Feb. 2, 2018

Nanaimo Market Statistics January 2018

January Provides Reasons For Optimism

 

Single Family Prices and Volume

89 single family homes sold in January, down 26% from the 120 sold in December, but up 59% from the 56 that sold in the same timeframe last year. The average home price decreased marginally, by just over 1% from December’s average of $529,724 to $522,608 which notably is only a 2% increase from last January. The median sale price slipped back under $500,000, coming in at $499,900, down 1% from December’s median price of $505,000, and down 3% from last January’s median sale price of $516,000. If you have been following our commentary, including our 2018 forecast, you will be familiar with our expectations that we should see strong demand in to the spring market to satisfy pent-up 2017 demand, however with rising interest rates and new mortgage qualification requirements, we stated that affordably is increasingly becoming an issue given average household incomes in Nanaimo. So what happened in January…

I. Sales volume was up 59% from last January - check.

II. The average home price and volume were lower, implying there is more activity at the lower end of the pricing spectrum, in other words, affordability challenges may be starting to emerge - check.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio decreased in January to 74%, down 41% from 125% in December, although up 32% from 56% in January of 2017. One note here, you may be looking at the 125% figure for December and be questioning how this is possible. Well, in December what happens is there is typically a very limited number of new listings heading into the holidays, so in addition to the December listings that sell, older listings dating back to September, October, November are also selling, leading to a higher number of sales than listings. This has been the case for the last 3 years in December (2015 at 116%, 2016 at 120%).

The sell price/list price increased to 99% in January, a 1% increase month-over-month, and year-over-year from 98% collectively. January’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average days on the market decreased to 26 days, down from 31 in December, which is a 35% reduction on the 40 average days on the market from January of last year. We see this as an important indicator of strong buyer demand, with qualified buyers ready to pounce when the right home hits the market.

As of the end of January, the number of active listings is 181, down 5% from December, and 8% from inventory levels at the same time last year. Folks, this is the lowest number of active listings that we have had since at least January 2015 (when our group began tracking this statistic), which also in our opinion marked the start of this strong upward swing we have seen in the Nanaimo market. Limited supply and strong demand is a condition that sets the stage for strong price action. However, the unknown variable here is affordability for locals. We’d expect the sub $500k market to be the primary benefactor here.

Top Performing Neighbourhoods & Categories

10 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from December to January, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 10.33% in Departure Bay to 27.13% in South Jinglepot. Top risers month-over-month were Departure Bay, Pleasant Valley, and Upper Lantzville. Top performers year-over-year were South Jinglepot, Cedar, Uplands, South Nanaimo, and Brechin Hill. Looking at volume, risers both monthly and annually included Lower & Upper Lantzville, Uplands, Old City, Cedar, Chase River, and Extension. You’ll notice that many of the average price and volume risers are found either in the outskirts of town or in the historically more affordable neighbourhoods, with early cycle gainers and traditionally most expensive neighbourhoods such as Hammond Bay and North Nanaimo having less price appreciation and lower volume. In fact, year-over-year, volume has been down in North Nanaimo for 11 months in a row. Why?... Affordability challenges are limiting demand, despite buyer preferences to be in this neighbourhood.

Lots were the top performing category in January, followed by townhouses and patio homes, while apartment style condos and single-family homes were down month-over-month, though still up year-over-year. On low volume, both patio homes and apartments showed very strong year-over-year price action. Downsizing baby boomers...you got it.

Opportunities

With active listings at cycle lows and strong buyer demand, we are undoubtedly still in a SELLER’s market.

For Buyers purchasing principal residences, one area that we continue to discuss is low-maintenance strata properties, particularly those ground-oriented options ideal for our aging population. For the better part of the last year patio homes have been amongst the category leaders, with 8 of the last 12 months showing year-over-year average price increases exceeding 25%. While you may think it is getting frothy now, the reality is this particular party is just getting started. While other areas of the market are being impacted by investors, international and interprovincial speculation, etc., patio home demand is demographically driven. In the next decade, no matter what happens in other categories, you will see a wave of baby boomers, (many of whom are underfunded for retirement) looking to simplify their lives and many cases top off their retirement nest egg by downsizing. However, there is currently a fixed supply of ground-oriented townhomes, limited development land, and limited demand from developers to venture into executive quality townhomes, because it is simply not as profitable as other development opportunities. What does this all mean...Even if we experience a correction, ranchers, patio homes, luxury condos and higher end townhomes with primarily main level living, are not going on sale. While we have had a run-up on prices recently, we see that there is still an opportunity to get in at a reasonable level now, despite how painful it is to look back 12 months and think about the prices you could have shored up your retirement home for.

Which leads us to the next section…If you are an empty nester living in your 3,000+ square foot home and have recently opened your property assessment and noticed the assessed value has nearly doubled over the past decade, now is a great opportunity to sell into a strong market. With affordability increasingly becoming a challenge, and tastes and preferences of the next generation shifting towards a more simplified living arrangement where bigger is not better, there are headwinds poised to limit demand and price action in the coming years for this category of housing, as there simply won’t be the demand at higher price levels. Remember, if you purchased your home for $400,000 in your peak earning years a decade or more ago, this home is now likely worth more than $800,000, average household income growth has not kept pace with housing appreciation and mortgage qualification has got significantly tougher. Those in a similar situation to you when you (possibly) maxed out your qualification to purchase at that price point, would now (possibly) qualify for less than you would have back then. The current $800,000 price point is only supported by demand at that level. If there is insufficient demand, prices start dropping.

So where are the opportunities for investors? Our preferred approach to real estate investing is to lead with a focus on cash-flow potential. In our view, opportunities to acquire cash-flowing properties in the residential market are extremely limited at this point in the cycle. For those investors who are game, looking at other asset classes could be an option.

Downtown Nanaimo is stale, poised for revitalization. Our downtown has the potential to be a world-class destination, however, a challenging political climate, excessive vacancy, concentrated ownership by those who have not spent money to keep their holdings modern, and in some cases a lack of vision for what is possible, has stunted growth over the past decade. While there are signs the tides are turning. New money is coming into Nanaimo, and developers are increasingly seizing opportunities. However, we are still early in this movement and commercial real estate remains affordable. There have been fantastic opportunities for land assemblies on key transportation routes in the past 12 months where you could purchase property at a valuation that would pay you a decent return to either wait for values to increase and sell into increasing developer demand in the future, or redevelop /re-fit aging properties to their highest and best use.

Another commercial opportunity which we are very familiar with (being the listing agents) is a 2,083 square foot space in Pacific Station, a mixed-use development which includes 50,000 square feet of professional office space. At the asking price, this particular space is a first phase unit, discounted to $272.68 per square foot. Comparatively, there is no other new commercial space currently available in Nanaimo for less than $330 per square foot. In fact, the phase 3 units in Pacific Station are selling with strong demand closer to $400 per square foot, and the future occupant of this phase 1 space is poised to equally benefit from the synergies of locating in North Nanaimo’s premier business community (with professional practices such as doctors, physiotherapists, chiropractors, architects, engineers, wealth managers, notaries, mortgage brokers, etc.), all in an easily accessible location with great visibility, and supported by the built-in consumer demand of the 76-unit residential component of the development. With no rental restrictions, leasing out the space could result in a very respectable return not available in the residential market, and as the commercial community rounds out, and construction of the last residential phase completes, any uncertainty inherent in earlier stages of the development will have been removed, increasing demand for commercial space, and ultimately real estate values.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Monthly Statistics January 2018

Source: VIREB

Jan. 12, 2018

Nanaimo 2017 Market Recap & 2018 Forecast

2017 Market Recap & 2018 Forecast

 

Single Family Prices and Volume

1,605 single-family homes were sold in 2017, down 5.5% from the 1,699 sold in 2016. The average sale price for a single-family home increased 16% to  $518,449 from 447,440 a year earlier, which was itself a 14% increase in the average sale price for a single-family home from 2015. The median sell price is relied upon as a secondary measure which will not be skewed by a few high priced homes selling at the top end of the market with 2017’s median price coming in at $489,900, up 18% from $415,000 in 2016.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio decreased year-over-year to 70% from 79%, suggesting a lower percentage of homes listed are successfully finding a buyer, with 30% of homes listed not selling, which in a market with such strong demand and low inventory, suggests some buyers are not being realistic with their pricing expectations or this figure would be higher.

The sell price/list price remained constant at 99%. This doesn’t mean that all homes are going to sell for 99% of the list price, as those selling significantly above the asking price in multiple offer situations are offsetting those sitting on the market for long periods and selling below 99% of asking. What this suggests is that for buyers it is still not deal hunting season. We remain in a sellers market, and if as a buyer you are finding that everything “is overpriced”, it’s not. This is the current state of the market. Limited supply and strong buyer demand means any attractive options are going to sell very close to, at or above asking. In the past, it may have been normal to offer 5-10% below asking to leave some room for negotiating. Not in this market, you likely won’t even get a response.

