Mortgage 101 – Why Atlantic Canada Is Beating the Housing Bust

Dan Ahlstrand and Clinton Wilkins discuss the Canadian mortgage market and real estate trends.

Insolvency and Mortgage Payments in Canada

Dan Ahlstrand
And welcome back to Mortgage 101. I’m Dan Ahlstrand, and he is Clinton Wilkins, and we’re talking about the mortgage world and the real estate market, as we do here every month, right here on this podcast and radio show, and there isn’t a place I don’t think you can’t find Mortgage 101 these days, right?

Clinton Wilkins
This is true, I mean, wherever you want to get it, you can get it,, between social media, obviously on the 95.7 website, and it’s on Spotify, Apple Music, it is on all our socials, and in reels, and you can read it, you can listen to it, however you want to digest this content, you can get it. I think a lot of people listen to it, though, on the old-fashioned FM. I think we sound good on the FM radio.

Dan Ahlstrand
Clinton, we were talking about the real estate market in the before they we took the first break here. Part of that story that I saw earlier this week. They, they chatted a little bit about insolvency, and there’s been a lot of talk about that, particularly in the House of Commons, that Canadians are finding it tough to meet their, meet their mortgage payments, and are either going bankrupt or are missing their payments. What’s your experience here in Nova Scotia?

Clinton Wilkins
I think overall, across the country, it is edging up. I think it is worse in the GTA, GVA. I’m not saying that we are absolved, but typically people in Atlantic are paying their mortgages maybe better than other parts of the country. They’re obviously doing it right now. I’m not saying it’s always that way, though. Certain pockets of the Atlantic actually pay their bills a lot worse than the rest of the country, primarily driven by income. So, we have some areas of Atlantic in the Maritimes that have very seasonal employment, or a lot of the employment is tied to maybe one employer, and just think: if you’re in a small town and there’s one employer, and that employer decides to lay people off or go out of business or cease doing operations, that’s very tough. It can be very tough for that housing market in that town because really, who’s moving if there’s no employment to be there. Especially in some of these more rural areas, maybe in New Brunswick, or in Newfoundland, or in PEI, and I think in Nova Scotia we’ve got a more balanced economy. We don’t have one key driver; if anything, the key driver is probably employees of the federal government. We’ve the biggest military presence in all of Canada, here in Halifax and surrounding areas in Nova Scotia, but there’s not one employer that’s driving everything that’s going on here economically in Nova Scotia. We probably have the most stable market of all the three four provinces here that are surrounding us. So in terms of living and doing business, home ownership, and from an economic standpoint, we are in pretty good shape in Nova Scotia. I think there’s something to be said about stability that has a value, and we still have had growth; we certainly had a lot of house price growth here in Nova Scotia over the last four or five years. Yes, it slowed, but we haven’t seen that negative growth; we’re seeing like 3% increases what we had last year in the housing market, which I can deal with. I think I can deal with it from a consumer, for people that are buying real estate, but I can also deal with it for clients that are looking to refinance or sell their homes. I think having that stability has a value; obviously, more is more when you own, but having a more balanced market is easier to navigate and transact in.

Stability and Economic Conditions in Nova Scotia

Dan Ahlstrand
Clinton, you mentioned house prices. In the last couple of shows that we’ve done, you’ve told us that Atlantic Canada, the Maritimes, have been kind of insulated from some of the wild rides that are happening in other places around the country, with house prices dropping, the bottom dropping out of some markets. Are we still insulated from that? Are we still seeing a relatively stable price point when it comes to houses?

Clinton Wilkins
Yeah, I think it’s relatively stable here. I can tell you, there are some areas in Ontario I’m hearing reports that some of these condo values are down 50%. I think that might be extreme. I think overall maybe they’re seeing like a 25% softening. But I was with some mortgage brokers this week in Vancouver. I’ve just been across the country, so I don’t even know what time zone I’m in, but we were with some meetings, and Mortgage Professionals Canada had their regional symposium in Vancouver. I was able to sit in there and just kind of hear what’s going on in Vancouver, and as much as we think our struggles are unique, we actually have very similar struggles across the country. But I would say there it’s even more challenging, from a qualification standpoint. I think the fraud is high. There are a lot of challenges around the valuation now. They have not been hit as hard as it has been in the GTA. I think they have been the hardest hit. I think we’re pretty lucky here overall. One thing that I think is interesting is one of the announcements that the federal government has made around the HST and that new home construction piece, and they made an announcement jointly with the Province of Ontario. About, I think, trying to get those shovels in the ground. It’s not just house prices that they’re worried about. The construction industry in Ontario is a huge, huge employer from all aspects, not just the construction; it’s the trading of real estate, it’s mortgage brokers, it’s realtors, it’s lawyers. A huge part of their economy is this trade of real estate, and it’s from construction to ownership, and beyond. They need to restabilize, and they’re doing whatever they can, and it’ll be interesting to see what the rest of the provinces do. I’m curious to see: is BC going to do something similar to what Ontario has done? I’m hearing early reports that I don’t think they’re going to. I think they’re going to do something different, and I think they’re going to push it on to the CRA to administer. In Ontario, they’re basically administering it themselves. So, it’ll be interesting just to see what happens around this new construction. Now, in Ontario, do they need as much new supply? Their population grows very quickly, so I think they always need some supply. Here we need all types of housing, so I think for us we just need those shovels in the ground more so than we’re worried about pricing.

