Description: The Corona virus crisis has been bad news for certain business sectors, but you can’t say that about real estate. The market continues to be red hot with the Canadian Real Estate Association’s declaration that home prices are up 17% in this past year. Some have suggested that with the virus keeping more families at home for work and school, a desire for more living space may be one reason for the sharp rise.
Date: October 15, 2020
Source: cbc.ca
Link: https://www.cbc.ca/news/business/crea-september-1.5763101
Discussion points:
1) Are you planning to buy a home after you finish university? How will this rise in price impact you?
2) Has your university community seen an increase in cost for student rentals given this rise in real estate prices?
3) In Wiley’s Financial Accounting: Tools for Business Decision-Making, we know that normally a long-term asset like a house would be treated as property, plant and equipment. If you were a home builder, however, and you had several homes for sale, where would these be found on your statement of financial position?
Jacob William Simpson, Lauren Simmons, Hayley Smith
1) Me and my group members don’t plan to purchase a home directly after university but we all consider it in the long term. The rise creates even more debt for people which could be a reason we wouldn’t buy a home right after school.
2) I don’t think we can get a proper measure because a large number of students didn’t come this year, creating a supply and demand issue. But as a whole, we have not seen a price increase. Due to covid, they don’t really have the option to increase the price even if they wanted to because fewer students are coming back. But we expect they will raise later on.
3) On your statement of financial position these would be found under inventory
Andrew Warner, Emile Wold, and Katie Waller
1) Most of us will be leaving school with student debt and will not be ready to buy a house right away. We will however be looking at it maybe 5 or 10 years later. The price rise is definitely still a factor as we try to make plans, if the price was falling, we may consider buying a house after all. 5 years after we have graduated the current rise in prices will likely have little impact on the market.
2) Sackville student housing has not seen a large impact in prices due to the rise in real estate prices. Due to a reduction in capacity of residences due to covid-19, we expected a boom in off residence students, but as classes moved online, many students didn’t come back to Sackville. Landlords were then worried about filling houses so raising prices didn’t make much sense. This may change next year as more students return to Sackville and the housing market increases. Residences had to reduce capacity by almost half due to COVID-19 so now they must make up for that loss and charge more for rooms. This means that residence prices have gone up, but this could be due to trying to make up for reduced capacity and extra cleaners and not due to the rise in real estate prices.
3) The builder would mark the houses as inventory on his statement of financial position. The buildings are like a product that he has built and is holding onto while waiting for them to be sold.
Gabrielle Baker, Esperance Karenzi Balewula, Diana Akilian, Alexander
1) Ideally we all want to buy a house after university because it is more beneficial and cheaper than renting monthly. This increase in pricing will make things harder for students right out of university who don’t have much money to begin with and cannot afford a house right away. By the time we enter the housing market the price of a house now will definitely be much more expensive when we are ready to buy.
2) No there has been no impact on cost of student rental in Sackville. At least nothing extremely noticeable. There are not as many students present in Sackville this year due to COVID-19 so those landlords who may not have had as many offers from students looking for somewhere to live would certainly not increase the prices because it would only make things harder for them to find tenants.
3) It will still be on the asset side on the financial statement but it will go under inventory.