Real estate round-up: 2016 in review

There’s an old saying in journalism: if it bleeds, it leads. When it comes to Canada’s real estate landscape, 2016 certainly had its ups and downs. Here are our top 10 newsmakers of 2016 – some good news, some bad, but all essential reading for the smart home buyer in 2017.

1. The 2016 leap year

If you’ve been keeping up on the real estate headlines in 2016, then you already know that a big newsmaker was the rising home prices. Markets like Greater Vancouver and Greater Toronto saw the price of an average detached home skyrocket to well over $1 million. Semis, townhomes and condos also made big gains. With 2016 being a leap year, we analyzed home price growth in four-year intervals, dating back to 1984, market by market. Strong historical home price growth might be expected, given that real estate is a proven performer over the long term. But looking at the growth in these four-year windows shows some pretty staggering appreciation.

Check out the average price nation-wide:

2. BC implements foreign buyers tax

While on the topic of rising home prices, the British Columbia government introduced a controversial 15-per-cent property transfer tax on foreign nationals who buy real estate in Metro Vancouver, with the aim of curbing low vacancy rates and reigning in the out-of-control home prices. So, why the controversy? Also known as Bill 28, the new tax was criticized by the real estate industry due to:

• lack of industry consultation and no warning that this was coming down the pipe;
• the size of the tax;
• a lack of a grandfather clause, which left many pre-sales buyers on the hook and introduced unnecessary uncertainty into the market;
• and how the government failed to take into account the fact that it appeared that the market was slowing down previously, regardless of the new tax.

On the up-side, the new tax seems to have spurred governmental interest in creating more rental and affordable housing.

The new tax took effect on August 2, but as of December 2, the Greater Vancouver Real Estate Board reported that home buyer and seller activity remained near historical averages.

3. The mortgage stress test

Again, rising home prices and low lending rates prompted our third newsmaker of 2016 – the mortgage stress test. On October 17, the federal government implemented changes to Canada’s mortgage lending rules to help reduce the risk of a housing market crash. Under the new rules, homebuyers with a high-ratio mortgage (which is required when buyers have less than 20 per cent of the purchase price) must qualify at a rate that is much higher than what is currently being offered by mortgage lenders. At the time of writing, the best rate for a five-year fixed mortgage was 2.34 per cent (source: Rate Hub). Under the new rules, buyers would have to qualify at the Bank of Canada’s benchmark rate of 4.64 per cent. This, all in an effort to shield highly indebted Canadians from spending more than they can afford in a more realistic rate environment.

4. Trump takes the win, Immigration Canada site crashes

When the U.S. sneezes, Canada catches a cold. So, after a year of dominating the headlines, when Donald Trump won the presidential election in November – much to the chagrin of many Americans and people around the world – the ripple effect was immediate. With the election results revealed, Citizenship and Immigration Canada’s website crashed due to a traffic surge. Could our American neighbours be planning a move to Canada in an attempt to escape Trumpdom? But it’s not as easy as packing your bags and taking a road trip. According to the 2017 Immigration Levels Plan, Government of Canada plans to welcome 300,000 immigrants in 2017. Of these, 172,500 will be taken in on economic grounds, which includes applicants and accompanying family members in federal and provincial programs, business immigrants, caregivers, and skilled workers and business immigrants. Another 84,000 will be family members of existing residents. Then, 40,000 will be refugees and protected persons, and 3,500 another will be taken in on humanitarian, compassion and “other.”

5. PM Justin Trudeau’s 2016 Budget:

Wait a minute… We had a little election of our own recently, didn’t we? Since revealing his inaugural 2016 Budget, we thought it might be a good time to grade this former teacher and Canada's current PM, Justin Trudeau, on his housing promises – and delivery. We looked at the Home Buyers' Plan, rental/affordable housing, and housing policy. So, how's he doing? C– back to the drawing board.

This leads up to newsmaker #6...

6. What should our National Housing Strategy look like?

The National Housing Strategy is a biggie. The federal government recently kick-started efforts to begin building a National Housing Strategy that addresses issues, from affordable housing to rental housing to home ownership, and create a plan that is equitable across differing economies, markets and conditions. This resulted in consultations with provincial bodies, industry experts and others – including everyday Canadians. Job 1: tackle the affordable housing issue.

