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Jack be nimble, Jack be quick!

GUELPH HOUSING MARKET REPORT – JANUARY 2017

If you want to invest in real estate in Guelph, you need to be like Jack. There are some fantastic opportunities if you have your financial ducks in a row. You have to be ready to pounce when you see the right property because you may only get to look at it once. Many Guelph listings are only on the market for 2-3 days before the selling agent reviews offers.

I attended the 10th annual 2017 Real Estate Pulse Conference recently. Every year, Chris Bisson of The Mortgage Centre gives a great overview of the market. On average over the past 48 years, Guelph properties increase in value by 6.5% per year. That’s taking the long view. But as you will see from the attached Guelph Housing Market Report, detached homes have increased in value by 24.5% in the past year, and townhouses have increased by 26.7%. Show me any other investment that is paying out at this rate! According to Bisson, home values are forecasted continue to increase by 10-15% in 2017.

Also speaking at this conference was Guelph’s Mayor Cam Guthrie, who referenced an article that appeared in the Globe & Mail Report on Business. The article talks about my clients, Marianna and Yeison, who were looking for a home of their own and decided that in order to get what they wanted they would need to ‘drive until they qualify’. Exerpt from the article “Why Can’t I Buy a house with a yard?”, Globe & Mail Report on Business, January 27, 2017:

“Two summers ago, Marianna Martinez and her husband, Yeison, were living in a house in midtown Toronto. It wasn’t their own house, mind you, but the basement of her mother’s two-bedroom 1930s bungalow. When the couple had their first child, they began to feel cramped. Like a lot of new parents, Marianna and Yeison, both 31, wanted a house of their own—one with a yard where their young son could play. But they could only get approval for a mortgage in the $200,000s. Toronto was far too expensive. So was Mississauga, a booming suburb. So was Milton, a rapidly growing community even further west.

So the Martinezes decided to “drive until you qualify”—the term real estate agents use for the tactic of going progressively further out from the city to find homes one can afford. In the Martinezes’ case, that meant heading more than an hour outside Toronto. They settled on Guelph or Kitchener and, in November, 2015, started driving out there every weekend. They got involved in about a dozen bidding wars. “It was crazy,” says Marianna.

Finally, last July, they snagged a two-bedroom townhouse in Guelph for $231,000. It has a small yard, but Marianna is satisfied. “In the summer, we have a blow-up pool and a hammock,” she says. “And a barbecue.”

Lise Anne Janis, a Guelph real estate agent who worked with the couple, wasn’t surprised by the family’s willingness to move so far. The average price of a new detached house in the Greater Toronto Area has soared from $440,000 a decade ago to more than $1.2 million. Even in most suburbs, the average exceeds $750,000. Low interest rates and a relentless population influx into the Toronto area have much to do with that surge, but there is another factor many believe plays a significant role: complex land-use policies the provincial government implemented in 2006 with the aim of curbing sprawl and preserving green space around the city. About two-thirds of buyers in Guelph now come from beyond that city’s borders, and Janis says the policies are a driving force. “There’s been an explosion of prices in Toronto and surrounding areas, and now we’re feeling it here,” she says.”

While it’s certainly fun to see one’s name in print, and even more fun when the article is quoted by the Mayor, my point here is that the market is not likely to calm down or reverse itself for some time to come. We have many more checks and balances in place, so Canadians are unlikely to see interest rates rise into the 20th percentile as we saw in the 1980’s, nor are we likely to see a crash like the one the Americans experienced in 2008-2009.

Until last summer, typically larger, more expensive homes increased at a much slower rate than smaller homes. Not anymore. Buyers are making decisions that are purely emotional. There is nothing logical about paying $100,000+ over list for a home, and yet it’s happening in Guelph every day. If you think I’m exaggerating, think again. Yesterday, a home in the West End sold for $703,000 in multiple offers. That’s $200k over list, and $300k+ over what it would have sold for last year.

If you’re curious as to what your house is worth right now, I’ll be happy to give you an update.