The average number of days on the market decreased 14% in 2017 to 24 days, down from 28 in 2016. This figure may be a bit misleading as the most attractive options throughout 2017 were consistently selling in less than a week. Where we see higher days on market is when homes are listed beyond their fair market value and have either waited months for the market to come to them or have ultimately had to price drop to secure a sale. With limited inventory and decreasing days on the market, buyers are having to react quickly, and therefore being pre-approved for financing prior to making an offer is all the more vital.

The number of active listings as the calendar turned over was 191, only 1 more than the 190 on the market at the end of 2016. What is interesting to note is that 2017 actually saw 114 more single-family homes hit the market than in 2016. With all this talk about historically low inventory numbers, it is important to point out that the lower inventory numbers are a result of a higher percentage of listed homes selling over the past couple years, than the number of listings being down. For example, if we travel back in time just 5 short years to 2012, there were 2,214 homes listed, less than in 2017. However, the percentage of homes listed that sold was only 46 percent, resulting in higher inventory levels throughout the year, culminating in a year-end inventory of 420 homes, more than double what we ended 2017 with.

Top Performing Neighbourhoods & Categories

In 2017, all 18 sub-areas defined by the real estate board in Nanaimo experienced a price increase, however, the weight of the increase varied significantly depending on the sub-area from 10% on the low end in Departure Bay to 29% on the high end in South Jingle Pot. Despite the headlines, not all neighbourhoods are moving in the same direction all the time. With real estate being location specific, it is vital to know what is going on in your area when determining whether the timing may be right to sell your home. For buyers, neighbourhoods will experience differing price action throughout the cycle. Again, it pays to know what is happening in each sub-area, to determine whether a purchase would be prudent.

There are 8 sub-areas that experienced average price increases of at least 20% - Brechin Hill, Cedar, Extension, South Jingle Pot, South Nanaimo, University District, Uplands, Upper Lantzville - with only South Nanaimo of the 8 also appearing on this same list for 2016.

However, price alone does not tell the story of a market as volume also has to be taken into consideration. Of the 18 sub-areas in Nanaimo, 7 experienced volume increases, with Cedar, Extension, Old City, Uplands and Upper Lantzville all experiencing volume spikes between 10 - 20%.

Patio homes were the top category in terms of the average price increase for 2017, up 32%. Following this, waterfront homes came in second at 26%, followed by lots (25%), single family homes (16%),  apartment-style condos (15%) and lastly townhomes (14%).

Forecast  

Once again time to pull out the old crystal ball...Well not exactly...Here at the Jahelka Real Estate Group we have assembled what is likely the most formally educated, and arguably qualified team in our region to be able to interpret this market and make some sense of where it is going. While market timing is nearly impossible, there are signs and symptoms that do give us reasonable insight into the health of the market. I would equate this to going to a doctor for a check-up. They can’t predict the number of days that you have left, but they can rely on their years of formal education and experience to reasonably accurately determine if you are generally in good health. They will also use their training to identify major risks that could drastically shorten your life expectancy such as the discovery of a tumour or clogged major arteries, before setting out a prescribed set of actions to best deal with the situation. Working with an educated, experienced Realtor is actually quite similar. You can choose to work with those qualified to competently guide you through the various real estate cycles you will encounter over the course of your life, or you can work with the guy you enjoy having a beer with who they just pulled off the scrap heap at the used car lot who will tell you “I don’t know where the market is going, I don’t have a crystal ball”, “We are at the start of a 7 year cycle” or “You should buy now to avoid missing out” or “I don’t see this ever slowing down as Nanaimo has just been discovered.” While we make light of it, these are all responses we have heard in conversations with licensed Realtors during the current market cycle. Again, your choice...Realtors are being paid like Doctors in many cases, shouldn’t they require some level of qualification or understanding of the market to earn your business?

Here’s our take on what is to come:

DemandDemand remains solid as we head into 2018, with 2017 fourth quarter single-family home sales numbers eclipsing 2016’s Q4 figures by 29 percent. While pending changes to lending qualification parameters may have played a role, the spike in sales numbers was likely more a result of the pent-up demand from the previous months and those who are actively searching having more homes to choose from with 25% more new listings hitting the market in Q4 2017 than Q4 2016. We see this pent-up demand carrying over and remaining relatively strong through at least the first quarter of the year. Beyond the first quarter, the number of new listings hitting the market will play a factor in determining how long it will take to satisfy the pent-up demand that currently exists before markets revert to more balanced conditions.

Longer term, you have to look at the underlying factors that drive demand, and here is where we start to have some questions. While Nanaimo’s population growth rate exceeds the provincial average, it is by no means excessive and not driven by any major economic activity that would lead you to believe population growth will play a major role in driving demand beyond a normalized level in the coming years. Although improving, Nanaimo is still a community in transition from a traditionally blue-collar economy to more of a white-collar, service driven economy.

It is important to consider that demand varies at different price levels and for different asset classes. Starting with price levels, Nanaimo has experienced average single family home price increases of 14% and 16% in 2016 and 2017, so when you consider that the most recent census indicated that the median household income in Nanaimo is $62,822, with an average total income of $76,942, and with mortgage qualification becoming increasingly challenging with the stress tests that have been put in place, it is inevitable that at some point you hit a wall where regardless of whether or not buyers would like to purchase at a certain price level, they are simply unable to qualify for it. Using CHMC’s Mortgage Affordability Calculator in a scenario where a buyer had a downpayment of $25,000, property taxes were $3,000 per year, and heating costs were $150 per month, with no significant consumer debt, at the Bank of Canada’s current qualifying rate of 4.99%, the median household income in Nanaimo would qualify for a mortgage of $244,470, and the average household income would qualify for a mortgage of $284,237. Yes, you read that right. The average household income in Nanaimo would qualify for a mortgage $234,212 less than the average home price in the city… In addition to the mortgage amount, of course, you would add your down payment to this figure to determine your maximum house price, but in the World’s most indebted nation, how many citizens of Nanaimo with a household income of $76,942 or less have $234,212 readily available to use merely to purchase what amounts to an average home? Homeowners who have been in the market a while and rode this cycle upwards resulting in substantial home equity that they could turn over, maybe; first time home buyers and young families just getting established, no chance. Make no mistake, this will have a significant impact on demand and ultimately housing prices. We see this as the number one headwind the Nanaimo housing market currently faces as the largest block of our population is the baby boomers, many of whom are now empty nesters living in the 3,000+ square foot homes they bought in the $200,000 - $300,000 range a decade ago, that are now valued well beyond the grasp of the average household in town based on income qualification. This leads us into the consideration of demand for different asset classes. With the aging population, it is no secret that baby boomers now becoming empty nesters will be looking to downsize in the coming years. However, selling their 3,000+ square foot homes requires buyers, buyers require financing, and buyers will likely not be qualified to finance the homes coming onto the market at higher price points.  You know where this is going… Where we do see sustained demand over the next decade is for low-maintenance, stratified properties catering to local empty nesters entering retirement and those increasingly seeking out Central Vancouver Island as their retirement destination of choice.

Supply: It’s difficult to predict with certainty how the market will react to rising prices, although greed seems to be playing an increasing role. While rising property assessments have many homeowners briefly considering “cashing-out”, the reality is selling your primary residence requires finding somewhere to go. Given the demographics with many baby-boomers becoming empty nesters, it is likely we will see some looking to downsize in the coming years giving serious consideration to making a move this spring to capitalize on heightened values. Overall, we see inventory levels slightly elevated from 2017 numbers, while subdued inventory levels and outright greed may keep sellers who should be considering listing on the sidelines in hopes of the market continuing to creep higher.

Looking out longer term, the coming years will likely see a significant supply of 3,000+ square feet homes hitting the market as empty nesters downsize to reduce expenses and housekeeping square footage to enjoy retirement. Increased supply without increasing demand at these price points puts downward pressure on pricing. Conversely, the supply of ground-oriented patio homes, condos, and low maintenance detached single story homes is likely to be insufficient to meet the needs of the downsizers. As such, the gap is likely to close, with a premium being paid for housing options well suited for seniors, while larger family and executive homes will likely become more affordable relative to incomes in the coming years.

Interest Rates: Given macroeconomic conditions across the country, we see the prime lending rate gradually increasing throughout 2018, with the first hike as early as this month based on solid economic numbers of late. The consensus among economists is that we are likely to see three .25% rate hikes this year, which we feel is a reasonable forecast.

