We recently held a super fun first-time buyers event at Donut Monster in January that was very well received. Outside of the mortgage discussions, most of the event revolved around the real estate market and strategies to get INTO the market.
The more you know and understand, the easier it is to position yourself to be successful. That’s true for just about anything, including personal finance.
As we head into the lovely Spring market, we thought it would be nice to give our clients our perspective of what’s going on out there. For first-time buyers, young families who are considering a move and retirees considering what to do with their home.
In Hamilton-Burlington, the market is broken down into three segments. Find your segment and see how this market will affect your plans. This report is partially anecdotal (from our experience at the office) and partially drawn from the recent RAHB report for February 2019.
First time buyers tend to fall into the below $500k camp and the natural competition created by a lack of supply and high demand has kept it very competitive. As a result, the sub-$500k neighbourhoods are seeing steady growth with the average sale price increasing year-over-year. Some areas have seen the average sale price grow by as much as 10% growth, such as Hamilton Mountain.
First timers are reacting to this competition by seeking out listings in neighbourhoods that move closer to industrial Hamilton seeking out a bargain OR putting offers on smaller houses (ie. 2-bedroom homes, instead of 3-bedrooms).
Buyers: You will find that they are looking at this purchase more-so as a starter home. School catchment and neighbourhood will be sacrificed for an affordable mortgage payment, making this a ‘good-for-now’ mindset.
Sellers: You will find that you have zero difficulty unloading a property in this price range. It’s not quite as hot as it was in 2015 and 2016 when listings were up and down within 24 hours, but it’s still very competitive and good properties that are listed at the correct price go quickly.
BETWEEN $500k – $999k
We really see the effects of the recent mortgage guideline changes in neighbourhoods with an average sale price above $500k. Down payment requirements are higher for purchases above $500k and the household income required to qualify for a purchase in that range is minimum $110,000 annually.
The average sale price in this range has remained relatively flat year-over-year. Some neighbourhoods have seen a dip, but we are talking less than a 1% decrease in average sale, which is negligible.
Buyers: You will find that the value is fairly decent, with many homes in this price range offering 4-bedrooms and good school catchment. If you have a big down payment and prospects for income growth at work, it’s a great time to be wading into this market.
Sellers will find that the sale process can be slow at times, but the patient seller is still getting close to what they want. You may want to consider selling first and then buying in this market.
This segment of the market used to be limited to very small, wealthy pockets with custom homes. Now that the GTA real estate fever has reached Hamilton/Burlington, we are seeing whole neighbourhoods pushing $1M, especially in Flamborough, Burlington, Ancaster and Dundas.
Financing a $1M+ purchase is not the same as a purchase below $1M. The down payment requirements are very high, limiting the buyer pool to people with deep pockets.
CMHC does not insure $1M purchases as well, so financing options are limited to a handful of banks.
Put those limitations together and you find that the buyer pool is tiny.
Buyers: That’s great news for you! It is essentially a buyer’s market and you can feel free to put in an offer that suits you without the worry of many competing offers. It seems strange to say, but there is VERY good value in the $1M market right now. The cost per square footage tends to go way down above $1M, the school catchment and amenities tend to be above average and the finishings tend to be very high quality.
Sellers: If you are selling in this market for more than $1M, there is less consistency of pricing and your final sale price may swing by $100k+. Realtors will preach extreme patience in this market and you will absolutely want to sell before you even think about putting in an offer elsewhere (unless you can carry both properties).
Altogether, it’s an interesting real estate market (when is it ever NOT interesting?) and hopefully this helps to give you some perspective as you consider your options.