Continuing the trend established during the past nine consecutive months, residential unit volume in the month of January exceeded the prior year by approximately 57%, and average residential values showed a year over year increase of about 3.3% to $269,317. However, one should remember that these statistics represent just one month of activity into the current year, and should be expected, given the distressed situation in the market in January 2009. However, when taken in context with the overall trend of the past nine months, these results are encouraging and are certainly representative of the general "health" of the local market. In spite of the trend towards a lower inventory of available properties, we are fortunate to have a market which represents more of a "balanced" environment as opposed to a "buyer's" or "seller's" market, which in either case, is a precursor of roller coaster swings in market prices. In the main, I continue to believe that our area will experience moderate growth and general pricing stability.
The introduction in Ontario of the Harmonized Sales Tax will result in additional closing costs to both buyers and sellers. It is estimated that this increase will amount to about $1,500.00 to the average home sale in the Barrie area. While this increase should, and cannot be considered an insignificant amount, it is like all taxes... "A Fact of Life"...and over time, will simply become part of the pricing equation for both buyers and sellers. This increase represents less than a half of one percent, and pales in comparison to the general market price increases which we have experienced over the past ten years (about 5.7% per year). However, for those who are planning on making a move this year, taking action prior to about the beginning of May is probably wise. This will allow for the lapsed time between the negotiating of the agreement and the date of closing, which must be before July 1st ... the effective date of the new tax.
The Federal Government has just announced new home financing controls which must be followed by the banking sector, the intent of which is to ensure that Canada continues to be the "world example" to emulate in mortgage financing... avoiding the pitfalls which other nations... most notably the United States... have experienced, and which played a major role in the current world wide economic recession. Stand up and say "Hurray" for us... we have put long term "prudence" ahead of "short term profit" in our housing and financial markets.
These new changes, essentially tighten up some mandatory debt service ratios and application criteria used by the lending institutions when an application for a mortgage is processed. This will have the potential to reduce the number of approved applications for a first mortgage, but will also have the effect of keeping these same applicants out of financial distress in the longer term, and therefore, will result in their re-application at a later date when their financial wherewithal has improved. Specifically, the following is the generalities of the main criteria announced by the Federal Government of Canada. The three big changes:
1. Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and a shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
2. Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the current value of their homes. This will ensure that home ownership is a more effective way to save.
3. Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation (investments)
Minister of Finance, Jim Flaherty, stated that "there's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps to help prevent one." (What he didn't say was... "After all, we are Canadian!!!")
Forward Predictions for the Barrie Area Market:
As we move further into this new decade, the monthly unit volume in 2010 will continue to equal or exceed the prior year values, and prices will increase marginally. Properties which are priced reasonably and present themselves well, will sell better than those which are simply relying on low prices to attract a buyer. Recreational and Specialty Properties will continue to be in demand, since they have a limited supply, but will take longer to sell and/or will be sold at values lower than previously. The introduction of the GO Service to Barrie, the general affordability of the Barrie area, and the imposition of a double land transfer tax system in the Greater Toronto Market will continue to fuel unit growth in the entire area in the short and longer term.
First time buyers will continue to play an important role in fuelling the growth of the local market. As a result, there is a dependence on the continuation of low mortgage interest rates. Rates continue to reside at the lowest levels in decades allowing more and more of this group to qualify for financing. Their influence on the market is significant since they create the initial impetus for move-up buyers to sell and then re-buy with a resulting multi-level chain of ownership changes. In addition, this move up phenomenon has the effect of strengthening market values in both the short and long terms.
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