Government InterventionThis area is always a bit of a wildcard. The Feds have continued to take action to try to contain the inherent risks in our country’s rising real estate market and household debt levels. They continue to implement tougher rules on mortgage lending and could clamp down further in this area. We are expecting the Government will take a wait-and-see approach, evaluating how recent intervention will impact the market, with many analysts predicting the housing market will cool nationally in 2018. If conditions nationally do cool, government intervention is not likely to have a major impact in 2018. Closer to home, there has been talk that continued strength in BC could see the 15% foreign buyer tax implemented in areas outside of the lower mainland. While we saw the Vancouver market largely rebound after the cooling that immediately occurred when this tax was brought in back in 2016, the impact would likely be greater in smaller centers where many foreigners have been buying higher end real estate to avoid this tax. At this point, it is still unlikely that the foreign buyer tax will be implemented in Nanaimo anytime soon, it is important to note that government intervention can have a significant immediate impact on real estate markets. Although trying to predict what is to come here would be foolish, given the political climate and market conditions, we just want to caution that market conditions can change very quickly as a result of government intervention.

Other Markets: For buyers coming from out of town, Nanaimo is always being compared to other markets and affordability plays a huge role here. The Greater Vancouver market is really the “straw that stirs the drink” in our provincial housing market. It is important to keep an eye on the Vancouver market as these same affordability challenges are even more prominent. The BCREA predicts the Real Estate Board of Greater Vancouver will see volume decrease by approximately 10%, with overall prices up a further 5.5%, and single-family home prices up slightly at 1.2% in 2018. Should a scenario similar to this unfold in 2018, it should not have a material impact on the Nanaimo market. However, if the Lower Mainland was to be hit by a more serious correction, a ripple effect is likely to impact Vancouver Island communities, which would no longer be as attractive from an affordability standpoint relative to Vancouver.

Opportunities

The primary opportunity we see in 2018 remains undoubtedly on the sell side.

Buyer demand is still quite strong, the sell/list ratio is high, days on market is low, and competition about 30% of the time is driving transaction prices above the asking price and likely beyond market value. Markets can turn quickly, while we don’t know how much further this market cycle has to run, we do know conditions are solid currently and trying to time a top is a recipe for disaster.

Current market conditions present a solid opportunity for those looking to downsize in the coming years to lock-in their recent gains. We have already started to see increasing demand for properties well suited to senior living, such as patio homes (prices up 32% in 2017), ranchers, etc., and we expect this trend to continue in the coming years. With this being the case, we see price appreciation is more likely in these categories of housing than others, so 2018 may present a good opportunity for those empty nesters in larger homes to transition to their retirement home at a reasonable price point before prices continue to be bid up to an unreasonable level.

In our view, given the rapid price acceleration in recent years, it may be prudent for investors to take some money off the table to move into other markets that appear to have more immediate upside potential, or in a worst-case scenario, to limit exposure to a possible market correction in years to come. Without a substantial down payment, finding cash flowing residential properties in Nanaimo is nearly impossible, so we would take extreme caution if you are looking to expand your investment portfolio in Nanaimo. It is our view that purchasing a negative cash flow property has only one certainty...You will lose money...While we don’t know how long this will be the case as rents generally do rise over time, buying a home and speculating that prices will rise in the coming years is a flawed strategy when you could buy in other markets or asset classes (eg. commercial) and guarantee positive cash flow.

For developers, we see the best opportunity in developments catering to the aging, downsizing population. Low-maintenance, ground-oriented, stratified properties with higher-end finishings, enough room for family to visit, and plenty of storage for all that “stuff” should garner strong demand. Single detached ranchers, and lifestyle properties in close proximity to golf courses and marinas should also be well received.

For buyers, as noted above we see opportunity for downsizers to potentially secure their retirement residence at decent price levels. Yes, prices are up for all asset classes, but you are better to sell high on the higher priced property, and buy high on the lower priced property than sell lower, and buy lower down the road. For example, if you sell a larger home for $600,000 and buy a townhome for $300,000, you have an additional $300,000 to fund your retirement. If the market corrects 10% across the board, you now sell for $540,000, buy for $270,000 and have only $270,000 remaining to fund your retirement. It is also important to note that given the demographic-driven demand, the buy lower option may never come.

When we say we see the primary opportunities being on the sell side, we are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.

If you have any questions about market conditions, would like more details specific to your neighbourhood, or for a consultation specific to your situation, please feel free to contact us anytime as we would welcome the opportunity to help.

All the best for 2018!

250.751.0804 | info@jahelkagroup.com | www.jahelkagroup.com

Source: VIREB

 

Dec. 8, 2017

Investor Insights

 

Taking A Research-Based Approach to Investing...Some Helpful Tools

As an asset class, one of the key factors differentiating real estate from other investment categories is the fact that real estate is essentially geographically localized. Unlike the financial markets, investment properties in various locales cannot be transacted on an organized national exchange. With this being the case, each community across the country is basically its own sub-market, with a unique risk/return relationship. Without an organized national market and with Realtors and industry professionals typically experts in their own markets only, there is no question that some markets present a far better risk/return proposition than others. However, one of the challenges with local and provincial economic conditions ever changing, is that these cyclical shifts really impact real estate markets, and from year to year, various markets will present better opportunities for investment than others.

While you can typically count on a qualified Realtor (who focuses their practice on working with investors), to assist with locating the best investment opportunities within a given market, you may be wondering just how do you determine the best markets to invest in if you are open to investing outside of your local market? For more on this, check out our post titled Should You Focus Your Real Estate Investments on Your Local Market?

Back in October’s Edition of Investor Insights titled 7 Key Considerations When Evaluating Markets For Investment…, I outlined a number of factors that you should look at when conducting your macro research to narrow your search down to the top markets for consideration. What’s interesting to note is that there are actually a number of credible, free, publically accessible information sources found online. If you are a serious investor, CMHC’s Housing Market Information Portal should definitely be bookmarked on your browser. The interactive portal allows you to easily access pertinent market information such as vacancy rates, average rents, housing starts, housing stock, population, etc. You can also compare various markets that you have interest in, to see how they stack up against each other.

For those looking for a less interactive experience, CMHC publishes a number of informative publications, such as Canadian Housing Statistics, Mortgage and Consumer Credit Trends, Housing Start Data, Rental Market Statistics, as well as Housing Market Insights. You can access reports highlighting national activity, provincially focused reports, or even reports with valuable information on a number of local markets. If you find something you like or that is beneficial in your research process, you can e-subscribe, so that you automatically receive these reports in your inbox when published.

Historically, I have found the rental market reports a great source of info. Up until 2015 they actually published a comprehensive nationwide report, however, more recently they have moved towards detailed provincial reports such as BC’s 2017 Rental Market Report as well as the abbreviated Canada Highlights version. These reports provide information on vacancy rates, turnover rates, average rental rates, number of rental condos in the market, ownership vs. rental ratios, etc. These tables allow for top performers to very quickly be identified and cross-referenced with average multi-family unit costs in these top markets from publically available MLS and real estate board data.

With the most recent census happening just last year, this is still a relatively valuable source of information on a market, provide tremendous insight into the local population with information on incomes, household composition, average age, education levels, labour force categorization, etc.

I could continue on with a list of countless other credible resources that you can draw into your research process, however the most important takeaway from this post is that by leveraging these free resources and doing your homework, you can potentially discover opportunities that would be less risky, with more upside return potential, and the only cost is your time. It seems in life that most people either have lots of time and not enough money or lots of money and not enough time to pursue the life they are looking for. It’s no different with investing...My recommendation if you are interested in investing but don’t currently have the money to do so is to educate yourself, really make yourself an expert...Finding the money to invest will likely become less challenging if you are able to seek out solid opportunities, as you have to remember, there are always those on the other side of the fence with not enough time, but that do have the investment capital to deploy if the right opportunity comes up.

If you are considering an investment in real estate, put our full-service advisory team to work for you. Contact us anytime for your complimentary consultation at 250-751-0804 or info@jahelkagroup.com.

Dec. 6, 2017

Nanaimo Market Statistics November 2017

 

November Market Conditions Rebound

 

Single Family Prices and Volume

116 single family homes sold in November, down 10% from the 129 sold in October, but up 18% from the 98 that sold in the same timeframe last year. The average home price rebounded strongly in November, up nearly 3% from October’s average of $516,354 to $531,307, a number that actually sets a new record as the highest average single-family home price ever for a one month period. The average price was up nearly 13% from last November. More notable was the median sale price, which came in at $512,000, up more than 9% from October’s median price of $469,000, and up more than 15% from last November’s median sale price. While the month-over-month median price increase makes you stop and take notice, it should be noted that October’s median price was the lowest since February, so the actual improvement is not as pronounced as it appears. After a number of months of deteriorating conditions, November was a departure from this trend, with noticeable improvements in both prices and volume. Is this possibly a push from buyers to complete their purchases prior to pending changes to mortgage qualification requirements where buyers will qualify for less in the new year? This is almost certainly a factor, especially at the lower end of the market where buyers are stretching their qualification levels, however, the true extent of the impact the change in mortgage qualification requirements will have will not be fully known until the new year.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio rebounded strongly in November to 86%, up 26% from 68% in October, and up 12% from 77% in November of 2016,  suggesting a higher percentage of homes listed are resulting in successful sales.

