Month: November 2021

One of the biggest barriers to homeownership for Canadians, especially for young and low-income Canadians, is the required home down payment. Without responsible saving practices, collecting the amount of money for the average down payment seems all but impossible.

However, that doesn’t mean you can’t do it—you just need the right strategy. It also doesn’t mean you need to stop enjoying your life and save every hypothetical penny towards your down payment. In this guide, we will outline the best practices for saving for a down payment. We hope that this will help every Canadian achieve their dream of homeownership.

Why is a down payment important?

First of all, you will not get any sort of mortgage loan without at least some amount of down payment. The only realistic way to avoid a down payment is to forgo a mortgage and pay the purchase price upfront, and if you were able to do that, you wouldn’t be reading this article.

Your down payment will affect the types of mortgage rates you can get. It will also determine if you need mortgage default insurance and how much it will cost. A larger down payment can also mean less interest paid, lower monthly payments, or a shorter amortization period because you only need to pay interest on the actual amount of your loan.

Should I save more than the minimum down payment?

Generally, the larger the down payment, the better. This is because the amount of your payment affects how favourable your mortgage is. However, there is no reason to spend your whole life saving for a 90% down payment.

You need to consider a few options like where you want to purchase and how much of a down payment you want to pay. You will need a minimum down payment of 5% on any home purchase, but down payments lower than 20% will also be required to buy mortgage loan insurance, so make sure to weigh your options. Mortgage insurance can cost up to 4% of your mortgage price, so something like 5% down ends up being more than 5%.

Once you know the average purchase price for the area and how much you want to put down, this number will be your target. Keep in mind: while you are saving, prices may change, and that additional costs may eat into your down payment. It is good to aim a bit above the minimum amount you think you need.

How to save money effectively

Sadly, many people were never taught how to save money. As a result, they end up wasting their time—and money—before they begin saving.

One of the most simple saving tips is to save money as soon as possible and as much as possible. But, that doesn’t necessarily mean you should start saving right away.

Before you save

In a best-case scenario, your down payment fund is kept separate from your daily expenses. That means you need to avoid the temptation to dip into your savings account when you find yourself tight on cash.

The conventional advice is to pay down any outstanding debts such as student loans or credit card debt and accrue a decently sized emergency fund, typically a few months’ expenses, before you start saving in earnest.

Not only will this put you in a better financial position and shelter you from financial hiccups, but it will also protect your savings from yourself. Also, consider the impacts of poor credit history on mortgage rates, and consider improving your score along with your saving plan.

Finally, becoming skilled at managing your money and saving regularly will help you when it comes time to make your monthly mortgage payments.

Take advantage of a high-interest savings account or registered retirement savings plan (RRSP)

Once you are ready to save, starting with a goal in mind can help you stay motivated and create realistic strategies. It’s also worth talking to your bank about a place to keep your savings. Options like a high-interest savings account, Registered Retirement savings plans, and TFSAs are financial tools you should be taking advantage of, rather than storing all your savings in a shoebox.

Cut out expenses

Saving isn’t something that happens all at once. You will be surprised at how much money you can save in the long term by cutting out unnecessary expenses now. It’s okay to treat yourself on occasion, but those regular small treats can add up.

Don’t just rely on intuition – track your results

Spend a month tracking every cent that you spend, then look at your results. Chances are, you will find a lot of little savings here and there that can help you save hundreds or thousands a year.

A good budgeting app can help you keep track of your expenses automatically. A budgeting app can be especially helpful if it is linked to your bank account.

Cutting down on bigger expenses

You can save on bigger expenses (i.e., rent or car payments) by opting for less expensive options. They may not be the most glamourous or comfortable choices now, but your future self will thank you.

Save large sums wherever possible

It may be tempting to spend without consequence if you have been gifted a significant amount of money, received large tax refunds, or a bonus at work. Rather than spending, you should seriously consider putting all or at least some of this money into your savings right away. While saving small increments over time will help you save in the long term, large deposits can help you get where you need to be much faster.

Explore other sources of income

Obviously, most people would choose to increase their income rather than explore other sources. Unfortunately, what you make isn’t always your choice, but there are some ways you can bring in more cash.

If you think need to make substantially more money to afford a down payment, consider a job change or acquiring additional training or certifications.

