There’s stiff competition among prospective home buyers in the St. John’s region because the number of listings are unusually low and demand is surging.
One real estate agent said deep-pocketed buyers from outside the province are primarily to blame for inventory levels that are the lowest he’s ever seen.
“The market is very robust, inventory is low and you’re going to need to compete for the most part,” said Jerry Boyles, an agent with Royal LePage Property Consultants.
Here’s an extreme case: a house in the city’s east end recently went on the market for $309,000, and it attracted 28 bids. It eventually sold for more than $60,000 over the list price.
Properties with two self-contained dwelling units known as two-apartments are especially sought after.
Over the last six months, nearly half of every listing in the St. John’s region sold for higher than the asking price, and 13 per cent of those fetched more than a 10 per cent premium, according to Bill Stirling, CEO of the Newfoundland and Labrador Association of Realtors
October set real estate records
Stirling said it’s unchartered territory for the local market.
“If a property comes on the market now and it’s priced where it should be .. they’re selling very quickly,” said Stirling.
It was the hottest October on record in the province for homes sold — 726 — through the association’s multiple listing service. That’s nearly 40 per cent higher than October 2023.
Dozens of bids, $70K over asking prices, and October saw the most home sales ever in the province, according to MLS. It means competition appears to be at its fiercest levels as many people bid over the seller’s asking price. As the CBC’s Terry Roberts explains, there are a few factors at play.
There’s currently a four-month inventory of listings in the St. John’s area. That means if no other houses were listed, the market would be dry by March. Traditionally, there’s a nine- to 10-month inventory, Stirling explained.
“So that’s a very strong sellers’ market,” said Stirling. “There are a lot of buyers out there competing for very few houses.”
Deep-pocketed mainlanders
So what’s creating this very tight market? There’s a variety of factors, but Boyles says it’s primarily a consequence of something that started during the height of the COVID-19 pandemic, when cash-flush buyers from other provinces started flocking to Newfoundland and Labrador like moths to a porch light.
These buyers, many of whom had ties to the province, started selling off their high-priced properties in Ontario and British Columbia for huge profits, and looked eastward with the promise of a slower pace and more affordable living.
They gobbled up homes in this province for much lower prices than what they were accustomed to, and were more than willing to pay a premium to get what they wanted.
Out-of-province investors were also buying up two-apartment homes.
At the same time, the province’s population started growing through international immigration, and a heavy demand for apartments drove rental rates up sharply. In many cases, apartment rental prices were higher than a typical monthly mortgage payment.
Interest rates have also been cooling, so more people are seeing home ownership as an option.
Locals being squeezed out
The result? Local buyers with tighter budgets are being squeezed out, and demand is outstripping supply.
Boyles said it’s not uncommon for him to bid on seven or eight different properties on behalf of a client, and come up empty across the board.
“[These clients[ have a normal income with a normal down payment and they’re not able to go more than $5,000 or $10,000 over a given asking price. They have a hard line in their budget,” Boyles said.
So if you’re in search of shelter, you’re likely feeling the pinch, and the fact that housing starts are up by about 60 per cent this year is not quite filling the gap. That’s because these new homes are more expensive as builders deal with a labour shortage, a spike in the cost of materials, and the hoops they have to jump in order to get permits and other approvals.
“It’s not quite as simple as just build more houses, because the cost of building those houses doesn’t match the incomes and affordability of the average person,” said Boyles.
The current bubble, however, will eventually burst, said Boyles.
The influx of buyers from Ontario and B.C. is drying up, and so is the big money they were throwing around.
“I was getting calls during the peak of COVID every single day. Now I’m getting a handful a month maybe.”
As for prices, they’re about 40 per cent higher than they were five years ago.
Despite that, Newfoundland and Labrador is still one of the most affordable places to buy a house in the country, said Stirling.
The problem for many consumers is finding one they want, and can afford.
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