The sell price/list price held at 99%, with no change month-over-month, or year-over-year. November’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average days on the market did increase to 31 days, up from 25 in October, and exceeding the average of 26 days from November of last year.

As of the end of November, the number of active listings is 265, down nearly 12% from October, but up 16% from inventory levels at the same time last year.  While the month-over-month decrease is not overly surprising given the time of year, the year-over-year increase which is continuing the trend noticed in preceding months is worth taking note of and watching moving forward as sustained higher listing numbers will provide more choice for buyers.

November market conditions were a noticeable improvement from market conditions in the preceding quarter. If you have been following our commentary, you may be thinking we definitely jumped the gun with “our doom and gloom” suggestion in October that the market may have reached or may be very close to a cyclical top. However, one month of improved market activity likely fueled by pending changes to mortgage qualification requirements that will see the average household income in Nanaimo struggle to qualify to purchase a single detached home without a significant downpayment, is surely not enough to say our “stay on alert” recommendation should be dismissed. After 5 months without any significant progress forward in the Nanaimo market, November’s improvements were a welcome sign of optimism for spring market conditions. That said, as we approach the slower winter months, keeping a close eye on the market will be important to determine if the past six months has been more of a consolidation or balancing of market conditions before a further move upwards in the spring or whether this could be the start of a more prolonged move downwards.  

Only Found Here

Days on Market:

  • Selling in 0 - 7 days:
    • Single Family: 39% at an average of 101.78% of the list price.
    • Condo/Strata: 34% at an average of 100.83% of the list price.
  • Selling in 8 -31 days:
    • Single Family: 30.5% at an average of 99.76% of the list price.
    • Condo/Strata: 39% at an average of 98.44% of the list price.
  • Selling in more than 31 days:
    • Single Family: 30.5% at an average of 97.5% of the list price.
    • Condo/Strata: 27% at an average of 67.09% of the list price.

Sell Price/List Price:

  • Sold above list price:
    • Single Family: 34% of homes sold above the asking price - at an average of 3.35% above ask, with 9.84% the highest premium paid. The average days on market for those selling above the asking price was 2.
    • Condo/Strata: 22% of condos sold above the asking price at an average of 2.61% above ask. The highest premium paid was 7.89%, and the average days on market for those selling above the asking price was 10.
  • Sold at the list price:
    • Single Family: 12% of homes sold at the asking price in an average of 26 days.
    • Condo/Strata: 12% of condos sold at an average of 21 days on the market.
  • Sold below the list price:
    • Single Family: 54% of homes sold, taking an average of 46 days.
    • Condo/Strata: 66% of condos sold, taking an average of 33 days.

There are clearly some key takeaways here:

  1. The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.

  2. The majority of properties sold below the asking price

  3. The single-family market was stronger than the condo/strata market in November in terms of price action and days on market. For the early part of this cycle, single-family homes undoubtedly outperformed strata properties, but earlier this year it was strata properties playing catch up, often outperforming the single-family market. We’ve not had a reversal with the past 2 months favoring single-family homes.  

  4. The average premiums paid when homes sell above the asking price are less than what we were seeing during the spring market.

  5. Unless sold very quickly (representative of the most attractive listings priced accurately), properties are taking longer to sell, with close to a third of transactions occurring after at least a month on the market

  6. There is a noticeable inverse relationship between days on market and sell/list ratio. In general, the lower the days on the market, the higher the price relative to list price. Homes selling well below the asking price (that were overpriced by greedy sellers with unrealistic expectations) are sitting on the market for a significant amount of time as the seller’s expectations normalize over time.

What this means for Buyers: While listed properties on average are taking longer to sell, the most attractive offerings are still attracting bidding wars. However, for the rest of the market the majority of sales are now happening below the asking price, so there look to be more opportunities to find a home without competition and potentially finding a “deal” under the asking price. By historical standards, properties are still selling quickly, so if you are a serious buyer, it is still important to be pre-approved for a mortgage and very clear on what you are looking for so that you can offer immediately on the best new options hitting the market.

What this means for Sellers: Likely due to the time of year, buyer demand is not as strong as it once was, necessitating the need to price accurately to maximize interest. For the last number of months, sellers have been caught up in the hype and media attention on the housing market and in many cases are still going to market with unrealistic expectations. This is not the “leave a little room for negotiation” market. Pricing accurately will minimize the days on market (and inconvenience to your family), as well as best position you for a competitive offer or ideally a multiple-offer situation. As you can see above, the longer a home sits on the market, the more likely it is to transact below the listing price as the listing becomes stale. Working with a Realtor with a very strong marketing platform is vital, however, pricing accurately has never been more important, so make sure the Realtor you select has a proven track record of pricing accurately and with average days on the market well below the market average.  

Top Performing Neighbourhoods & Categories

14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from October to November, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 8.55% in Hammond Bay to 29.72% in South Jinglepot. Top risers month-over-month were Brechin Hill, Extension, Pleasant Valley, North Jinglepot, and Hammond Bay. Top performers year-over-year were South Jinglepot, Lower Lantzville, Brechin Hill, Cedar, and South Nanaimo. Similar to the past couple of months, the top performers were a bit scattered, however with the exception of Brechin Hill, year-over-year areas on the outskirts of town in various directions featured prominently, not surprising given the affordability challenges in the most in-demand neighbourhoods.  Looking at volume, risers both monthly and annually included Uplands, Cedar, Extension, and Lower Lantzville.

Apartment style condos were the top performing category in November, followed by single family homes, and townhouses. Patio homes and lots were down month-over-month, but still up noticeably year-over-year.  

Opportunities

Despite a few months of deteriorating conditions preceding November’s improvements, overall market conditions remain strong by historical standards, undoubtedly still a SELLER’s market. While “good deals” are extremely hard to come by in periods of sustained market strength, there are 2 periods where we find Buyers have an increased chance of finding a “hidden gem.” These periods are in the heat of summer, especially around long weekends when the majority of buyers have retreated to the sidelines to enjoy time with family and friends, and around the holiday season and during times of especially cold or sustained stormy weather in the winter. The reality is major changes in life circumstances, such as job transfers, divorce, etc. do not wait for the holidays to end or for weather to improve and will necessitate listings throughout these inopportune times to list, and it is often during these times, that buyers who are on the ball can find some of the best bargains of the year.

While still a SELLER’s market, there is generally subdued demand from buyers heading into the holiday season. On the flip side, the number of active listings falls during this time of year, so if you have a good offering limited competition could lead to a timely sale.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here:  Monthly Statistics November 2017

Source: VIREB

 

Nov. 3, 2017

Investor Insights

 

Sometimes The Best Investment Approach Is Sitting on the Sidelines

If you have had the chance to read our October Market Recap you will be well aware that the momentum that has propelled the Nanaimo market to record highs appears to be losing steam. Most of the metrics we look at to evaluate the strength of the market have deteriorated and we are heading into the typically slow winter months, which won’t be much help in keeping this juggernaut propelling forward.

You may be surprised to hear this as you may have been talking recently with work colleagues, neighbours, friends, or family, who have boasted about making a killing in the real estate market. Given the upward trajectory of the market over the last few years, investor confidence is at an all-time high. With so many success stories and year-over-year gains in the double digits, it seems like it would be nearly impossible to not make money in this market. From an investment perspective, markets move based on 2 factors - fear and greed. Right now the greed factor is at an all-time high. Wannabe developers and investors are jumping in with reckless abandon, which to me is concerning. It is this greed, this demand-driven exuberance that has been putting upward pressure on pricing. The reality is, it is unsustainable, and the market statistics are supporting this notion. The smart money is investing when markets are fearful and the underlying statistics, economic indicators, and projections support acquiring real estate. They are not waiting until their hairdresser, cab driver, and mechanic are all singing the praises of their most recent real estate gains.

What is interesting is that you have leading realtors in our local market releasing reports stating there is no sign this market is slowing down and making claims to clients that we are just a few years into the seven-year cycle. Let me ask you this...If I were to tell you the average price of a home in Nanaimo declined by 2% from the previous month, the median price declined more than 4%, the number of listings was near a two year high, the sell/list ratio was down, and the average days on market was as high as it has been since last Winter, on those points alone, what would you think about jumping into the market? If you are not convinced, check out this article detailing CMHC’s recent report that Canadian housing markets are “highly vulnerable”.

In recent installments of Investor Insights, we have talked about whether you should be focused on investing in your local market and key considerations when evaluating markets for investment. These topics have arisen primarily because we see headwinds when looking at our local residential market from an investment perspective. However, I know many real estate investors are biased towards investing in your local market, a market you know and trust, and a market where you can drive by your properties at your discretion and have a level of comfort that all is well.

