Yet again, the Guelph Real Estate market set new highs in October with an average price of over $650,000. Over 55% of sales were sold higher than the original asking price compared that to the summer months where that number was less than 50%
Like most smaller cities surrounding the GTA, there has been a huge demand for Guelph housing as buyers push out of the GTA in search of larger homes at lesser prices. But who would have predicted such a surge in demand despite a corresponding surge in uncertainty and unemployment?
This month we take a look at the top 3 things we’ve learned about the Guelph real estate market in 2020:
1. A pandemic did not result in lower prices
When COVID- 19 first hit in March, there was fear that the Guelph real estate market would correct. Instead, buyers stopped buying as they were told to stay home and sellers stopped selling because they didn’t want people in their homes. The combination of fewer buyers and fewer sellers didn’t mean lower prices, it simply meant a pause in activity.
When restrictions began to ease in May, GTA buyers rushed into Guelph en masse. After being cooped up for 8 weeks in condo towers and being told they could work remotely, GTA buyers realized they could get more home for their money. This caused a huge buyer influx to Guelph, resulting in an estimated 50% increase in GTA buyers within Guelph. This buyer-surge wiped out many new Guelph listings and prices inevitably rose.
Has supply improved?
Absolutely not. In fact, as of November 13 there are only 101 active single-family residential homes available in Guelph. Based on October sales trends, this implies that the entire housing stock in Guelph could be wiped out in only 12 days- we are in housing dire straits right now.
2. COVID-19 has changed our wants and needs
Those GTA buyers needed flexibility to the highway and South Guelph has been the beneficiary, as Beth and Ryan Waller wrote last month. GTA buyers had no problem selling more expensive homes and moving to a relatively cheaper market, resulting in a big spike in higher-end home sales in most parts of town, notably South Guelph.
That trend has continued through October and the $750K plus segment of the market now consistently averages over 25% of sales in the past 12 weeks- this is almost double what it was earlier in 2020.
There were some clear trends that have emerged: buyers were spending more time at home and were willing to pay a premium for homes that had a main level office space, a pool and an outdoor dining or patio area. Gazebos, trampolines and hot tub manufacturers also benefited from this. Portable heaters and fire tables are gaining traction this fall.
3. Guelph home prices are getting dangerously high
You’ve likely heard of (or have been part of) a “bidding war” if you’re buying a home in Guelph. With so little supply, houses are often going to the highest bidder without conditions. Pair this with historic low interest rates in the 2% range and buyers are willing to stretch themselves on their offer prices.
Further issues could arise in that banks appraise the value of homes and lend accordingly. If a buyer has paid higher than the appraised market value of a property, their bank may require the buyer to make up the difference before receiving a mortgage. In a market where prices are increasing substantially, this could quickly become an issue if buyers get caught up with emotion in the bidding process and pay far more than market value of the home.
In Ontario, the provincial government writes the rules that real estate salespeople, brokers and brokerages must follow . This means bidding wars are blind- as in, no other buyer knows the details of another buyer’s offer.
In recent years, this process has undergone scrutiny to move to an open model which currently exists in countries like Australia where buyers are aware of what competitive offers are, reacting accordingly. As REALTORS®, we believe it may be time to seriously consider a review of the offer process.
Source: GDAR data 2019-2020