Editor’s note: this blog is Part 1 of a two-part series. Read Part 2: Helping Clients Navigate Competitive Markets next week.
Home buyers in larger markets like Toronto or Vancouver are already familiar with occasionally seeing competitive markets and are typically prepared to compete with multiple offers. But this year, thanks to existing market trends and pent-up demand created by the COVID-19 pandemic, other markets are now experiencing this rat race—some for the first time.
“I wouldn’t say that anywhere in particular is used to seeing this type of competition among buyers. Historically these types of market conditions are cyclical and only come around every 15 or 20 years,” says Shaun Cathcart, CREA’s senior economist.
“Even in Toronto and Vancouver, which have seen bursts of multiple-offer market conditions in the last decade, it’s still more the exception than the rule. That said, there are some markets now that have not seen sellers’ markets like we’re seeing now at any point in recent memory,” he says. That includes parts of Ontario outside of the Greater Golden Horseshoe, and most of Quebec and the Maritime provinces.
The market conditions we’re seeing now aren’t necessarily the result of COVID-19. Rather, Cathcart says, they’ve been building in this direction for the past five years or so. That said, the pandemic has arguably made the situation even more acute.
For Blair Campbell, broker of record with Accsell Realty Inc. Brokerage in London, Ontario, it’s become a “very hectic marketplace here, and multiple offers are the norm.” Recently, he sold a home in London for more than $2 million—and it was in competition.
“That’s unheard of,” he says. “I’ve had other homes nearing the $1 million mark in competition as well, so all facets of the market are on fire.”
There’s also a “huge lack of inventory,” he says. “It is a challenge, it requires patience, and the hard part is dealing with the buyer who has already sold their home and is under the gun.”
He advises buyers to go in with a good number, but not to overpay. Your clients need to be willing to move on to the next deal if it doesn’t work out.
It comes back to the basics: being pre-qualified, knowing what they can afford and doing their due diligence ahead of time.
“We’re at historic all-time lows for supply and the demand is through the roof,” he says. “In London, we had a strong market prior to COVID-19. The big thing with COVID is it’s sped up decision-making for some people, and there’s a huge influx of buyers coming from more expensive markets.”
The highest average value increase was in St. Thomas, for example, about a 15-minute drive outside of London. The second was in Middlesex County. “People still want access to the amenities; they don’t want to go too far,” Campbell says.
Atlantic Canada has also seen unprecedented activity. In the spring, buyers and sellers in Saint John hit the pause button for a couple of months. Then it started to let up and “it has not stopped since, which is somewhat surprising,” says Sherry Sheldrick, a REALTOR® and salesperson based in Saint John, New Brunswick, and member of CREA’s Marketing and Communications Committee.
While 2019 was a record-breaking year in the city, 2020 is looking like it will surpass it—despite the pandemic-related slowdown in the spring.
“We have huge demand and low inventory, so it’s really pushed us into a sellers’ market,” she says. Low interest rates are a draw for buyers, but the region is also seeing interest from people in Ontario and out West, looking to relocate.
“I think New Brunswick is finally on the map,” says Sheldrick. While, for the first time, the average selling price in Saint John is more than $200,000, it’s still much lower than other parts of Canada, she says.
“People come here from Ontario or B.C. and look at what they get here for their dollar and can’t believe it,” she says. “It’s such a beautiful landscape here as well.”
Home buyers can expect multiple offers on properties; some are sold the same day they’re listed, and many times it’s above asking.
“That’s not typical here,” says Sheldrick. As a result, she prepares buyers ahead of time. “If you’re a serious buyer, you need to be available.” They also need to have their financing in order and be willing to make a quick decision—if the buyer is flexible on a closing date, that can work to their advantage.
“If you’re a serious buyer, you need to be available.”
“The people we were dealing with through COVID-19 were, in most cases, people who had sold their home or were relocating and they had to buy,” she says. But in June, when the province relaxed some of its restrictions, demand “essentially went crazy.” It’s not just resale; new construction is also disappearing as fast as it can be built.
Halifax is typically a balanced market but now, not only in the Halifax Regional Municipality but across most of Nova Scotia, it’s a sellers’ market.
“We have definitely less than a 30-day supply in most cases,” says Da Silva. “So, it’s very, very hot. There are several homes that I know of personally that have sold for $100,000 more than asking.”
As a result, some buyers are extremely frustrated, she says. Some are making emotional decisions and may potentially overpay. This is where REALTORS® can temper expectations and provide much-needed guidance.
There was initial speculation that the economic fallout from COVID-19 would lead to a ballooning of supply as investors and those not able to pay their mortgages would be flooding the market with properties for sale. While Cathcart says there’s “no doubt” some of this is going on, the flip side is an even larger number of households have balked at the idea of selling the family home during a global health crisis. “The value we place in our homes has surely not gone down during this time,” he says. “We already had almost the tightest market conditions ever heading into this year. They are now the tightest ever.”