If you’re looking at a flip, or primarily investing for capital appreciation, I would suggest the risk/reward profile is slanted too far towards the risk for me to sleep at night. So what about cash flow, isn’t real estate investing supposed to be a long-term proposition? Right now a $500,000 investment in the Nanaimo market will produce rental income in the range of $2,000 to $2,500. Factoring in mortgage payments, property taxes, insurance, property management, and maintenance costs, not losing money on a monthly basis is going to be challenging without a significant down payment, which is limiting the effects of leverage, one of the most powerful tools that can be used to increase your wealth through real estate. Now if you can’t cash flow and the prospects for continued capital appreciation are relatively bleak, at least over the short term, what should you do if you are set on investing in your local market?

Sometimes, the best investment approach is sitting on the sidelines. If you have a portfolio of properties and you’ve ridden this market to the top, maybe looking at liquidating a few to free up some cash wouldn’t be the worst idea. Of course, this depends on your long-term investment plan, and your individual circumstances.

For investors, it is important to remember that when managing your assets, protecting your downside is every bit as important, if not more important than chasing your gains on the upside. Remember, a decline of 50% requires an increase of 100% just to break even. Selling near the top, or at least at a level that you are comfortable with positions you to “go shopping” when the market is “on sale.” This is how real acceleration is possible when building a portfolio. While this market could still have some room to run, we are seeing signs of demand cooling. It always does, markets are cyclical, it is not different this time… make sure you are protected.

Remember, as real estate professionals, what puts food on our table is facilitating real estate transactions in our local market. Realtors and other related professions have a vested interest in their local market and make no mistake when your household income is reliant on a market, sometimes the market outlook can be presented through rose coloured glasses. Be careful where you get your information on the real estate market. Make sure your Realtor is playing the long game with your best interest at heart, not the transaction driven, short game.  What I can assure you is we have no interest in delivering anything but our unbiased, fact-based analysis and insight. We are looking to build long-term client relationships, serving as trusted real estate advisors for our clients for years to come.

If you are considering an investment in real estate, put our full-service advisory team to work for you. Contact us anytime for your complimentary consultation at 250-751-0804 or info@jahelkagroup.com.

Nov. 3, 2017

Nanaimo Market Statistics October 2017

 

Single Family Prices and Volume

129 single family homes sold in October, down 15% from the 152 sold in September, but up 13% from the 113 that sold in the same timeframe last year. The average home price was down nearly 2% from September’s average of $526,392 in October at $516,354.

Also interesting to note is that while the average price is still significantly (9.12%) above the average home price for the same period last year, the year-over-year spread on price appreciation has been decelerating. For example, July’s average price was 17.61% above July 2016, August 13.92% above the previous year, September up 10.43%, with October up 9.12%. More noticeable, the median price of $469,000 was down 4.14% from September suggesting there are more homes selling at lower prices than in previous months. In terms of median price, the year-over-year gain was just 4.22%. Comparatively, September’s median price was up 16% from last year, August was up 18%, July 26%. When reviewing market conditions from time to time we have deviations from the trend from one month to the next. However, when we start to see patterns 3, 4, 5 months in a row, which are all relatively consistent, it is probably time to take note.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio declined to 68%, down 9% from 75% in September. Year-over-year, this ratio was down almost 12% in October, suggesting a lower percentage of homes listed are resulting in successful sales. It should be noted that a 68% sell/list ratio is still relatively strong by historical standards.

The sell price/list price held at 99%, with no change month-over-month, or year-over-year. October’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average days on the market held constant from September at 25. This figure is up 25% from the average of 20 which occurred during October of 2016.  

As of the end of October, the number of active listings is 301, down nearly 7% from October, but up 29% from inventory levels at the same time last year.  While the month-over-month decrease is not overly surprising given the time of year, the sizeable year-over-year increase is worth taking note of and watching moving forward as sustained higher listing numbers will provide more choice for buyers. Longer term, more supply will serve to satisfy pent-up demand as we head towards more balanced market conditions. The upward pressure on pricing we have experienced the last few years has primarily been a result of demand for homes outpacing supply. Once there is enough supply to satisfy demand, eg. balanced conditions, motivated sellers will begin to price more attractively to separate their offerings from the competition. If listing numbers (supply) eventually substantially outpace the number of buyers (demand), increasingly motivated sellers will need to cut prices to move their homes as control of the market shifts back towards buyers. In a nutshell, the economics of a price correction has just been outlined. Keeping an eye on listing numbers and sell/list ratio will be important moving forward.

Aside from the average days on market holding constant month-over-month at 25 days, and the number of sales being up year-over-year (possibly due to having almost a third more listings available), basically every other metric we have covered has deteriorated. This is not the first month we have reported similarly in this spot. As we stated last month, when you consider these metrics in addition to impending changes to the mortgage qualification process and the expectation of interest rates continuing to rise through 2018,  the market may have or may be very close to a cyclical top.  With October marking the fifth consecutive month without any significant forward progress in the Nanaimo market, as we approach the slower winter months, keeping a close eye on the market over the coming months will be important to determine if this is more of a consolidation or balancing of market conditions before a further move upwards in the spring or whether this could be the start of a more prolonged move downwards

Only Found Here

Days on Market:

  • Selling in 0 - 7 days:
    • Single Family: 45% at an average of 101.33% of the list price.
    • Condo/Strata: 43% at an average of 100.99% of the list price.
  • Selling in 8 -31 days:
    • Single Family: 32% at an average of 98.85% of the list price.
    • Condo/Strata: 38% at an average of 97.77% of the list price.
  • Selling in more than 31 days:
    • Single Family: 24% at an average of 97.23% of the list price.
    • Condo/Strata: 19% at an average of 97.71% of the list price.

Sell Price/List Price:

  • Sold above list price:
    • Single Family: 31% of homes sold above the asking price - at an average of 3.29% above ask, with 10% the highest premium paid. The average days on market for those selling above the asking price was 5.
    • Condo/Strata: 22% of condos sold above the asking price at an average of 3.84% above ask. The highest premium paid was 5%, and the average days on market for those selling above the asking price was 12.
  • Sold at the list price:
    • Single Family: 14% of homes sold at the asking price in an average of 13 days.
    • Condo/Strata: 19% of condos sold at an average of 84 days on the market.
  • Sold below the list price:
    • Single Family: 55% of homes sold, taking an average of 36 days.
    • Condo/Strata: 59% of condos sold, taking an average of 31 days.

There are clearly some key takeaways here:

 

  1. The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.
  2. The majority of properties sold below the asking price
  3. The most attractive are still selling quickly, with 45% of single family homes and 43% of strata properties selling in less than 7 days.
  4. The average premiums paid when homes sell above the asking price are less than what we were seeing during the spring market.
  5. There is a noticeable inverse relationship between days on market and sell/list ratio. In general, the lower the days on the market, the higher the price relative to list price. Homes selling well below the asking price (that were overpriced by greedy sellers with unrealistic expectations) are sitting on the market for a significant amount of time as the seller’s expectations normalize over time.

What this means for Buyers: While listed properties on average are taking longer to sell, the most attractive offerings are still attracting bidding wars. However, for the rest of the market the majority of sales are now happening below the asking price, so there look to be more opportunities to find a home without competition and potentially finding a “deal” under the asking price. By historical standards, properties are still selling quickly, so if you are a serious buyer, it is still important to be pre-approved for a mortgage and very clear on what you are looking for so that you can offer immediately on the best new options hitting the market.

What this means for Sellers: You need to price accurately to maximize interest, especially with the number of active listings just shy of 2-year highs. Sellers have been caught up in the hype and media attention on the housing market and in many cases are still going to market with unrealistic expectations. This is not the “leave a little room for negotiation” market. Pricing accurately will minimize the days on market (and inconvenience to your family), as well as best position you for a competitive bidding situation. As you can see above, the longer a home sits on the market, the more likely it is to transact below the listing price as the listing becomes stale. Working with a Realtor with a very strong marketing platform is vital, however, pricing accurately has never been more important, so make sure the Realtor you select has a proven track record of pricing accurately and with average days on the market well below the market average.  

Top Performing Neighbourhoods & Categories

14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from September to October, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a single high priced or low priced transaction could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 7.05% in Hammond Bay to 31.24% in Lower Lantzville. Top risers month-over-month were Divers Lake, North Jinglepot, Central Nanaimo, Lower Lantzville, and Uplands. Top performers year-over-year were Lower Lantzville, South Jinglepot, Cedar, South Nanaimo, and North Jinglepot. Similar to the past couple of months, and more so than in previous months, the top performers were a bit scattered, however year-over-year areas on the outskirts of town in various directions featured prominently, not surprising given the affordability challenges in the most in-demand neighbourhoods.  Looking at volume, risers both monthly and annually included Uplands, Old City, and South Jinglepot.