Dan Ahlstrand
Saw some reports this week about house prices; the average price in the Maritimes kind of hovering around that half-million-dollar mark. I know that’s something that you’ve been talking about, maybe a little bit more here in HR.

Impact of Housing Prices on Different Market Segments

Clinton Wilkins
I think maybe 600 is kind of the average price point here. Obviously, certain areas of the city maybe even more than that, but I think from an affordability standpoint, compared to income, it’s very affordable. Like, there are some areas in the country where it’s 10-13x people’s annual income, the price of a home on average. So, I think here we have very affordable income, or very affordable housing in comparison, but maybe our incomes aren’t quite as high. But I think as a percentage, it is more affordable here from a price point.

Dan Ahlstrand
I know a lot of people listening to us today are saying half a million dollars. Holy smokes, I can’t afford even the down payment on that. Or are we missing those, those entry-level homes, those those less than $500,000 homes in Nova Scotia?

Clinton Wilkins
I can tell you from a price point standpoint, and in terms of where what’s most heated in the marketplace, it’s at 600,000 and sub 600, I’m seeing it like those are the homes that are not staying on the marketplace. I think the ones that are the slowest are like the above 700,0.00 The challenge is there’s not a lot at 500,000; there’s not a lot at 400,000, and really below that you’re not really getting very much, at least here in Halifax. Yes, maybe in more rural areas, like you go down to Windsor, or you go to Truro, or you go to New Glasgow. Yes, maybe some homes are that sub-400,000 price point. It doesn’t really exist, and I think those are the ones that are creating the most demand. And what happens when there’s more demand? It drives that price up. It’s really a supply and demand issue here, and it’ll be interesting to see whether builders can deliver a product at the 500,000 price point. Most of the construction that’s happening now is above 700; that’s typically what most of these new constructions that we’re seeing are. So, be interesting to see: can builders start delivering a product that can be more affordable without potentially heating or overheating the marketplace?

Summer Market Trends

Dan Ahlstrand
Where’s the room for the first time home buyer to be able to cobble together enough of enough of your funds, if you have to make it happen, to go to bank of mom and dad, to go to grandparents, or just to work and save, to save enough for a down payment on a $500,000 house, if you can find ones, not an easy task, particularly for a young family. Man, kids are expensive these days, and they’re always expensive, but they’re even more expensive now. So, where does the first-time home buyer fit into this project?

Clinton Wilkins
I think the first-time homebuyer really needs to go for the average; I think they need to prepare themselves for 600,000. Those are the ones that are going to be the most successful. We hear from first-time homebuyers that want to get pre-approved for, like, a purchase of 350 or 400. That’s going to be very restrictive, and you either have to reset your expectation, or you need to figure out location-wise where you can get that type of real estate. So I think there’s some concession to be made, and I think for a while first-time homebuyers were buying dream homes. We talked about granite countertops, we talked about stainless steel appliances, we talked about new construction. I don’t think that’s what first-time homebuyers are buying right now. I think they are back to buying a semi-detached, maybe. That’s a semi-detached in Dartmouth or Cole Harbour or Sackville. I think that’s the type of real estate that first-time homebuyers are buying. They’re buying that bungalow, maybe that was 56 years old, that hasn’t been renovated, that a grandmother or grandfather’s buying, or were living in and had sold. So I think the expectation is changing, and I also think that the market is shifting.

Dan Ahlstrand
We’re going to take another break here on Mortgage 101. We’re looking at June, the summertime push to maybe buy a house or get into the housing market, or maybe to reinvest in your home. That’s something that a lot of people are looking at too, because summer is construction season around here. Maybe we’ll dig into that a little bit here on Mortgage 101.