Multiple offers are the new norm in the province’s housing sector, says broker
It’s long been viewed as one of the most affordable housing markets in Canada, and a region immune from some of the rampant home price appreciation seen elsewhere in the country.
But while average home prices in Newfoundland and Labrador are still a fraction of those seen across Canada’s hottest markets, first-time buyers in the province are facing an increasingly challenging task in attempting to put together a downpayment.
St. John’s was one of 12 major markets where housing affordability worsened last month, according to Ratehub.ca, as prices and the income required to purchase the average home ticked higher.
The Newfoundland and Labrador Association of Realtors said the benchmark prices for single-family homes and townhouse or row units both surged year over year in April, jumping by 9.9% and 10.3% respectively, in a trend that local broker Rob Jennings (pictured top) of East Coast Mortgage Brokers said is having big implications for the market.
A seller's market pushing buyers to their limits
“$400,000 is the new $300,000,” Jennings told Canadian Mortgage Professional. “The floor has risen in terms of what it takes to get into a house in the St. John’s Metro.” What used to go for $200,000 years ago, he said, is now coming in much closer to $300,000.
Inventory has tightened across the province in recent times, even as demand – particularly at the entry level – has not eased.
Jennings said that means the “very hot” market is still tilted firmly in favour of sellers, with first-time buyers often frozen out because bidding wars are taking prices well beyond what they can afford. In some cases, he’s seen bids spike by nearly $100,000 compared with the original asking price.
And another trend from the wider Canadian market has also spilled into Newfoundland: entry-level properties like two-unit homes, duplexes, and semi-detached houses are now the most contested market segment because they’re also drawing interest from investors seeking rental income properties.
New strategies helping first-time buyers get across the line
While putting together what’s needed to buy a home may no longer be as straightforward as before, it’s still possible for first-time buyers, and many are adopting new strategies to get their application over the line.
Two-unit properties – homes with basement apartments – have become a strong option for entry into homeownership in St. John’s, and Jennings said smart use of rental income calculations is helping clients get approved for significantly more than they could through the major banks alone.
“A basement apartment right now can command $1,200 to $1,500 per month in rent for a one- or two-bedroom,” he explained. “That covers well over half the mortgage and carrying costs of a home.”
The expansion of 30-year amortizations is a significant policy that has resonated with plenty of first-time buyers across Canada, and mortgage brokers have reported that option being a popular one since its introduction.
Still, Jennings said he’s keen to ensure clients are fully aware of what they’re getting into when they choose that amortization – even though many, if they want to push ahead with a move straight away, often have no other choice.
“A lot of first-time buyers have to take it. A lot of second- and third-time homebuyers have to take it too. That’s just the way it is,” he said.
St. John's still relatively affordable, but for how long?
St. John’s still remains one of the most affordable major metro markets in the country, a fact Jennings said creates real upside even as affordability bites locally.
Newfoundland has also historically arrived late to national market cycles, a pattern that makes the market’s current heat feel both familiar and overdue.
“I always say we were late to the COVID party for sure. Now, we’re having our hot market and seeing the downsides of it,” he said. “But I don’t think anything dramatic happens. We just had so much more room to go up, and we’re still cheap [in contrast with other cities].”
Still, the growing challenges for first-time buyers mean the mortgage broker is more front and centre than ever before. “First-time homebuyers are really relying on brokers more than ever,” he said.
“You have to be a financial adviser more than you ever had to be – because you’re trying to put a square peg in a round hole. Everybody wants more house, and buying a house is hard.”
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