Interestingly, on low volume, waterfront homes were the only category to see average prices rise in October, as condos, townhomes and patio homes (on light volume), all experienced fairly significant pullbacks in average price month-over-month.  

Opportunities

While still considered a SELLER’s market, this year’s fall market conditions appear to be trending towards more of a balanced market. Despite buyer demand not appearing quite as strong as it was earlier in the year, this is still a reasonably good time to consider listing your property, as we don’t know what the future will bring. While Buyer demand could conceivably get stronger, factors such as higher interest rates, affordability challenges, and speculated further government intervention to cool the housing market, will more likely than not cool buyer demand over the next year or two. Therefore, if you need to sell, with near record high average sale prices and market indicators deteriorating, the fall or early spring market may represent your last solid opportunity for some time to exit with ease.

For buyers, the number of active listings remains near the highs last seen in the fall of 2015. More listings equal more choice for buyers and potentially the opportunity to secure a home without enduring excruciating bidding wars and ultimately overpaying to have an offer accepted, as we are now seeing the majority of transactions are occurring below the list price.  As we head into winter, buyers will again head to the sidelines, as those with a choice typically prefer to avoid moving during the busy holiday season and challenging winter weather that could follow into the new year. Similarly, if sellers have a choice, they will often wait until the spring market to list. However, major changes in life circumstances, such as job transfers, divorce, etc. will necessitate listings throughout the winter months, and it is often during these times, that buyers can find some of the best bargains of the year.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here:  Monthly Stats Nanaimo October 2017

Source: VIREB

 

Oct. 5, 2017

Investor Insights

7 Key Considerations When Evaluating Markets For Investment…

As you know, Real Estate is all about location, location, location. Last month in our Investor Insights piece titled “Should You Focus Your Real Estate Investments on Your Local Market” we outlined our case as to why it may make sense for you to move beyond your local market when looking for your next real estate investment. Maybe what we said made sense and you are on board, but find yourself wondering where you should begin in narrowing down the search of possible markets to invest in. With this in mind, we’ll outline a number of key considerations and some helpful resources that can be used to hone in on potential locations for your next investment.

  1. Vacancy Rates: This one is fairly self-explanatory. Obviously, the lower the vacancy rate, the easier it will be to ensure your property is rented and the larger the pool of suitable candidates you will have to rent your property. In addition, a lack of supply or heightened demand leads to upward pressure on pricing as landlords can command a premium with limited options available. CMHC’s Housing Market Information Portal is an extremely valuable resource, with access to various reports and statistics, including vacancy rates and average rent levels in various markets.

  2. Affordability: RBC Economics publishes a quarterly report on housing affordability, looking at the percentage of pre-tax median household income it would take in various markets to service the costs of owning the average home (both single-family homes and condos have been factored in), when mortgage payments, property taxes, and utilities are factored in. Interestingly, in RBC’s September 29 report, housing affordability in Canada is currently the worst our nation has seen in 27 years. REIN, one of the leading real estate investor education providers recommends focusing on areas where the index is 33% or less, suggesting that anything over 38% is trending towards a speculative market. In the most recent report Vancouver, currently at 80.7% was the highest in the nation, Victoria was the third highest at 58.6%. You may be surprised to know that some of the markets touted as among the most attractive for investment in Canada over the last decade actually came in under the 33% threshold: 30.3% in Edmonton, 32.1% in Saskatoon, 32.1% in Halifax. While these areas have experienced macro-driven slowdowns, many of the underlying fundamentals that made them attractive a few years ago are still present.

  3. Rent levels: Many seasoned real estate investors use a screening tool referred to as the “10% rule.” Basically, they will only invest in an area where the gross annual rent is at least 10% of the purchase price. Over the long haul with fluctuating interest rates, etc., this number has been determined to provide a safe buffer to position you well for the investment to stay cash flow positive for the duration of your holding period. In Nanaimo, gross annual rents are currently typically less than 5% of the purchase price. Despite our low interest rates, it is pretty hard to cash flow at these levels.

  4. Average Incomes: Investing in markets where the average income growth is higher than the provincial average will position you well. Statistics Canada and the provincial statistics sites are helpful resources, as is the Census Profile data immediately after release.  

  5. Population Growth: Similar to average income, you want the population growth in the specific market you are investing in to be outpacing provincial population growth. In-migration is a key driver of demand. More people = more demand for both rentals and home purchases, putting upward pressure on pricing.

  6. Strong Employment Base: You want to invest in markets where you have a relatively balanced employment base. Heavy concentration in one sector can be fatal for a rental market. Think Newfoundland and the cod fishery, Southern Ontario and the automotive manufacturing plants, small-town Alberta and the oil & gas industry, coastal BC and Forestry. All of these areas went boom to bust in fairly short order and some have taken years, if not decades to recover.

  7. Infrastructure and Transportation: How accessible is the market from other major centers? Is there a regional or international airport? How is the public transit system? Is there a university in the area drawing a steady pool of renters each year? All of these factors bode well, as the draw of the area and will positively benefit population growth and be better positioned to attract new business to the area.

While there are numerous other factors that you could look at, these 7 items are relatively straightforward to analyze and can serve as somewhat of a screening tool to determine if a market may be worth a further look. All of this research can be performed from the comfort of your own home and following a disciplined, systematic approach to researching various markets for future investment will go a long way in protecting your downside risk, while simultaneously positioning you well to realize a solid return on your investment.

Once you have narrowed your search down to a few markets, reach out to a few investment focused Realtors and property managers to validate your findings and assumptions. The right professional team can be an invaluable resource as you build your real estate portfolio and secure your financial future.

If you are considering an investment in real estate, put our full-service advisory team to work for you. Contact us anytime for your complimentary consultation at 250-751-0804 or info@jahelkagroup.com.

Oct. 4, 2017

Nanaimo Market Statistics September 2017

 

September Raises Further Concern...Are The Tides Turning

 

Single Family Prices and Volume

152 single family homes sold in September, down 4% from the 158 sold in the same timeframe last year, but up 10% from the 138 that sold in August. This rise in volume was not unexpected as those who took some time to enjoy the summer months have renewed their focus on their home search heading into fall. After slipping slightly in August, the average home price rose 1.5% in September to $526,392, which also marked a 10% increase from last September’s average price of $476,691. While the average price was up month-over-month, September’s median price of $489,252 was a slight decrease from August’s median price of $495,000. However, it is important to note that the median price was up more than 16% from last September.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list rose by 19% to 75 from 63 in August. While this is a notable improvement, it is still lagging last September’s figure of 87%.

The sell price/list price held at 99% month-over-month, one point up from the 98% figure for September 2016.  September’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

For the fourth consecutive month, the average number of days on the market increased, albeit marginally from 24 to 25 days. This figure is just 1 day higher than last year’s average of 24 days. On this note, it is interesting to note that during our team meeting this morning we had one of our Advisors commenting that it seems like for the first time in months, most of the properties that showings are being requested for are available. While this isn’t quantitative data, it is an interesting observation nonetheless, a possible early warning sign that pent-up buyer demand may be dissipating.

As of the end of September, the number of active listings is 323, down nearly 6% from August, but up 39% from inventory levels at the same time last year.  This is a trend that will be important to watch as this is the fourth consecutive month where we have seen heightened year-over-year inventory levels. The number of new listings has also been rising year-over-year, with the past 4 months experiencing heightened listing numbers over last year’s new listing figures. With lack of supply being a major driver of recent price gains, it will be interesting to see whether rising inventory levels continue leading to more balanced market conditions in the coming months.

While we saw some improvements over last month’s figures, we are still experiencing deteriorating metrics in other areas. September is often a strong indicator of the strength of the fall market and when compared to last September, we have more listings, fewer sales, an inferior sell/list ratio, a higher average days on market, and 39% more active listings. Taken together, folks you have your warning sign. The market may have reached or may be very close to a cyclical top. With September marking the fourth consecutive month without any significant forward progress in the Nanaimo market, interest rates on the rise, and nearly approaching the slower winter months, keeping a close eye on the market over the coming months will be important to determine if this is more of a consolidation or balancing of market conditions before a further move upwards in the spring or whether this could be the start of a more prolonged move downwards.  

Only Found Here

Days on Market:

  • Selling in 0 - 7 days:
    • Single Family: 41% at an average of 102.41% of the list price.
    • Condo/Strata: 36% at an average of 100.56% of the list price.
  • Selling in 8 -31 days:
    • Single Family: 29% at an average of 98.31% of the list price.
    • Condo/Strata: 43% at an average of 98.30% of the list price.
  • Selling in more than 31 days:
    • Single Family: 30% at an average of 98.20% of the list price.
    • Condo/Strata: 21% at an average of 97.35% of the list price.

