Philip Aldrich has been a real estate lawyer for 18 years.
He works at one of the largest law firms in Peterborough and the Kawarthas, LLF Lawyers.
He says the real estate craze started just after the stock market crash in 2008. Things have increasingly grown since then, but it’s been in the last 18 months that the real “insanity” started . Houses are going for sometimes hundreds of thousands above asking price.
People are buying houses without even getting inspections in fear of losing the house they want.
Phil says things really started in Vancouver and have been moving east ever since, now migrating into small communities such as ours in Peterborough and the Kawarthas.
But is this a dangerous game? Are people buying more than they can afford?
Sit back and watch this week’s MF’s Trans Canada Nissan Drive By as Phil gives his professional advice on the current Canadian real estate market.
We also take a side tour and visit the home of Phil’s post secondary summer time job that helped him finance his lawyer career.
So, Vancouver’s real estate market was insanely busy. (I don’t know the exact stats on volumes or price increases but it was substantial on both accounts). In the summer of 2016 BC implemented a “non-resident speculation tax” tax for Vancouver and the surrounding area which, essentially, charged a 15% tax on non-residents/non-citizens from buying up Vancouver properties with no or little intention to either occupy or rent out the homes. So lots of houses in Vancouver sat empty while the residents vehemently complained.
When the tax was implemented, where did the non-residents go? Yup… Toronto. Theoretically this caused a flurry of activity starting in 2016 driving up prices about 40% over one year and volumes skyrocketed. What did the good people of Toronto think about this? Hmmm, for those with homes they said “let’s cash out, honey, and take our obscene amounts of money and spread west, north and east (please note south is Lake Ontario) throughout the “Golden Horsehoe”. We can buy twice the house at half the price and pocket all of our retirement money in a span of 3 weeks!” So they did…. From the easterner’s (ie. Peterborough’s perspective) as Oshawa and Whitby experienced a huge influx of wealthy, transplanted Torontonians, they, in turn, spread further east. “Hmm, Peterborough’s not a bad place, and the prices are even cheaper, AND we can retire there in a few years, AND we can telecommute, AND the 407 is expanding. Pack up the kids, honey, we’re moving to cottage country!”
So Peterborough has been seeing their fair share of price increases, insane volumes AND the Toronto mentality of underlisting property-values and bidding wars. Who benefits? Those with homes looking to move further east or into retirement centres.
So what happened? In April the Ontario government introduced legislation to cool off the housing market and started implementing in a 16-point plan. The most significant aspect of this is, like Vancouver, a 15% non-resident speculation tax, and things have cooled somewhat. the bidding wars are disappearing; the frantic purchasing has abated, prices have declined about 10%; and now we seem to be seeing a more “seasonal” approach to the real estate market (please note that the realtors have access to all of the sales figures and I just read them in the paper like everyone else…. I just know my “closings” volume is extremely high right now but will likely lessen over the next couple of months). Ironically, I read a couple of weeks ago that the Montreal real estate market has experienced a surge… perhaps the non-residents are moving further east. If Montrealers get fed up where to next? Moncton? St. Johns? Ummm… Saint John?…..Fredricton? I have no idea but maybe it is time for the east coast to rise!
Ironically information was released that the Toronto housing market was experiencing less than 5% of purchase from non-residents and the surrounding areas were less than 10% non-residents. So, was it really the non-residents driving the market? Maybe it was just enough to feed into the frenzy… who know. Lord knows the stock markets can also get frenzied on rumour and speculation. So, what’s next for Peterborough? Good question…. I think markets are good, but back to reasonable levels. Interest rates have started to rise (.25% a couple of weeks ago after years of record-low prime rates). Guess what? The 407 is still coming…. Peterborough is still attractive to an aging demographic. Your guess is as good as mine. If only I had a crystal ball and a whole bunch of extra cash….
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