If you want to stay in your current job, you can also consider a second job or side hustle. Many people try to monetize their hobbies, take on gig work, or freelance work outside of their day jobs. While an additional job can add extra stress, the ability to be your own boss may make it moderately more enjoyable.

Invest your money

Investing is the secret to financial success. It’s no wonder why some of the world’s richest people are also some of its largest investors. As a result, more people are investing to grow their wealth. That’s why more homes are being sold to real estate investors rather than people looking for a place to live.

Your eventual home is an investment for yourself, so it wouldn’t hurt to learn a bit about investing now with smaller amounts.

There are various options available for investing. Some investment products are stocks, bonds, REITs, mutual funds, and more. Every potential investment has its own risk-reward ratio, and you should consider how much risk you are able to take on before investing. It is also good to consider how soon you would like to cash out on your investment.

Investing can be rewarding, but complicated. Be sure to do some research before you go all in.

Use assistance programs and first-time buyer incentives

If you are a first-time homebuyer, there are numerous programs that you can take advantage of to ease your difficulty in funding your down payment. While these options usually come with terms, it is still a good idea to take advantage of their savings. After all, they exist to help you!

First-Time Home Buyers Incentive

The First-Time Home Buyers Incentive program will allow you to get 5 or 10% of a down payment from the government, to be paid back over 25 years or when you sell your home.

The First-Time Home Buyers Incentive is a shared equity mortgage, meaning the government has a stake in your home. You have to pay back the same 5% or 10% you borrowed from the government. But, if the value of your house goes up, so does the amount you have to pay.

Home Buyers’ Amount

This program offers eligible Canadians a $5000 non-refundable income tax credit for the year of your home purchase, saving you up to $750 in federal taxes.

Home Buyers’ Plan (HBP)

The HBP allows you to withdraw up to $35,000 from your RRSP, tax-free, to put towards your down payment. Each partner can withdraw $35,000, providing you $70,000 for your down payment. While this can be helpful, it’s not free money.

Not only will you be required to pay back the amount borrowed, but you will also be borrowing against your retirement fund. Furthermore, you will need money in your RRSP to advantage of this option. Check with your municipality on incentives for first-time homebuyers as there may be additional programs available in your area!

Put your saving skills to work

If you follow these tips, you will be on track to saving for your down payment. And, if you keep yourself in the saving mindset, you may even find additional ways to save money beyond what we covered here. Even after you’ve made your down payment, the fun doesn’t stop there. Being smart with your money is a crucial skill that will help with keeping up with mortgage payments. Good luck!

Everyone dreams of owning their own home, but for many people, the financial requirements can seem insurmountable. While a home won’t ever be cheap, it might not be as bad as you think.

If you plan on buying a home in the near future, you will need to take a careful inventory of your financial condition. There are numerous factors that affect how mortgage lenders will feel about lending to you, and what mortgage amount you will be able to afford.

In this article, we are going to cover everything you need to think about before looking for a home of your own. We will also offer some tips to help you get the most affordable mortgage available.

The general answer

The conventional answer to the question, “How much mortgage can I afford?” is that you should aim for a purchase price that is 2 – 4x your annual income. For example, if your household makes $120,000 a year, you could afford a maximum purchase price of $480,000.

However, in recent years, home prices have shot up faster than Canadian incomes could keep up, meaning that this formula may not be so accurate anymore. In 2020, Canadian home buyers’ average income-to-value ratio was closer to 7x the household’s income. Are these mortgages actually affordable? It’s hard to say.

Most banks and lenders now offer online mortgage calculators to help give you a ballpark idea of what you can afford. These are a good place to start.

Terms to know and how they affect affordability

Your mortgages affordability can be best understood through the amount of your monthly mortgage payments. Since you don’t pay your loan all at once, it’s best to think about it as a series of smaller payments. Banks will determine your mortgage options based on how much of a mortgage payment you can afford with a given purchase price, interest rate, amortization period, and monthly income.

Gross vs Net Household Income

One of the biggest factors in determining how much mortgage you can afford will come down to how much money you actually have for your monthly payment. There are two major terms to know here: gross household income and net household income.

Your gross household income is the amount of income your household takes in before any taxes, debt payments, or other obligations.

Your Net household income represents the amount of income you have after paying for taxes, bills, and debt payments.

Once banks know your income, they are able to calculate your debt service ratios.