The hope is that the consultative process – dubbed “Let’s Talk Housing” – yields solutions that make more sense than unilateral policy changes, such as the latest round of mortgage rule changes. We’ll see what 2017 brings on this front.

7. Rogers Real Estate drops $1.5 billion on downtown Mississauga development

Those who have driven by the vacant, prime piece of property near on Burnhamthorpe just west of Hurontario learned earlier this year that Rogers Real Estate will be developing the site into a 10-tower, 15-acre, 4.3 million-sq.-ft. master-planned community that will also include more than two-acres of public parkland in Mississauga’s downtown hub. The cost? A whopping $1.5 billion. Dubbed M City, this will be the first major residential condominium development by the Rogers family. The project has been quietly in the works since 2007, when Rogers Real Estate Development enlisted developer Urban Capital Property Group to manage the process of turning this long-held family asset into a legacy community.

8. CMHC raises the red flag on Canada’s housing market

This was all over the news before Canada Mortgage and Housing Corp. (CMHC) even made the official announcement. The federal housing agency upgraded its risk rating for Canada’s housing markets from “moderate” to “strong” in its Housing Market Assessment, citing problematic conditions overall due to four key factors:

• overheating, when sales greatly outpace new listings in the market for existing homes;
• acceleration of housing prices;
• overvaluation of house prices in comparison to levels that can be supported by housing market fundamentals;
• and overbuilding when the rental market vacancy rate and/or the inventory of new builds that are unsold is elevated.
• Of Canada’s 15 major markets assessed, nine – or 60 per cent – showed moderate or strong evidence of overvaluation, seven showed evidence of overbuilding, and four showed evidence of price acceleration and overheating.

CMHC highlighted that this problem isn’t exclusive to Canada’s priciest markets – Toronto and Vancouver – but is slipping into the suburbs. For example, check out the price growth in Victoria, Abbotsford, Kelowna outside of Greater Vancouver, or Greater Toronto’s Hamilton, Oshawa and Barrie communities, which are also experiencing double-digit price growth.

9. Fort Mac wildfires

A wildfire had been reported southwest of Fort McMurray, Alberta on May 1. That, in itself, is not unusual. Fort McMurray is an area in the Regional Municipality of Wood Buff­­­alo in northeastern Alberta, surrounded by the Athabasca oil sands and boreal forest. By May 3, the fire had quickly spread through the town, destroying some 2,400 homes and buildings and forcing Alberta’s largest wildfire evacuation. The fires continued to burn across northern Alberta and into Saskatchewan. When they were finally deemed “under control” on July 5, it was two months, 1.5 million acres, and a cost of $3.58 billion – the costliest insured natural disaster in Canadian history, as per the Insurance Bureau of Canada. The effect on real estate in The Prairies was doubly dark, adding to the area’s existing economic woes due to prolonged low oil prices.

10. Top 50 real estate investment cities

For those looking to invest in Canadian real estate, we pinpointed the top 50 investment hotspots based on vacancy and rental rates for a two-bedroom unit, complemented by data on population, employment and wage growth, average home prices, and economic development. Drumroll please…

1. Brampton, Ontario
2. Richmond Hill, Ontario
3. Milton, Ontario
4. Barrie, Ontario
5. Orillia, Ontario
6. Surrey, British Columbia
7. Maple Ridge-Pitt Meadows, British Columbia
8. Abbotsford-Mission, British Columbia
9. Squamish, British Columbia
10. Okotoks, Alberta
11. Winkler, Manitoba
12. Aurora-Newmarket-Whitchurch-Stouffville, Ontario
13. New Westminster, British Columbia
14. Burnaby, British Columbia
15. Richmond, British Columbia
16. Coquitlam, British Columbia
17. Catharines-Niagara, Ontario
18. Kelowna, British Columbia
19. Oshawa, Ontario
20. Etobicoke South-Lakeshore, Ontario

For investment hotspots #21-50, click here.