Real Estate Talk:
Turn of events market update

Avoidable and unavoidable factors now affecting the real-estate market

By Joseph Marovitch

August 25, 2021

Last month, Quebec appeared to be on a good path as we moved toward the end of the pandemic. People were getting vaccinated, and death, infections and hospitalization decreased. Restrictions were removed.

This month we have a fourth wave of the Delta virus, which apparently is continuing to mutate. There are a few factors that are slowing down the real estate market. Some are avoidable, others are not.

What is avoidable is the spread of infections. Vaccines and masks are available but many refuse to take these vaccines and even refuse to wear a mask. Without enough people vaccinated, the virus can mutate and make those who were vaccinated susceptible to new strains of the virus.

The continued progression of the virus is again causing many sellers to hesitate to sell. The effect is a continuous stream of buyers for a dwindling number of properties.

What is not avoidable because of the avoidable issue is vaccine passports. As of September 1, Quebecers are required to carry a vaccine passport if they wish to enter a restaurant, bar, or mass event like a concert. The vaccine passport is a problem for entrepreneurs as more staff are required in a time when hiring staff is difficult. The passport will cause conflict as those who think they have the right to make everyone else sick protest, start fights and yell obscenities to no effect other than disruption and causing stress.

The continued progression of the virus is again causing many sellers to hesitate to sell. The effect is a continuous stream of buyers for a dwindling number of properties. This causes prices to rise to levels that are unaffordable for the average buyer.

Other effects

Many restaurants, bars and stores closed over the year and it appears that many people are interested in new opportunities to rent the vacant spaces and open new concept restaurants. However, many of these investors are trying to take advantage of low-interest rates with little cash of their own.

‘On the bright side, a vaccine passport could save many lives and reduce the spread of infection, thereby causing full herd immunity…’

Those experienced in the restaurant and bar business are wary of the risk and uncertainty of the market, not knowing where we are in the pandemic and what the effect of vaccine passports will be. To top off everything else, a federal election will take place on September 20, creating lines of people waiting to vote and protests to erupt. The election could be a super spreader itself, mitigating the virus further.

On the bright side, a vaccine passport could save many lives and reduce the spread of infection, thereby causing full herd immunity, and an election will cause those so certain the vaccine does not work to either put their money where their mouth is, come out to vote and prove they are either right or wrong. The only problem for anti-vaxxers is, if they are proven wrong, they could die.

And the saga continues…

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: Kick-starting the real estate market in September

State of the market

With continued low-interest rates, many people are now considering a home purchase. In the last few weeks, listings have begun to increase. This means it is possible to buy a home and avoid a bidding war due to increased inventory, though the price of property will not likely decrease.

The risk is that interest rates may increase, causing mortgage loans to be more expensive. Therefore, I always advise visiting your mortgage broker and locking in a rate for up to 120 days. Locking in a rate means that, should interest rates rise over the three months one is searching for property, the buyer will maintain their locked-in rate.

As well, should interest rates decrease, the buyer’s pre-approval interest rate will reduce as well. Other advantages are that, with a pre-approval, the lender will let the buyer know exactly how much they can borrow and, therefore, know how much they can afford for a house. Finally, a seller is usually a little more flexible when they receive an offer accompanied with a pre-approval document indicating the buyer has the funds.

‘Locking in a rate means that, should interest rates rise over the three months one is searching for property, the buyer will maintain their locked-in rate.’

When meeting with a potential buyer, I am always asked how much must the buyer put down on a mortgage. According to a recent article in Money Sense, written by Jason Heath, down payments are as follows:

Minimum down payments

• $500,000 or less – 5%
• $500,000 to $999,000 – 5% on the first $500,000 and 10% on the balance
• $1,000,000 plus – 20% down payment
• Income Property – 20% minimum down payment

Residential property purchased with less than 20% down requires the mortgage to be insured by the Canadian Mortgage and Housing Corporation (CMHC), which comes with insurance fees. As well, a CMHC backed loan can take months to acquire as the CMHC appears to be backed up with applications more than usual this year. By putting down 20% or more on a mortgage, a buyer can avoid the CMHC and its premiums, not to mention acquiring a smaller mortgage, lower monthly payments, and a quicker way to pay off the mortgage.

Another advantage of putting down 20% or more is that the buyer may be eligible for a homeowner’s revolving line of credit at very low interest rates that can be used for renovations, upgrades, a vacation (I do not recommend using the homeowner’s line of credit for a vacation).

Have a great week!

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Feature image: Tim Sheerman-Chase via StockPholio.com

Other articles by Joseph Marovitch