This is a guest post from HaliPad Real Estate Inc.
(Member since 2019)
In the first quarter of 2020, the average sale price of a single-family home in the Halifax Regional Municipality was $344,644. In 2021, at time of writing, that number has skyrocketed to more than $475,000. This represents a 39.5 per cent increase. The most significant jump occurred from December to January where the average monthly sale price increased from $426,705 to $468,548.
Low inventory is not a new problem. It was a challenge in March 2020 but, since then, the number of homes for sale has fallen by a further 72.8 per cent. Meanwhile, sales have increased by 18.1 per cent year to date.
Buyer desperation
With numbers this bleak, you find a real estate market characterized by bidding wars, bully offers and an overall feeling of buyer desperation. Sellers hold the cards and are delaying when they review offers, often several days after the initial list date.
The goal is to get as many buyers through the door as possible to create the maximum amount of interest. At which point, sellers often review ten or more offers and select the one with the best terms and highest price. This is happening all across Canada, not just in the HRM.
Low interest rates and low vacancy
A recent Reuters article commented on Canada’s red hot housing market becoming a ‘bonfire’. A call by some to implement cooling measures fell on deaf ears. Policymakers feel that due to COVID-19, the economy is too fragile to increase interest rates. As the cost to borrow remains low, so do vacancy rates in the rental sector. The result is an increasing cost to rent which, in turn, pushes more people towards homeownership.
Bully offers
A bully offer is perhaps a buyer’s best tactic to obtaining a home in the current market. By waiting until the offer date selected by the seller, a buyer opens themselves to tremendous competition. The purpose of a bully offer is to give the seller an offer so compelling that they must think long and hard about it. A bird in the hand is better than two in the bush. Offering something to the seller with minimal conditions and substantial financial clout gives you the best opportunity to get selected.
Tactics for those looking to upsize
For those who already own a home, this market is not as daunting. We recently had a client who sold their two-bedroom condo and obtained $45,000 more than they were expecting. They had a lot more equity than they imagined and used a portion of it to pay off some short-term debt like a line of credit or a car loan. This meant they were then able to get approved for a higher mortgage than they thought possible. Their mortgage payment is now higher, but their overall monthly debt payments have decreased. You will have to find another home, but if you negotiate a longer close on your sale and restructure some of your short-term debt, it will give you the best opportunity to upgrade.
What’s next?
More than 9,000 people moved to Nova Scotia in 2020. Unless we see a huge influx of inventory, we do not see the market changing anytime soon. New construction is not occurring anywhere near fast enough to satisfy demand. We have clients who bid on a new build two weeks ago and their close date is November. That is pretty much as quick as you’ll see at the moment. A home being built today won’t be ready until late in 2021 if not early 2022. So those looking for accommodation in the meantime are going to have to do so in the resale market, where there’s not much choice either. After vaccinations roll out and Nova Scotia eventually opens its borders, the big question is: Will people leave, or will we see an even greater number flock to our fantastic little province? We’re certainly not going anywhere.
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