Claude Sullivan of East Coast Mortgage Brokers had four words of advice at the St. John’s Northwest Rotary Club luncheon Tuesday: “Buy now. Don’t wait.”
Sullivan, along with Re/Max Plus Realty agent Jim Burton, spoke to a crowd of about 50 at the Holiday Inn on the evolution and affordability of housing in St. John’s.
Their message: with real estate prices currently on the upswing — plus the possibility of a slight rise in interest rates — people thinking about buying homes should consider making the plunge now, as houses are likely to get less affordable in the short term.
“Real estate prices are increasing. The potential — although we don’t expect it, but the potential is there — for interest rates to increase as well,” Sullivan told The Telegram. “So that would be a perfect storm for an increase in mortgage payments.”
But some of that reduction in affordability — with the federal government in recent years putting stricter qualifications on home-buyers — is what has helped Canada so far avoid the housing crunch in the United States, said Sullivan. In Newfoundland and Labrador, a strong economy has kept the housing market humming.
“With these megaprojects looking to employ thousands of people over the next few years, that makes our situation to be a little different from the rest of Canada,” Sullivan said. “Our economy’s so vibrant compared to the economy in other parts of Canada, that we don’t anticipate that the negatives in the other parts of Canada are going to affect us. We’re going to ride through it because of the strong economy and the strong projects.”
But Canada has gone from a nation of savers to a nation of debtors, Sullivan said. In recent years the biggest barrier to home ownership is not the size of a potential mortgage payment.
“The government, through (the Canada Mortgage and Housing Corp.) regulates what people will be able to qualify for, and that is to make sure that people don’t get in over their heads,” he said. “The biggest problem that we generally find is that mortgage payments, or mortgage debt itself, is not the crippling factor for most people when they experience problems; it’s the other debt. The other debt, though, is very hard to regulate and police, whereas mortgages are easier to control.”
Burton, who spoke before Sullivan, painted a picture of a St. John’s housing market that has seen the average price of homes go from just under $101,000 in 2000 to about $268,000 last year, an increase of 166 per cent. If you look at only new homes, said Burton, the average price is $340,000.
Three main factors are driving consumer confidence in the St. John’s area, Burton told the Rotary Club: population growth, income growth, and employment growth. St. John’s, he said, is the oldest community in North America to hold city status, but 30 per cent of the city has been built since 1990.
“The city is growing, and the downtown landscape is changing dramatically,” he said. “It’s nice to see the confidence that’s being invested on Water Street, with the new $50-million office building on the old Woolworth’s site (and) the hotel that is being built just up the street from that.”
The province’s economic strength is expected to continue at least through 2012, said Burton. “The positive growth will continue. The demand for housing will remain steady for 2012,” he said.
“Unit sales — we’re anticipating to see 3,700 MLS sales, which will be probably about four to five per cent higher than we had last year. Prices should move ahead about five per cent this year — average price we’re anticipating to be about $279,000.”