Sell Price/List Price:

  • Sold above list price:
    • Single Family: 29% of homes sold above the asking price - at an average of 5.58% above ask, with 19% the highest premium paid. The average days on market for those selling above the asking price was 17.
    • Condo/Strata: 24% of condos sold above the asking price at an average of 3.46% above ask. The highest premium paid was 5%, and the average days on market for those selling above the asking price was 12.
  • Sold at the list price:
    • Single Family: 9% of homes sold at the asking price in an average of 21 days.
    • Condo/Strata: 17% of condos sold at an average of 84 days on the market.
  • Sold below the list price:
    • Single Family: 62% of homes sold, taking an average of 30 days.
    • Condo/Strata: 59% of condos sold, taking an average of 26 days.

There are clearly some key takeaways here:

  1. The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.
  2. The majority of properties sold below the asking price, with percentages in both categories on the rise.
  3. The most attractive offerings are still attracting significant bidding wars, with 5 homes transacting between 10% - 19% above the list price. Single-family homes were pursued significantly more aggressively than condos.
  4. There is a noticeable inverse relationship between days on market and sell/list ratio. In general, the lower the days on the market, the higher the price relative to list price. Homes selling well below the asking price (that were overpriced by greedy sellers with unrealistic expectations) are sitting on the market for a significant amount of time as the seller’s expectations normalize over time.

What this means for Buyers: While listed properties on average are taking longer to sell, the most attractive offerings are still attracting aggressive bidding wars. However, for the rest of the market, the majority of sales are now happening below the asking price, so there seems to be more opportunities to find a home without competition and potentially finding a “deal” under the asking price. By historical standards, buyer demand remains strong, so if you are a serious buyer, it is still important to be pre-approved for a mortgage and very clear on what you are looking for so that you can offer immediately on the best new options hitting the market.

What this means for Sellers: You need to price accurately to maximize interest, especially with the number of active listings hovering around 2-year highs. Sellers have been caught up in the hype and media attention on the housing market and in many cases are going to market with unrealistic expectations. This is not the “leave a little room for negotiation” market. Pricing accurately will minimize the days on market (and inconvenience to your family), as well as best position you for a competitive bidding situation. As you can see above, the longer a home sits on the market, the more likely it is to transact below the listing price as the listing becomes stale. Working with a Realtor with a very strong marketing platform is vital, however, pricing accurately has never been more important, so make sure the Realtor you select has a proven track record of pricing accurately and with average days on the market well below the market average.  

Top Performing Neighbourhoods & Categories

14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from August to September, with all 18 experiencing increased prices year-over-year.  These annual increases range from 9.38% in Hammond Bay to 29.87 % in Lower Lantzville. Top risers month-over-month were Lower Lantzville, Cedar, South Nanaimo, Uplands, and Chase River. Top performers year-over-year were Lower Lantzville, South Jinglepot, South Nanaimo, Cedar and Old City. Similar to the past couple months, and more so than in previous months, the top performers were a bit scattered, however, areas on the outskirts of town in various directions featured prominently, not surprising given the affordability challenges in the most in-demand neighbourhoods.  Looking at volume, risers both monthly and annually included Upper Lantzville, Extension, and Old City.

Interestingly, the average sale price for apartment-style condos and patio homes surged in September, up 31% and 21% respectively, month-over-month. Townhomes also had a respectable showing, with condos, patio homes, and townhomes now all up more than 20% year-over-year. For those following our commentary, this should not come as a surprise. With downsizing empty nesters looking for less square footage these categories were poised to rise on the back of heightened demand. Taken together with single-family home prices becoming increasingly out of reach and the fact that as the calendar ticked over into 2016 many stratified properties were still priced below their previous cycle highs (2007/2008), it was the perfect storm for rapid price acceleration. On relatively low volume, month-over-month and year-over-year waterfront homes and lots saw decreases in average sale prices.

Opportunities

While still considered a SELLER’s market, as we transition into the fall market, conditions appear to be trending towards more of a balanced market. Despite buyer demand not appearing quite as strong as it was earlier in the year, this is still a good time to consider listing your property, especially if you have listed in the past number of years and been unsuccessful. While Buyer demand could conceivably get stronger, factors such as higher interest rates, affordability challenges, and speculated further government intervention to cool the housing market, will more likely than not cool buyer demand over the next year or two. Therefore, if you need to sell, with record high average sale prices and market indicators deteriorating, the fall or early spring market may represent your last solid opportunity for some time to exit with ease.

For investors, it is important to remember that when managing your assets, protecting your downside is every bit as important, if not more than chasing gains on the upside. Remember a decline of 50% requires an increase of 100% just to break even. Selling near the top also positions you to “go shopping” when the market is “on sale.” This is how real acceleration is possible when building your portfolio. While this market may still have some room to run to satisfy the built-up demand from the spring market, we are already seeing signs of demand cooling. It always does, markets are cyclical, it is not different this time… Make sure you are protected.

For buyers, the number of active listings remains near the highs last seen in the fall of 2015. The average days on market is increasing, and the majority of transactions are now occurring below the list price.  More listings equal more choice for buyers and potentially the opportunity to secure a home without enduring excruciating bidding wars and ultimately overpaying to have an offer accepted. As we head into winter, buyers will again head to the sidelines, as those with a choice typically prefer to avoid moving during the busy holiday season and challenging winter weather that could follow into the new year. Similarly, if sellers have a choice, they will often wait until the spring market to list. However, major changes in life circumstances, such as job transfers, divorce, etc. will necessitate listings throughout the winter months, and it is often during these times, that buyers can find some of the best bargains of the year.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here:  Monthly Stats Nanaimo September 2017

Source: VIREB

Sept. 7, 2017

Investor Insights

Should You Focus Your Real Estate Investments on Your Local Market?

Market conditions on Central Vancouver Island have risen to a level where finding cash-flowing residential properties without a sizeable down payment is nearly impossible. If you are able to find a good opportunity, the return is likely to be modest. Essentially at this point in the cycle, you are betting on capital appreciation, which may be fine for you if you have a long term investment horizon (10+ years), but if you think your holding period may be shorter you are definitely taking some risk with an increasing number of signs pointing to the fact we may be closer to the top of this cycle than most think. If this is your market of choice, what do you do, sit on the sidelines and wait for a correction? Not a bad approach if your investment capital is earning a return in another asset class. However, if you are looking to put your money to work in the real estate sector, harnessing the benefits of leveraging what only real estate can offer, investing beyond your local market could be a solid option. If you have historically managed all of your own properties, it may actually be a blessing in disguise, exposing you to the benefits of having your properties professionally managed while you have more time to enjoy your life.

At a fundamental level, no matter the asset class, investing is about securing the highest return for a given level of risk. When fund managers look at publicly traded companies, they typically evaluate the risk/reward characteristics of the security, in addition to the financial performance and future expectations for the company, among other considerations. The location of the head office or the markets operated in are less of a factor if the company rates high across all other areas of consideration. For the most part, investors are OK with that, because there is company management ensuring ongoing operations are smooth, and potentially a fund manager, or your portfolio manager/investment advisor continuing to monitor the financial performance of the company.

From strictly a risk/return perspective, real estate should be no different. For a given level of risk, where can you secure the highest return? Since real estate is location specific and cyclical, the real estate cycles are not occurring concurrently. While BC has boomed, some parts of Alberta have been hit hard over the past few years with declining oil prices. There have been points in the past where Alberta has boomed while BC was slumping. What is important is to identify locations that are fundamentally strong - solid employment base, low vacancy rates, strong infrastructure, growing population, etc., then once these core requirements have been satisfied, look for the locations that will produce a solid return with strong future growth prospects. Once you have identified a few target locations to invest, contact a few local property management companies, do some due diligence and find one you have a level of comfort with prior to seriously pursuing any properties. Since property management will be your boots on the ground and ultimately play a significant role in the success of your investment, take as much time as you need at this stage, asking for references, a property plan, their policies, procedures, and cost structure, etc., whatever you need to satisfy yourself that they will do a good job for you. They may even be a good resource in addition to an investment focused Realtor to point you in the direction of the best areas to invest, where rents are strong, vacancy is low, and the future outlook for the neighbourhood is strong.

While I understand there are many different ways you can invest in real estate and succeed, the long term, buy and hold approach in strong areas on the upswing offering solid cash-flow, lends itself to some geographic diversification. Simply not having all of your eggs in one basket alone will better position you for success, let alone the opportunity to secure a better return in other markets.

While there is a level of comfort in being able to drive by and check on your properties at your discretion, what you really have to ask is whether this added convenience is really worth the cost. In most cases, I would argue it is not. After all, you may well have investments in your portfolio around the globe, and it is pretty unlikely you are traveling to meet with the executives and touring operations on a regular basis to ensure your investment is safe. Why would you? There are measures in place, such as management and regular reports, to ensure you have the information you need to know what is happening with your investment. Real estate is no different. It is an asset class, and a great one at that, with a proven track record of helping people from all economic and professional backgrounds, build wealth and position themselves for a comfortable retirement.