Gross Debt Service Ratio

The gross debt service ratio (GDS) is the ratio between your annual housing expenses and your income. Your annual housing costs include the sum of your monthly mortgage payments, mortgage insurance fees, property insurance fees, property taxes, and utilities such as heating costs. In a condo, your condo fees may count towards your GDS.

In general, banks will not offer you a monthly mortgage payment that would comprise more than 32% of your gross income. In some rare cases, you may be able to go as high as 39% GDS.

Total Debt Service

Your total debt service ratio (TDS) is the ratio between your gross income and all of your expenses. This includes aforementioned shelter costs and other things such as household expenses, student loans payments, car loans, and credit card bills. In general, banks will borrow at a TDS of 40%, with a maximum of up to 44% in some cases.

Credit Score

Your credit score also plays a major part in calculating what size of loan you can afford. Banks need to feel confident that their loan will be profitable, so they favour people with the best credit histories. In general, Canadians with excellent credit scores (~680 and up) will get the best rates from their lender. Therefore, they will be able to afford more on their mortgage.

Your down payment

Saving up enough money for your down payment can be one of the biggest barriers to getting a mortgage loan. Having too low of a down payment can cost you more in insurance costs and high rates. In comparison, having a larger down payment will give you the best mortgages available.

On a home of $500,000 or less, you will need to put up a minimum of 5%, and on homes worth more than $1 million you will need at least 20% down.

These days, more Canadians are relying on gifts from their families to pay for much if not all of their down payments. Unfortunately, this is not an option for most Canadians. You will need to practice careful saving before you even approach the idea of getting a mortgage.

Mortgage default insurance

If your down payment is less than 20% of the value of your home, you will be required to pay for mortgage insurance. Mortgage insurance can cost you up to 4% of the value of your mortgage.

Amortization period

The amortization period is the length of time it will take for your mortgage to be fully paid off. A longer period means more affordable monthly payments, but it also means you will pay more in interest in the long run.

Mortgage Stress Test

The mortgage stress test is a measure introduced to ensure that Canadians can still afford their mortgage loans if interest rates increase. The mortgage stress test will test your income against an interest rate higher than your actual mortgage rate.

The testing rate is 5.25% or your interest rate plus 2%, whichever is higher. All banks will require this test on all mortgages, even those not needing mortgage insurance.

Tips to make your mortgage more affordable

Pay a large down payment

A higher down payment will help you get a more affordable loan. If you are set on a certain mortgage amount, consider saving for a few extra years to raise your down payment. Alternatively, you could seek out additional sources of income to increase the amount that you can afford to save.

One option available to first-time homebuyers is the Home Buyers’ Plan. This incentive allows first-time buyers to withdraw up to $35,000 from their RRSP, tax-free, to put towards a down payment. If you are buying with a partner, you can collect up to $70,000 in total. But be warned, this is essentially a loan from your future self; after a 2 year grace period, you will need to repay any amount you take out in 15 years. It is up to you to decide on getting money for your home now against saving for retirement later.

Improve your credit score

Improving your low credit score can do a lot to help your mortgage affordability. It will also put you in a much better financial spot generally.

There are a few different ways that your credit score is determined. There are also some easy ways that you can begin improving your score. See our recent credit score guide for more in-depth information.

Pay down debts

Paying down your debts will free up more of your monthly budget to go towards your mortgage. If you spend less on monthly debt payments, those savings can go towards your down payment.

Adjust your lifestyle

For some people, the idea of owning a home is the dream. That being said, you may need to consider moving towards a more frugal lifestyle in pursuit of your dream. If you are willing to reduce your monthly expenses for the joys of homeownership, it can do a lot to make your mortgage more affordable.

Look elsewhere

You may have your heart set on a certain neighbourhood or town, but prices can be very different in different areas. Consider looking at more affordable areas near where you want to live, and you may find a deal that changes your mind.

It’s important to think beyond the purchase price—municipalities all have different property tax rates. Keep this in mind because a cheaper home in a different location can end up costing more after you pay property taxes.

Conclusion

Hopefully, you now have a better idea of the maximum mortgage you can afford. If you feel ready to start your journey, talk to a mortgage specialist or mortgage broker who can help you find the price that is right for you.

The US-Canadian land border is finally set to reopen on Nov 8th, spurring many snowbirds to once again make plans to head south. While many may choose to stay for a short period, others are making more long-term plans to invest in US property.

This article will offer you everything you need to know about the Border reopening. It will also explain how investors can take advantage of the US real estate market.

