COVID-19 has impacted Nova Scotia and the world beyond what anyone could have imagined. The Real Estate market sector that has been one of the most sectors impacted of all. Not only has it been impacted, but, especially here in Nova Scotia, the real estate sector has been changed forever.
Nova Scotia real estate has been hot long before Covid-19 hit at the beginning of 2020. This mainly due to the increasing population, fast-tracking immigration programs, and some of the lowest home prices in Canada.
Rent prices were on the rise, new construction was not happening fast enough due to lack of labour force, and interest rates were at an all-time low.
It was a busy, competitive sellers’ market already in 2019.
Fear of Missing Out
In Nova Scotia, the real estate market came to a standstill from March to May of 2020 as service providers adjusted to a new way of doing business and consumer confidence slowly came back. Being in an existing Sellers’ market and the low-interest rates, along with a major case of FOMO, drove Buyers to jump back into home buying with both feet.
The fear of missing out has also fueled the bidding frenzy that has been seen this season. Some listings have seen 35-36 competing offers, with several properties here in Nova Scotia getting offers of $100,000 over the asking price!
REALTORs® have adjusted how they promote new listings because of this frenzy, in that they are giving “property previews” to give their databases and followers an advanced heads up as to a new listing coming to market. Buyers are not waiting for REALTORs® to contact them with listings. Buyers are searching on Facebook pages, online marketplaces, other REALTOR® websites and For Sale by Owner sites.
REALTOR®s are also stating ahead of time and in the listing remarks that offers are to be left open for a certain length of time if they feel that this property will receive multiple offers so that seller will not be forced to respond to an offer that may be requiring a fast response time. It also allows for interested Buyers to get a chance to view and make an offer as opposed to the Seller having to respond to first come first serve.
“Where are they all coming from?”, was a common question being asked by industry members and sellers alike. Many could not comprehend Buyers taking the risks of buying during these uncertain times and even buying properties sight unseen.
Moving on up! With interest rates at an all-time low, this allowed Buyers to buy up a price range, get more house, for the same monthly payment as they were paying or pre-approved for previously. Or for first time home buyers, finally making them eligible for a mortgage.
The Nova Scotia Government also has been hosting a down payment assistance program to help the first-time home buyers cover the down payment for a home purchase. The federal COVID Assistance program certainly also played a part in enabling Buyers to save for down payments.
Nova Scotia has long been known to have some of the lowest property prices in Canada.
Whether a Buyer has been considering moving to Nova Scotia for the relatively low housing prices, or to be closer to family in trying times or looking to retiring to an area with low population density and therefore less COVID intensity.
There have been many stories of buyers, who are originally from Nova Scotia, wanting to move home to be close to loved ones as a fear response to COVID 19 and being separated from family.
Living their Best Lives
With COVID restrictions in place for the foreseeable future, the way homeowners socialize, enjoy leisure time, and even how they work have changed. Homeowners have reassessed what is important in their lives. How to best maintain connections safely. Where and how do they won’t spend their time during isolation.
With consumers re-prioritizing their lifestyles, this resulted in sales for properties with over 5 acres and lakefront/recreational properties have seen the greatest jump in sales of 20% for Nova Scotia overall for a year over year comparison for both categories. The Annapolis Valley area saw the greatest increase in the number of sales for these two property categories at 48% for lakefront and 51% for 5+ acre properties.
Lakefront was the most desirable overall, seeing a 20% increase in sale prices for Nova Scotia as a whole. To break it down into regions, the lakefront sale prices on the South Shore remained unchanged, Halifax saw a 12.5% increase in the sale price for lakefronts, but sale prices for lakefront properties went up the most in the Annapolis Valley at 21%.
Time To Sell
With COVID 19 shutting down work for many along with shops and restaurants, this gave homeowners the opportunity of time at home and disposable income with which to complete home renovation projects.
Stock markets and investment portfolios took a hit at the beginning of COVID, so many homeowners focused on improving the equity built up in their property investment.
As reports came to light as to how much home prices were going up despite the coronavirus, taking advantage of the increased home equity, was often could be seen as an opportunity to make up for the investment losses of earlier in the year; To sell when the market was high meant getting a larger chunk for a homeowners retirement fund, while they were planning to downsize shortly anyways.
So Far in Numbers
For Nova Scotia, as a whole, residential home sale prices are up 13% year to date compared to 2019. Comparing the third quarter of 2019 to Q3 of 2020, the numbers are not as dramatic. The number of sales for Halifax and Annapolis Valley only hit 5% above last year, whereas the South Shore area has seen an increase in home sales increase 19% over last year.
This is where a lack of inventory starts affecting the livelihood of the real estate market. The number of residential sales has gone down slightly in the Halifax area because there are just not enough homes on the market. 90.5% of homes listed get sold.
The Halifax home sale prices this quarter remain comparable to the year to date increases of 12%, while for the Annapolis Valley area home prices have only increased 4% over last year.
The explanation for this, lower figure, is that due to the lack of inventory buyers are going to the southern end of the Valley to find properties, and these properties are priced significantly lower than once selling closing to Halifax bring the average down for the Valley as a whole.
On the South Shore of Nova Scotia, the inventory has not been as desperate and the market there has remained fairly stable at a 6 months supply. But because there are more inventory and selection in this part of Nova Scotia, the South Shore is experiencing a 19% increase in the number of home sales this quarter compared to 2019, As a result, this has driven home prices up as well to 14% above last year.
Forecast for Upcoming Quarters
The areas of Halifax, Annapolis Valley, and most of Nova Scotia will have 3- 4 months’ worth of inventory well into the spring market. The number of listings may even dip lower as Sellers typically do not like to list in the winter whereas they have to maintain a home for showings during the snowy weather if they are in a position where it is not pertinent that they sell.
Nova Scotia will be in a sellers’ market for many months to come and that will continue to push home prices up.
There has been talking from buyers considering holding off buying because they are hoping for a lot of foreclosures to happen next year, due to homeowners losing jobs and not being able to make mortgage payments.
There are two reasons that this will unlikely happen. First of all, homeowners without work due to COVID are eligible to receive Government support. Or there are plenty of businesses looking for workers, so these homeowners should not be out of work for a long period.
Secondly, the mortgage changes that were implemented after the last housing crash, put homebuyers through fairly stringent application processes or “stress tests” to ensure that they could afford the mortgage payments even in harder times such as we are in.
Also, after the housing crash, home buyers got smarter and looked at their home purchase as an investment and equity builder as opposed to a personal line of credit from which to draw money from for trips and toys. Homeowners having more equity in their homes these days, then they are less likely to let them go into foreclosure for non-payment.
As coping with COVID becomes the new norm, the economy will start to stabilize. Inflation will then start to rise and shortly after will follow the interest rates.
Even with interest rates increase ¼ of a percentage point, that would mean an increase of 3% of a monthly mortgage payment. This could affect many buyers who are on the cusp of eligibility or prevent families from moving up to a home that fits their needs.
The Nova Scotia real estate market will not be cooling anytime soon. Due to our COVID protocols, Nova Scotia has been the national poster “child” for how to keep infections down and from spreading. Along with home affordability and desirable rural living, Buyers from away will continue to seek safety and security in Nova Scotia.
Home prices will continue to rise, but the interest rates will not stay this low for long. The foreclosures that buyers are holding out for will not happen, so the time to buy is now.