commute to the capital from the nearby Home Counties, which is the reason these areas have such high property values than those farther away from the capital.

Falling Prices

In the last twelve months, average property values rose by 2.9% in

Photo courtesy of David Iliff‏

London and its bordering counties, but everywhere else they fell, with the North East, the region farthest from the capital, experiencing the biggest drop of 6.9%. But London isn’t immune to falling house prices, with many analysts predicting a slow down and probable fall. So where does that leave potential property investors looking to make money? The answer is not easy. The market throughout the country is tumultuous and with trouble in the Eurozone, future predictions are almost impossible to make, but there are some tantalizing prospects for the clever investor.

Infrastructure

Anyone thinking of buying property in the UK needs to look at London and recognize the importance the city plays in house prices throughout the country. Because of London’s limited size and limited number of houses, governments past and present have been trying to find a way of easing the burden on housing by encouraging more growth outside the city. One recent project that is possibly set to alter the housing landscape outside the capital is the proposed High Speed Rail Link (HSRL) that will connect the capital with the country’s second city, Birmingham. Birmingham is nestled in the West Midlands at the heart of the country, some 100 miles from the nation’s capital. However, with the introduction of the new rail link, Birmingham will be less than 50 minutes away from London, allowing far more freedom for London workers to move away from the city.

Currently, the average house prices in the West Midlands area is at an average of £176,576 ($277,330) but by 2025 when the rail link is fully operational, these prices could rocket, meaning any West Midlands property purchased now, could provide a worthwhile investment for the future. And it’s not just the West Midlands that will benefit. High speed rail links connecting Birmingham to Manchester in the North West, and Leeds even farther away could see dramatic increases in average property prices in these cities too, albeit it, perhaps not as extreme.

HOME BUYING DIFFERENCES BETWEEN OLDER AND YOUNGER BABY BOOMERS

Marcus Assalone — Fri, 18 Nov 2011 12:22:19 +0000

A new survey from Coldwell Banker Real Estate finds that 87 percent of 1,300 agents and brokers polled agree that the economy is delaying baby boomers’ plans to sell their homes. That said, the desire to purchase and own a home, or more than one home, remains strong in this demographic cohort, especially so in the investment market segment. Another 87 percent of respondents said they have baby boomer clients who already own or are looking to own an investment property, including 22 percent of agents who report that at least half (50 percent) of their boomer clients either own or are looking to own such properties.

“The baby boomer generation has driven the U.S. economy for years, and like many Americans, they may be anxious about their next real estate decision,” said Jim Gillespie, CEO of Coldwell Banker Real Estate. “I know baby boomers are a very diverse group and cannot be described in generalities, but our survey clearly indicates that those boomers who are financially secure are actively seeking to buy their retirement home, or a second home, and they are taking advantage of the opportunities and value available in today’s market.”

The survey also underscored that by dividing boomers, which account for 79 million Americans, into two age categories, a more dynamic picture of the real estate market emerges. Here are the additional findings:

	Younger Baby Boomers (Ages 47-55)	Older Baby Boomers (Ages 56-64)
Second Homes:	More than one-third (34 percent) of agents say younger baby boomers (ages 47-55) are interested in purchasing a second home.	22 percent say older baby boomers (ages 56-64) are interested in purchasing a second home.
Looking For Larger:	31 percent of respondents say that younger baby boomer clients are selling their current home and looking for a larger. home.		Compared to 6 percent of older boomers.
Downsizing:	80 percent of agents say that older baby boomers are more likely to want to downsize than younger baby boomers (52 percent). Although the economy has impacted boomers, the reason for downsizing is not only about the desire to save money. According to the survey, 49 percent of agents say the primary reason boomers want to downsize is because they desire a simpler lifestyle, while only 28 percent said the leading reason boomers are downsizing is to save money.
Single Family Home or Other Options:	Younger baby boomers are much more likely to prefer a single family home than older baby boomers (82 vs. 47 percent of agents agree).	For the older baby boomers, agents say about half are (47 percent) are looking for a townhome or condo. 27 percent of agents say their older boomer clients prefer an active adult community.

Survey Methodology: Coldwell Banker Real Estate conducted an online survey among 1,333 Coldwell Banker real estate professionals across the United States about housings trends for baby boomers. The survey was fielded between September 6 and September 15, 2011.

*Some answer percentages in the above may not total 100 percent, if only the most popular responses are listed. In other cases, respondents had the option to check all that apply, which may mean that percentages total more than 100 percent.