After 19 months of closure, the land border between the US and Canada will reopen to Canadian travellers on Monday, November 8th. Previously, the Border was only open to some essential travel, though Canadians could still enter the US through air travel. While Canada opened its border to Americans back in August, the US has held off on welcoming Canadians until now.

With the ongoing pandemic, many people have been wary of air travel. Vacationers who traditionally choose to drive south have also been forced to remain at home until now. As a result, travellers should expect potentially long waits at the border as many people try to cross over in the coming weeks.

Canadians hoping to cross the Border after reopening must be fully vaccinated against Covid-19 and should be prepared to submit proof of vaccination. Canadians with mixed vaccination can travel across the border, and children under 18 are exempt from the vaccine requirement entirely. One final condition is that returning Canadians are required to present proof of a negative Covid-19 test conducted less than 72 hours before their re-entry.

For the most accurate details, see the official US border FAQ website.

The prospect of investing in property south of the Border is not a new idea—it’s just something that most people weren’t thinking about these last 18 months. But now Canadians are seeing the sunlight at the end of the tunnel. Investing may suddenly be on their minds.

Say goodbye to Canadian winters

One of the major reasons that Canadians are drawn to the US real estate market is the same reason that they are drawn to vacation there; the US enjoys much warmer climates than most of Canada, and Canadian winter conditions are all but unheard of in the southern sunbelt states.

This is reinforced by statistics of where Canadians choose to buy their properties in the US. The largest number of Canadians chose to buy homes in the state of Florida. This state has been the most popular choice for many years. The other most popular locations for Canadians were the sunny states of Arizona and California, both of which enjoy year-round warm weather.

US market overall more affordable, even after the exchange rate

Another major factor attracting Canadians is affordability—an area where the US is currently doing much better than Canada. We spoke to Alain Forget, Head of Sales & Business Development at RBC Bank and a Canadian with 17 years of experience in cross-border banking who has lived in Florida for 21 years, to learn more.

Alain highlighted the average price of a US home, currently around $350,000, is well below the Canadian average, even after the exchange rate. When adjusted, that comes out to just around S435,000 CAD at current exchange rates. For comparison, the average home in Canada cost $686,650 in September 2021—and even more in major metropolitan areas.

“That really shows that—for Canadians who want to look at buying for the lifestyle, for long-term asset diversification, and ROI—there’s still a lot of buying opportunities in those markets,” said Forget. “Canadians invested $4.2 billion in US properties in the last year, and the Canadian average residential purchase price for that period was $474,000 US. That amount of money can buy you much more real estate in the sunbelt states than you can get in the GTA, Vancouver Metro, or Montreal.”

“The main reasons why people are buying are lifestyle, weather, and of course the long-term return on their investment. However, they can also buy much more space under the sun than in Canada for the same amount of money.”

Three reasons why it is a good time to consider buying US property

For Canadians looking to buy, it is as good a time as any to consider a US property investment, says Forget. He highlighted three reasons why that may be the case.

Firstly, many Canadians were who were looking to buy simply weren’t ready or able to due to travel restrictions, financial concerns, and health and safety concerns around Covid-19.

“Now that land borders are opening this week, we will get a lot of Canadians who were thinking or contemplating to buy in the last two years, and then they had to say, ‘Nope, we’ve got to wait.’ Now, it’s time that they can come back, and are maybe looking to not miss the window of opportunity now open to them.”

Another reason is the ease of working from home making it easier than ever to choose where you want to live, rather than having your job choose for you.

“People now understand, because of what we learned in the pandemic, that we can work from anywhere,” said Forget. “You can work from the US and enjoy the weather here, even if you’re a business and you’re based in Toronto or Montreal or Calgary or Vancouver. So, you have all these active boomers who can work remotely saying, ‘Well, I can work under the sun for a few months or a couple of weeks at a time and go back and forth.’ If you do go that route, however, make sure to seek professional cross-border advice for immigration and tax concerns that may arise from an extended stay.”

Finally, thanks to historically low-interest rates, affordable home prices, favourable exchange rates, and a tight rental market, Forget argues that buying a home is the wise choice for those planning on vacationing with a long-term horizon.

