Homeowners are trading up faster and sales in the move-up segment saw a jump in 2012 over 2011 – despite the overall trend of dwindling sales and modest price gains.
The recently released RE/MAX Move-Up Buyers Report pointed to some stunning stats. The average Canadian home value escalated 93 per cent over the past ten years.
That means that urban markets saw increases ranging from 62 per cent in Saint John (4.96 per cent compounded annually) to 199 per cent in Regina (11.57 per cent compounded annually).
More recently, activity in traditional move-up price ranges climbed year-over-year (2012 vs. 2011) in 14 of the 16 cities examined. But if you bought a home more than five years ago, you’re particularly lucky. The report noted jumps in prices have been less significant more recently, with more cities gaining an annual appreciation rate of five per cent over the last five-year period.
Prairie centres like Regina and Winnipeg, however were still going strong, reporting a 12.7 per cent and 8.39 per cent annual increase respectively. And St. John’s recorded an annual compounded gain of 11.08 per cent over the past four years.
Consider this example: a first time buyer bought a house in 2002 at the average Canadian price of $188,164 with a downpayment of 10 per cent. If the buyer financed the remaining amount at 7.02 per cent over a five-year, fixed rate term amortized over 25 years, the balance owing after 10 years would be $135,619.
However, from that time (2002 to 2012), the home would have appreciated 93 per cent to $363,730 at an annual rate of return of 6.81 per cent (compounded). The equity of $228,111 could be applied to their next home, at $500,000. With today’s lower interest rates, the carrying costs would be only be slightly higher than that original mortgage payment.
But the big gains have turned move-up buyers into a restless lot and time between sales has decreased. First-time buyers largely upgraded their starter homes within four to seven years after their purchase.
“The leapfrogging currently underway allows purchasers to gain greater equity with each move, accumulating wealth in the interim,” explained Gurinder Sandhu, Executive Vice President and Regional Director, RE/MAX Ontario-Atlantic Canada in the news release.
“Homeowners are finding themselves in an ideal position as their mortgage terms expire. Even in Vancouver, Calgary, Edmonton and Saint John, where housing values declined slightly, move-up buyers are taking advantage of softer values to trade-up while the spread has narrowed and interest rates are still low.”
Because of that five-year rate of return and overall strong performance, Sandhu dismisses the idea that Canada is headed for bubble territory.
Check out the tables to see you how your city faired over the last decade…