The N.L. real estate market is red-hot — and nobody seems to know why
Low mortgages, expats moving home could explain why sales have hit a 10-year high
The housing market in Newfoundland and Labrador continues to sizzle long after a record-breaking summer, and its robust strength — which is holding despite the province's negative economic outlook — has industry experts and real-estate agents scratching their heads.
"It's curious," mused Bill Stirling, president of the N.L. Association of Realtors, reached by phone last week.
While Stirling harbours some theories to explain the rising prices and sales, he warns nobody quite knows what to make of the market right now, in a province reporting consistently high unemployment rates and staring down the barrel of bankruptcy.
Housing prices on average in Newfoundland and Labrador shot up seven per cent in February compared with the same period last year, which was already an ample month, Stirling said.
Meanwhile, 2020 boasted the strongest sales year the province has witnessed in a decade, with houses changing hands 5,177 times by the association's count.
The surprise boom has left Stirling, and his counterparts across the province, relatively stumped.
"We don't know exactly what's driving some of it," he told CBC News.
Expats flocking home?
Stirling has some theories, though.
For one, he points out, interest rates have bottomed out, sometimes dipping below 1.3 per cent. "That's basically free money," he said, and it's the number one reason his members' clients said they bought a house in 2020, according to a recent NLAR survey of about 200 of its members.
First-time home buyers are another big reason, with near 60 per cent of members surveyed saying they'd had clients itching to get out of their apartments and into the market.
The third-highest? Expatriate Newfoundlanders and Labradorians eager to come home.
"It's safer to live here," Stirling suggested. Anyone who lost an oil job in Alberta, for instance, might have decided to move home to look after their parents and get their kids back in school.
"And it's not just expats," he said. "We're seeing enough of a trend … there's people who are not from here, no ties to here, but are looking to relocate out of the more densely populated areas of the country."
Stirling cautions it's the first time the annual member survey has asked for the reasons behind purchases. It's not clear, therefore, that there's anything unusual about last year's motivations.
But he's still convinced there's something to the idea. His colleagues in the major cities are describing a "mass exodus" of condo-owners leaving cramped urban areas. They escape with serious capital, then buy outside the hottest markets, he said.
"They're moving further afield, and getting a lot more house for their money," Stirling said.
Bigger homes a pandemic must-have
St. John's-area real-estate agent Andrew Duggan, in contrast, calls the expat narrative "romantic."
While he's sold homes to out-of-province buyers, he doesn't think "the migration numbers really support that kind of an explanation," Duggan said. There simply aren't enough people moving here, he thinks, to drive those sales, unlike in neighbouring Atlantic provinces.
Duggan points to a simpler explanation: with everyone stuck at home, people just need more space.
"People are coming to me and saying, 'Andrew, listen, I'm spending so much more time in my house. How can I make my house better?'" he said.
Those clients often want a sunny spare room to turn into a home office, he added.
"'Open concept' has taken a bit of a hit. It's nice to have that entertaining space, but we're not entertaining anymore ... for now, people are really valuing the idea of separation," Duggan said.
He also suspects his clients have watched their savings accounts blossom over the last year.
"They're no longer spending in the same ways. We can't go out, we can't do trips," he said, suggesting the extra cash might be flowing into the housing market instead.
'Anecdotal, but real'
Analyst Chris Janes, with the Canadian Mortgage and Housing Corp., is hearing a few theories through the grapevine.
"We don't have numbers on it yet … but all the Realtors I've been talking to basically say that people have been moving back from larger centres in Canada," Janes said. "It's anecdotal, but it's real."
Out-of-province buyers are mainly snapping up houses under $300,000. "In a lot of cases these are people who are near [retirement], or have already retired, and have deep pockets," he said. Often, they don't need a mortgage and buy outright.
Janes offers a possible explanation for Duggan's immigration rebuttal. The people moving away are mostly renters: People under 35, looking for work. Those moving back are typically over 45, and have money to spend.
Yet Janes, too, attributes the boom partially to the work-from-home revolution, and said other real-estate agents have told him they're mostly selling to buyers who want to upsize as opposed to returning expats.
"People are looking for dedicated home offices, larger homes, space for the children," he said. Jane, though, warns he doesn't think the uptick will last.
"The question we have to ask is, how sustainable is it?.… Is this just a blip on the radar screen that we'll look back on in a year or two, when we come back to our economic reality here in the province?
"We would suggest yes."