“There are people who retired already in the last few years, and they simply want to escape the Canadian winter. Now, they are looking at the rental market, which is challenging right now from an inventory and availability standpoint, but also because it’s getting very expensive as well. So, honestly, if somebody is looking to spend three, four months each year in those sunbelt states on a long-term basis, it’s much more cost-effective to buy a property and enjoy the appreciation of value on the long-term investment horizon rather than to spend $15,000 to $30,000 or more each year on rent. It is worth doing a cost-benefit analysis based on your own personal circumstances to find what is really the best option for you.”

The US is one of the most popular foreign destinations for Canadians for good reasons. However, investing over the border is not exactly the same as buying at home in Canada

“The buying process is similar and it’s not,” says Forget. “One of the issues that I have seen from Canadians is they assume that everything is the same in the US as it is in Canada, and it’s not. You have to remember when buying a property as a Canadian in the US is that it is a different country, which means you have to comply with US laws, rules, regulations, business practices, and terminology. You need to be familiar with all these things so as not to fall into costly traps.”

There are a lot of considerations that extend beyond just the purchase, explained Forget.

“You need to do your homework. You need to seek professional advice on issues around the real estate asset itself and the transaction—and beyond that. You need to work with a professional real estate agent and get professional advice on legal and tax issues, as well as financing. As a US national residential lender dedicated exclusively to Canadian clients, RBC Bank can help you on all these points or connect you with qualified professionals.”

Forget describes RBC Bank’s US services as “holistic.” Not only can they pre-approve you for a US mortgage based on your Canadian credit and assets, but they can also help you navigate the legal, tax, and insurance concerns that come along with cross-border property ownership. Their program called Home Plus Advantage is designed to offer full-service support for Canadians. It even offers a free e-guide you can download right now to get you started on your journey from dreaming to doorstep.

These days, it isn’t always easy to find a property to buy. It is even harder when you are looking for your dream home. For many people, building their own homes is a solution to help them get exactly what they want. While it is totally viable option, it is a very different process than buying a resale home. For one thing, it is a lot harder to tell how much a new home will cost. Hopefully, this article can help.

What is the average cost of building a home?

The average construction costs of building a new house will depend a lot on what you decide to build and where. The location of your lot, the size and style of your home, its features, materials, and more will all affect the final price. Every project is very different.

Generally, the cost of building a new home (when done efficiently) is comparable to the cost of buying a resale home. Every home was at one time a new build, and most homes only gain value once they are built, so at the very least you are making a good investment.

Considering cost per square foot

One useful way to calculate all the complicated costs involved in a newly built home is the cost per square foot. Just like home prices, cost per square foot varies greatly across different regions. A report from Atlus Group outlined some new build prices across major Canadian cities.

On the upper end, the most expensive new build homes per square foot are in Vancouver, where new builds with pre-made plans can cost up to $265 per square foot. The GTA is the second most expensive with up to $240 per square foot.

The lowest possible new build prices are found in Halifax, with prices per square foot potentially as low as $90. Most expensive of all are custom build homes which can cost upwards of $1000 per square foot.

Mortgages for new builds

Chances are, you will need to borrow money to finance your dream home. Financing a new build home is similar to financing a resale home, but there are some key differences as well.

Firstly, if you are buying land to build your home upon, you may need a separate loan in order to purchase the property. Some other mortgages will allow you to buy the land as part of the construction loan.

Your lender will be able to offer you a construction mortgage or a self-build mortgage. These sorts of mortgages often require a higher down payment than traditional mortgages, at least 25% – 30%. There are two types of construction mortgages:

Completion mortgage

A completion mortgage loan will not pay out until the project is completed. This means the mortgage can be modified to fit your project as you go, but you also don’t get to actually access the money until the house is completed.

Draw or progress-draw mortgage

A draw or progress-draw mortgage pays out the money of the loan in increments. The lender will determine how much you need and then set out a schedule by which funds will be made available.

Construction mortgages also have their own special terms. Some construction mortgages have a time limit that the home must be completed by or certain builders you must work with.

It is easier to get a mortgage for a new home build if it is not your first home, and you already own property from which a home equity line of credit can be used to fund and secure your new mortgage.

Production vs Custom homes

When it comes to newly built homes, there are two different types to keep in mind.

The first type is production homes. Production homes are built by companies who sell houses built according to a number of pre-made designs. These houses are cheaper than custom builds and can be built much faster and easier. However, pre-designed homes also do not offer the same level of customization as a truly custom home.

