It could be low mortgage rates or simply optimism about economy helping to drive new home construction and sales of existing homes but, whatever the reason, there is no doubt the Halifax real estate is becoming a sellers market.
The federal housing agency, Canada Mortgage and Housing Corp., released statistics this week, which showed that construction of new single-family homes was on the rise in Halifax, up 42.5 per cent in February over the same month last year. Construction started on 104 single-family houses in February compare to 73 homes started in February 2011.
Matthew Gilmore, CMHC’s senior market analyst for Nova Scotia, says home construction in Halifax is really just getting back to where it had been. “What I’m expecting to see this year is a higher level of construction activity over last year and getting back to what we would consider the 10-year average.”
In terms of new construction, it’s too early to tell if any of it is related to Irving Shipbuilding winning a $25-billion contract to build a new fleet of combat ships for the Canadian Navy, says Gilmore. But he suspects some of the new housing starts are based on the naval contract and that should continue over the next few years as work on the shipbuilding contract actually begins.
“One thing we tend to find in housing is the industry is a bit proactive in anticipating the demand as opposed to reactive and waiting for the demand and we’re seeing that already in existing home sales. We’ve seen some fairly high levels of activity in the four months following the announcement of the contract, which I wouldn’t say it’s coincidental.
“I keep referring to it as anticipation of coming demand and some people are trying to get ahead of that curve. We saw high levels of (existing home) sales in November; preliminary numbers show that February was a strong month, we saw growth in December and January as well. And it’s the kind of growth we’re expecting to see over the next year or so. “
This week Canada’s big banks got into a battle to attract new mortgage clients by offering new ultra-low five-year fixed rate mortgages. Bank of Montreal started it with a 2.99 per cent mortgage but the other major banks quickly have joined in. That has some in the mortgage industry, like Clinton Wilkins, a Centum Home Lenders mortgage adviser in Dartmouth, sounding a warning.
The Bank of Montreal mortgage deal, he says, is really a no-frills mortgage that leaves clients with little or no room to move. Under the terms of the 2.99 per cent mortgage, Wilkins says, mortgage holders who need sell their homes before the completion of the five-year term would be on the hook for sizable penalties.
On average, he says, Canadians renegotiate the term of their mortgage every 33 months and so there may be other mortgage offerings, which may work better for the individual mortgagee.
No doubt, the bank “mortgage wars” are likely to be temporary, so there has be a larger reason why more people are thinking about the real estate these days.
CMHC’s Gilmore says the real driver of the housing market is the expectation that there’s going to be increased employment in Halifax.
“If you have more people employed it will result in incremental demand for housing and that’s what we’re expecting to see or anticipating at this time.”
While nobody really knows how the naval contract will affect the local economy, there is a good chance it will help to boost demand for housing. As a rule of thumb, Gilmore says, for every two jobs there is demand for a new home.
“So if you get two more employed you’re going to get at least one more housing unit. You could have more than that, depending on how paying the jobs are so 10,000 (jobs) over the life of the contract could easily mean 5,000 housing units in addition to what we would otherwise build,” he told me in an interview.
Sales of existing homes on the Multiple Listings Service have been “balanced” over the past year or so, Gilmore says, but in the last few months the market has started to shift towards a sellers market.
“That just means that (the market) will be a little more friendly to sellers, a little less friendly to buyers. The seller will end up having a little bit more bargaining power over the buyer in this case. So what goes with that is slightly higher asking prices, possibly longer days on market but it kind of depends, it depends on how insistent buyers are that they want something.”
Canada Mortgage and Housing is forecasting a 10 per cent increase in sales of existing home and a six per cent increase in prices this year, according to Gilmore.
While the housing agency doesn’t expect the market to continue at that pace indefinitely, he says the bar has been raised on home prices and sales to a slightly higher level than previously.
“Seeing 10 per cent (sales) growth this year doesn’t necessarily mean we’ll see it every year, but we should get 10 per cent higher or a little more and maintain that for the next few years, that’s kind of what we’re expecting.”