Some brokers are finding investor clients a safe harbour in the stormy sea of predictions for the housing market.
“We have been extremely busy, the real estate investment sector is huge for us,” says Jerome Christensen, with Mortgage Alliance
. “About 40 to 50 per cent of our business consists of investors.”
A recent Moody’s Investors Service report warns of a looming economic downturn that could send Canadian housing prices plummeting 44 per cent; while a TD Economics study, Long-Run Rate of Return for Canadian Home Prices, forecasts a “string of lacklustre performances” in the coming years, with a 2 per cent rate of return only matching the pace of inflation for the next decade. Analysts are inferring that translates into a significant drop in sales, a phenomenon with a more-direct effect on brokers.
But never mind the predictions, says Christensen, who so far has only seen strong numbers.
“A lot of our clients purchase real estate property as investments,” he told MortgageBrokerNews.ca. “With low rates and many (clients) putting 25 to 30 per cent down, extending the amortization to 30 years, they can easily sustain rental properties.”
The Canadian housing market has generally been described as being overvalued by as much as 10 per cent, although New York’s Fitch Ratings has placed that number closer to 20 per cent. Either drop would be the by-product of residential home prices growing by as much as 7 per cent in the last decade.
“We have seen value going up everywhere, all across Canada,” says Christensen. “Our brokers are in B.C., Manitoba, New Brunswick, Ontario… but definitely Toronto is the desired market.”
Recent numbers from CMHC showed Toronto bucking the national trend in detached housing starts, with an increase of 7 per cent in February compared to the previous month. A more dramatic change was the number of starts for apartment dwellings, townhouses and condominiums, which rose 54 per cent during the same period.