A custom-built home is just that—a home custom designed by yourself, exactly to your liking. Or, more accurately, a house designed by a trained architect you hired. In fact, a custom home requires you to take on the services of many professionals to design and build the home, meaning extra work for you, as well as added price. The benefit is a new house to the exact specifications that you desire.

Purchasing Land

The land that you build your home on will be a major part of the total cost of your build. There are many things you need to consider in choosing a lot:

• Overall location – Is the lot in a place you will be happy to live for many years? Are you looking to build in an expensive urban area or a cheaper rural area?
• Size – Is the size of the lot big enough for the home you want to build? Is there any additional space for a yard, a driveway, or a shed?
• State of the land – Is the land ready to build on? Or does it need significant clearing?
• Grading – Do you plan on having a walk-out basement? If so, you will need to find land with a slope. Alternatively, uneven land may need to be levelled if you wish to have a flat area to build.

According to Statistics Canada, the average cost per acre of farmland was around $3,300 in 2020. But, this price can go up or down based on your specific province.

Finding and working with a contractor

Once you’ve found the land your house will be built upon, you need to find a contractor who can actually do the job. A contractor will offer you a quote for the build, and the quoted amount will depend on the contractor you talk to. It may be a good option to consult multiple contractors and take bids on who will build your home. But, it’s important to remember that the cheapest contractor isn’t necessarily the best; all contractors will have strengths and weaknesses, such as specializing in a certain type of home or completing projects faster.

Labour and material costs

The actual work of building your home will incur two major construction costs: labour and material costs.

Material costs are the price of the actual building materials that go into your home. If you are working with a contractor, you will likely pay their rate for materials, which represents the price they paid plus any extra fees to cover logistics. The materials you choose can make a big difference in the overall price you pay, also in the value of your home. While you want quality materials for a quality build, you shouldn’t always go with the most expensive materials. Instead, consider where the biggest difference can be made, and where you can save on cheaper materials.

Your contractor needs to pay for materials, but they also need to pay their workers. That’s why you will also pay labour costs on your home build. Labour costs will either be charged per project or on an hourly basis.

Labour and material costs can vary depending on what is being done. For example, more specialized work like HVAC or electrical can have higher labour costs and more expensive materials.

Building Permits and other costs

Another financial consideration is the cost of building permits. Construction can be a disruptive and lengthy process—and it must be done right. For this reason, governments have enacted building codes that the construction industry must abide by and that municipalities are in charge of enforcing. A building permit signifies that your construction project is compliant with building codes, local laws, safety and fire regulations, and any other relevant rules.

Building permits will often cost you a fixed rate and a scaling rate based on the square footage or value of your construction. You may also have to pay for inspections related to your project.

Often, you will need to get multiple different permits for different parts of your project, and many permits will require one or more inspections on your property. It can be quite the process to get all your permits in order, but it is absolutely crucial. Otherwise, you could face large fines and an unsafe finished product.

How long does it take?

Building a home is certainly not the option for those looking to move into their new home as soon as possible. Ultimately, the time it takes to complete the building process will depend on a lot of decisions you make and how fast you and your contractors can work. At times, it can be up to a year before even construction begins as you work with designers and contractors.

After consulting various sources, it seems you can expect a house to be built in just under a year at the fastest, and over two years on the slower side. This is an important consideration for budgeting because while you are building your home, you may still need to pay carrying costs or rent on another property while you wait.

Building vs Buying: Is it worth it?

Building and buying a home are both perfectly viable options for those looking for a real estate investment. What you choose will depend on your own situation.

Resale properties are good for people who don’t have the funds to organize a new build. An existing home is also suitable for someone who wants to live in a city where finding vacant land would be all but impossible. Resale homes are also good for real estate investors who want to make money in real estate so are simply looking to buy without all the added work. Finally, new homebuyers will have a much easier time buying resale as opposed to building new.

New builds are ideal for people who are very particular about their home’s materials and layout and are willing to pay top dollar to get it done. It is also a good option for those looking to capitalize on undeveloped land they already own. It is also more suited for someone who is willing to take on project management responsibilities, as there are numerous moving parts when building your home.

Despite a marked slowdown from the hectic first half of the year, Calgary has no shortage of activity in its residential market. The new monthly report from the Calgary Real Estate Board (CREB) revealed that the city saw its strongest third quarter since 2014.