If you are considering an investment in real estate, put our full-service advisory team to work for you. Contact us anytime for your complimentary consultation at 250-751-0804 or info@jahelkagroup.com.

Sept. 7, 2017

Nanaimo Market Statistics August 2017

Market Indicators Either Flat or Down for 3rd Consecutive Month

 Single Family Prices and Volume

138 single family homes sold in August, down 17%  from the 166 sold in the same timeframe last year and down 9% from the 152 that sold in July. Given the time of year when people are out enjoying the summer, the continued slowdown is not unexpected, however, it is interesting to note that in 2016 volume reached its summer bottom in July. After 3 months hovering around the $525,000 mark, the average sale price for a single family home dipped slightly (1.11%) in August to $518,612, which was an increase of 14% over last year’s August figure. August’s median price of $495,000 was an increase of 2% from July’s median price of $485,000 and an increase of nearly 18% from last August. While not as pronounced as July’s year-over-year figures, we are still talking about sizable gains here.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio dipped a further 7% from July to 63%, more notably, this represented a 31% decline from the 91% posted in August of 2016.

The sell price/list price held at 99% month-over-month, one point up from the 98% figure for August 2016.  August’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average number of days on the market increased by 20% from July to 24 days. This figure is still 11% lower than that of last August, suggesting homes on average sold a few days quicker than they did last August.  

As of the end of August, the number of active listings is 342, up 2% from July and 26% from inventory levels at the same time last year.  This is a trend that will be important to watch as this is the third consecutive month where we have seen heightened year-over-year inventory levels. The number of new listings has also been rising year-over-year, with the past 3 months experiencing accelerated increases in percentage rises over last year’s new listing numbers. With lack of supply being a major driver of recent price gains, it will be interesting to see whether rising inventory levels continue leading to more balanced market conditions in the coming months.

While the figures in this section remain strong by historical standards, it should be noted that for the third consecutive month, each month-over-month metric was either flat or inferior. While this is not completely unexpected given the time of year and extended heat wave we have experienced making it more attractive to be at the beach than touring properties, it does undoubtedly put our team on alert to be watching for behavioural signs from our clients that buyer sentiment may be changing. Keeping a close eye on the market over the coming months will help determine whether this month’s conditions are just continued seasonal cooling or the start of a larger trend. September will be an important month to watch as historically it has been a good indicator of the strength of the fall market.

Only Found Here

Days on Market:

  • Selling in 0 - 7 days:
    • Single Family: 41% at an average of 101.07% of the list price.
    • Condo/Strata: 38% at an average of 100.18% of the list price.
  • Selling in 8 -31 days:
    • Single Family: 31% at an average of 99.41% of the list price.
    • Condo/Strata: 44% at an average of 99.95% of the list price.
  • Selling in more than 31 days:
    • Single Family: 28% at an average of 97.88% of the list price.
    • Condo/Strata: 17% at an average of 97.39% of the list price.

Sell Price/List Price:Sold above list price

  • Sold above list price:
    • Single Family: 27% of homes sold above the asking price - at an average of 3.98% above ask, with 16% the highest premium paid. The average days on market for those selling above the asking price was 24, although this was skewed by 2 that required 100+ days to sell.
    • Condo/Strata: 27% of condos sold above the asking price at an average of 3.29% above ask. The highest premium paid was 10%, and the average days on market for those selling above the asking price was 13.
  • Sold at the list price:
    • Single Family: 14% of homes sold at the asking price in an average of 9 days.
    • Condo/Strata: 24% of condos sold at an average of 42 days on the market.
  • Sold below the list price:
    • Single Family: 59% of homes sold, taking an average of 28 days.
    • Condo/Strata: 49% of condos sold, taking an average of 24 days.

There are clearly some key takeaways here:

  1. Homes are not selling nearly as quickly as they did in the spring market
  2. The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.
  3. The majority of single family homes and nearly half of the strata properties sold below the asking price.
  4. There is a strong correlation (or inverse relationship if you would like to get technical) between days on market and sell/list price. In general, the lower the days on the market, the higher the price relative to list price. Homes selling well below the asking price (that were overpriced by greedy sellers with unrealistic expectations) are sitting on the market for a significant amount of time as the seller’s expectations normalize over time.

What this means for Buyers: At some price levels and locations, you may have an opportunity to have more than an hour to decide if you want to pull the trigger and enter into a bidding war. In fact, there may be increasingly more opportunities to find a home without competition and potentially find a deal here and there under the asking price. However, buyer demand remains strong, so if you are a serious buyer, you need to be pre-approved for a mortgage and very clear on what you are looking for so that you can offer immediately on the best new options hitting the market.

What this means for Sellers: You need to price accurately to maximize interest, especially with the number of active listings climbing to near 2-year highs. This is not the “leave a little room for negotiation” market. Pricing accurately will minimize the days on market (and inconvenience to your family), as well as best position you for a competitive bidding situation. Working with a Realtor with a very strong marketing platform is vital, as is working with an experienced negotiator who can guide you through a potential multiple offer situation.  

Top Performing Neighbourhoods & Categories

15 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from July to August, with all 18 experiencing increased prices year-over-year.  These annual increases range from 5.63% in Hammond Bay to 33.63 % in the Old City. Top risers month-over-month were Extension, North Jinglepot, South Nanaimo, Old City, and Brechin Hill. Top performers year-over-year were Old City, Central Nanaimo, South Jinglepot, North Jinglepot, and South Nanaimo. Similar to last month, and more so than in previous months, the top performers seem somewhat scattered, with no strong correlation among top performing areas. Looking at volume, risers both monthly and annually included Uplands and Lower Lantzville.

On low volume, for the second month in a row water front homes led in both average month-over-month and year-over-year increases as buyers are captivated by the oceanfront lifestyle that is so attractive this time of year. Month-over-month. Single family, townhouses, and lots all saw declines, with apartment style condos and patio homes experiencing marginal increases. Year-over-year, all categories experienced gains in average prices, with townhomes and single family homes having sizeable gains, in addition to the strong price action on water front homes previously noted.

Opportunities

Heading into fall, we remain undoubtedly in the midst of a SELLER’s market. We continue to see the opportunities firmly on the sell side. If you have previously listed a property that didn’t result in a sale, the fall market may be the perfect opportunity to re-enter the market.

With that said, if you have been following our commentary, you are well aware that the past 3 months have all exhibited flat or deteriorating market conditions across a variety of metrics. While this is not completely unexpected given the time of year, it is a trend to monitor and adds fuel to the fire that we may be nearing a top in the current cycle. Across the country, volume has slowed in major markets, and just this morning the Bank of Canada has announced the second rate hike this summer. With affordability already a challenge, rising interest rates will surely impact the ability of buyers to qualify for mortgages as levels needed to get them into their desired categories of housing. There is also talk that non-insured mortgages may soon require buyers to qualify at the substantially higher qualifying rate, which is currently only applicable to insured, high ratio mortgages. The byproduct of this is less investment capital flowing into the real estate market. Less demand = reduced upward pressure on pricing. So what are we getting at...While, if you are an investor or downsizer trying to maximize your gains and time a market top, there are warning signs suggesting now may be the time. Whether it’s the stock market or the real estate market, timing the top is a fool’s game. It is impossible even for the best of the best. You can look at all the past trends and analysis you want, but if unforeseen circumstances such as government intervention, a natural disaster or major international conflict get in the way, conventional wisdom goes down the toilet. When managing your assets, protecting your downside is every bit as important, if not more than chasing gains on the upside. Remember a decline of 50% requires an increase of 100% just to break even. Selling near the top also positions you to “go shopping” when the market is “on sale.” This is how real acceleration is possible when building your portfolio. While this market may still have some room to run to satisfy the built up demand from the spring market, there is no doubt that it will turn at some point. It always does, markets are cyclical, it is not different this time… Make sure you are protected.

For buyers, the number of active listings is the highest it has been since the fall of 2015. Throughout the summer, we noticed in some cases that competition has somewhat dissipated on the buy side, and homes don’t seem to be snatched up as quickly, supported by rising average days on market. More listings equals more choice for buyers and potentially the opportunity to secure a home without enduring excruciating bidding wars and ultimately overpaying to have an offer accepted. However, September traditionally sees families return to the routine and often has decision makers re-evaluating major life decisions, such as whether it is time to make a move. This often drives fairly robust buyer demand in the early fall months, before buyers and sellers retreat to the sidelines for the holiday season, so this window may close fairly quickly as we head towards the latter part of the month.

 

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Monthly Stats Nanaimo August 2017

Source: VIREB