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Friday, July 12, 2024
The Turner Report: What now? Where does NOTL housing market go from here?

This marks the debut of columnist Garth Turner as a regular contributor to The Lake Report. He’s a longtime journalist, commentator and former federal cabinet minister. We look forward to his insightful contributions.

Garth Turner

Thanks for coming to my new Lake Report piece. Today, let’s talk about your house. 

First, a few words about me. I’m a NOTL Old Town guy. My place was built more than 200 years ago and among other things was once a thriving brothel.

It’s the second time we’ve lived here, having previously resided on King Street beside what now seems destined to be a honking big hotel. There’s a lot of that going on lately.

Prior to this effort to support our great local paper, I’ve been a daily newspaper guy, a financial guy, TV talking head, serial businessman, author (17 books), blogger, wealth manager, member of Parliament (twice, slow learner), and I even admit to having been the minister running the CRA, our nation’s tax agency (don’t judge).

But let’s talk about your house. 

Real estate is a cult in Canada. Everybody wants some, especially in upscale, gorgeous, Leave-it-to-Beaver places like Niagara-on-the-Lake. That’s why the average price here last month was $1.123 million and the rest of the region clocked in at just over $700,000.

But since COVID, and the housing mania it engendered in 2021, the market’s been weird.

Sales are down — well below the 10-year average — while listings have swollen and mortgage rates are more than double pandemic levels. Despite that, plus some punitive government measures, prices haven’t collapsed. Sellers have not surrendered. No fire sales.

In fact, a house around the corner just changed hands for well over $3 million. The folks across the road are hanging in with a listing that (with the land transfer tax) will hit four mill. This is serious money. NOTL is not your typical little bump in the GTA hinterland.

So, why is this the case? And what’s coming?

“The current market in NOTL is slow,” admits Sotheby’s broker Kymberley McKee. She lays blame on the feds’ capricious ban on foreign buyers (now extended) and the ongoing uncertainty about what the Bank of Canada has in store after one weensy quarter-point chop.

“Personally, the day after the reduction, I did notice a marked increase in booked property showings,” she says. “These viewings have not yet translated into firm offers, which only reinforces the observation that buyers are definitely more cautious.”

Bosley sales representative Doug Rempel points out that March, April and May sales sank — down 16 per cent, 12 per cent and 21 per cent from year-ago levels.

“It reflects a wait-and-see attitude,” he says. “People are waiting to see what the Bank of Canada does with interest rates. For better or worse, the psychological impact that has on buyer confidence has been a major factor in the nervous market we’ve seen here in Niagara.”

NOTL may have a lot of properties on the block right now (about 255), but the region has seen supply mushroom. At near 3,000, inventory is at all-time highs.

Niagara sales last month fell below 2023 levels. In NOTL they were a third higher. Cachet, tree-lined streets and exclusivity sell. 

So what now?

Most economists figure two more cuts for the central bank by Christmas. Maybe even three. The prime at the banks will fall to just over 6 per cent. Five-year mortgages may slip below 5 per cent.

By next summer the Bank of Canada will have dumped its policy marker to 3.5 per cent. At that point home loans will have a 4-handle. 

We’ve always had an inverse relationship between rates and house prices. Cheap money brought crazy valuations. But 10 rate hikes didn’t put a chink in the armour of the NOTL market. 

Sales may have stalled. The dollars didn’t. And now we’re on a path to monetary easing in Canada and globally.

In a normal world, it’d be up from here. But we’re not normal. Next week, I’ll tell you why.

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