CREB says that despite the economic strain caused by the pandemic, the Calgary real estate market remains “resilient.” A majority of resale activity in the third quarter was driven by the almost 4000 detached homes sales or 60% of activity for the period. The benchmark for detached homes was up 1% since last quarter, while months of available supply rose more than 30% to 2.11 months. Prices on all other residential segments were up comparably. Despite this, CREB still warns of an “exceptionally tight market that continues to favour the seller.”

Jesse Davies, a Calgary realtor who runs his own team at Century 21 Elevate Real Estate agrees with that sentiment.

“From my own experience, I wrote seven offers this last week with all different clients, and we didn’t come away with one purchase. On average, there were about five offers that we were competing with on each deal, and those seven deals were across all price levels. Everything from a $250,000 condo up to an $800,000 house,” Jesse told CREW.  “We’ve been hearing the rumblings from Vancouver and Toronto about how the market has been behaving, and Calgary is just not used to that type of market. It’s definitely still a strong seller’s market due to the lack of inventory.”

Just as in many cities across the country, the amount of available supply simply can’t reach the level of demand for homes in the market. Low supply and a narrow ratio between sales and listings have kept competition steep for all housing types across the city.

“Looking at the stats: in the last seven days, the number of new listings that came onto the market was less than the actual sales in some cases. I don’t think we’ve ever experienced that in the history of the Calgary market. That’s definitely an imbalance of supply.”

But Davies has hope for increased supply in the coming months, as more sellers take advantage of high home prices. The benchmark price for homes in Calgary actually peaked most recently in 2014, at around $460,000, before trending downwards for many years. Now as prices have once again come above their previous high, sellers who held out to break even on their properties may begin entering the market.

“Now, we’re starting to see that the average price is outpacing the numbers that we had in 2014. 

May of 2014 is kind of where the single-family peaked, and then you saw it drastically drop. A lot of times, when I would go on listing presentations, if the owner bought in 2013, 2014, or 2015, they were underwater significantly. So a lot of times they just said that they would wait. Now that prices are coming up again, people may revisit the idea of selling.”

The benchmark price of a detached home in Calgary in Q3 2021 was $538,700, an increase of over 10% year over year. With such massive gains in the detached segment and similar gains of 9.5% and 8.5% in the semi-detached and row housing segments respectively, many investors looking to get in on the Calgary market are turning to the comparatively affordable condo market. Condos in Calgary have seen a 2.47% year-over-year increase in benchmark price. Not a bad amount of growth, but appealing in comparison to other segments in the city, and the markets of other cities. According to Davies, the market is drawing attention from across the country.

“I get a lot of calls from people from Toronto and Vancouver and they ask me about a good place to invest their money. I just had a Toronto investor buy pretty much a new build, around 5 years old. That owner who first purchased that new build would have paid over 500 and the investor got it for around 350. It’s a stunning unit and in really great condition. So, I think there’s a really good chance for appreciation as well as cash flow for this type of investment. If you’re looking at a two to five-year horizon, and this pandemic goes away or becomes a less significant issue, I think there’s a really good opportunity to make some make money on appreciation, as well the cash flow perspective, because renters will be more inclined to rent a condo as interest rates increase.”

Another benefit that draws investors from other cities to homes in Calgary is affordability, says Davies. Calgary is one of the most affordable cities in North America, and one of the cleanest and safest.

“I’ve had quite a few clients that have relocated here from Vancouver and Toronto. The bang for your buck that you get when either purchasing a home or a condo in Calgary is significant. And I think a lot of people are working from home and are seeing this as an opportunity to get into a market that’s been suppressed for the last five years, while the rest of Canada’s been significantly up. In addition, Calgary is a beautiful, clean city. Its proximity to Canmore and the mountains is appealing for a lot of families. These would be the main reasons that people would be attracted.”

The outlook for Calgary looks good as we move into the new year. Davies predicts modest gains and an increase in supply driving an active spring market, as well as a return to a more standard sales process as the pandemic wanes.

“Historically, inventory levels are always pretty low during the winter months, just because people don’t like to move when there’s a foot of snow outside,” said Davies. “So I think what we’re going to see is a ramp-up in the spring, where we’re going to see a lot of properties come on the market, especially if prices continue to uptick. Obviously, that’s going to be dependent on whatever ends up happening with COVID. I think that is another reason that supplies are being suppressed because not everybody is comfortable with a bunch of people coming through their house during a pandemic. So I think there’s gonna be modest gains, both in the detached sector and across all other sectors.”