With the new mortgage rules which effectively knock down the price of entry to the real estate market for first home buyers or home buyers on a limited budget, it isn’t surprising that condominiums saw the highest growth rates of any property type in October.
The Toronto Real Estate Board’s October Market Watch was full of more of the same, with 11.5% growth in year-over-year number of transactions across Toronto and the GTA. The only difference was that this growth was mostly fueled by condo sales.
Condo sales in GTA are exploding
The number of condominium sales in the Greater Toronto Area increased by 28.3% year over year, while Toronto condos clocked in at a 19.8% increase. This can be explained in a very simple way – if you are priced out of the detached or semi-detached home market, you are likely going to purchase a condominium in Toronto if you can afford it, and in the GTA if you can’t. The average price for a Toronto condo is $100,000 more than the average price of a condo in the GTA – a significant and palpable difference to a first-time or tight budget buyer. At an average price of around $359,000, a GTA condo is the last bastion of affordability in the area market for a buyer with a single income.
Rates of price growth skyrocketing due to lack of supply
Despite the explosion of condo sales, if we go by the rate of price growth, detached homes are still the most desirable commodity in the local real estate market. Condos only went up by 12.5% in October, while detached homes went up by 25.8%.
Jason Mercer, Director of Market Analysis for TREB, explained the phenomenon. “Until we experience sustained relief in the supply of listings, the potential for strong annual rates of price growth will persist, especially in the low-rise market segments.”
Detached homes are bound to face a continued lack of supply because it is more profitable for a builder to build a condominium building than a detached or semi-detached home in the current hot market, especially where land is at a premium in Toronto.
Is the foreign buyer tax in Vancouver driving sales in Toronto?
Although the TREB had promised a review of this to come later in 2016, we haven’t seen it yet. It will be up to the TREB to determine if correlation is the same as causation in the matter of Vancouver home prices plunging while Toronto home prices increased in October, although it’s hard to imagine that the Vancouver foreign buyer tax is having no impact at all given the sharp contrasts between the increases and decreases – Vancouver’s overall home sales slid by 38.8% in October. This could also be a result of the new mortgage rules making new properties in Vancouver officially unaffordable to those with an average middle-class income, especially since prices in Vancouver are higher across all property types.
How the new mortgage rules factor in
Realistically, the new mortgage rules only affect first time homebuyers or buyers on a limited budget, as stated above. While they were touted as a means to cool the hot housing market – which they may have done in Vancouver – in Toronto they seem to be driving these buyers into condominiums. Those at the upper end of the market who can afford a detached or semi-detached home in the area will be largely unaffected by these mortgage rules, and this could be why home prices continue to appreciate in the detached and semi-detached categories at a high rate.
The GTA and Toronto real estate market is continuing its upward trend, according the Toronto Real Estate Board’s Market Watch for May 2016. Both total number of home sales and prices are up across the board.
The big news – 15% overall increase in home prices
The MLS® Home Price Index Composite Benchmark was up over May 2015 by 15%. The MLS Home Price Index is a set of software tools that provides indices on markets in various areas across Canada, and is the most accurate indicator of home price data in Canada. Overall transactions were also up by 10.6% year-over-year in May 2016.
Average prices were up across the board on every property type, with the largest increases being in detached homes in both Toronto and the GTA, represented by the 905 area code on the above chart. The GTA saw the largest increases in home prices in all categories.
The real story is the shortage of inventory
According to the President of the Toronto Real Estate Board, Mark McLean, the story these numbers tell is about the dwindling supply of homes under the Toronto Real Estate Board’s jurisdiction.
“While the record number of home sales through the first five months of 2016 is not necessarily surprising, it does sometimes mask the larger story in the GTA: the shortage of listings, which has resulted in strong upward pressure on home prices.”
While builders are incentivized by the steady upswing in home prices as the result of a lack of supply, they may meet future roadblocks with the Province of Ontario’s plan to expand the Greenbelt, which would minimize areas for new builds in the GTA.
Condominiums see higher price inflation than usual
As supply of the generally more desirable low-rise homes decreases and their price increases, many buyers in both downtown and the 905 area are looking more seriously at condominiums. Jason Mercer, the Toronto Real Estate Board’s Director of Market Analysis, notes in May’s Market Watch that the price growth of condominiums is “well above the rate of inflation.”
Toronto’s Suburbs are becoming increasingly popular–and with good reason!
It was another record-breaking month for the Toronto Real Estate Market and the rest of the GTA. With conditions being as tight as they are in the city, it’s not surprising that properties in the suburbs are going fast–and fetching a pretty penny too! We ranked areas in the GTA according to their price increase, highest selling prices, largest sales increase, and least expensive.
Why is Spring 2016 the Best Time to Sell a House in Toronto? Just take a look at historical Toronto Housing Prices for this time of year.
It’s hard to believe that February is already over and Spring will be here in just three weeks. Like many Torontonians, Realtors love this time of year, not only because of rising temperatures but because it’s the best time to sell a home. Any seasoned Toronto Real Estate Agent will agree that certain seasons are more favourable to sell a house than others. Oftentimes, the transition between cold months to warmer months sparks something in buyers, and with the current condition of the Toronto Real Estate Market, this couldn’t be truer. In fact, it’s in the Spring when Toronto housing prices increase and homes sell at or above asking price. Furthermore, the amount of time they on the market is significantly short when compared to other seasons. We’re still in a seller’s market, and the pent-up demand from buyers is exceeding the supply of Houses for Sale in the Toronto. While warmer temperatures do have an impact on home sales, but there are a few other reasons people want to shell out a few extra dollars for a house in the Spring.
Most families prefer to purchase a home in the Spring because that leaves them with ample time to register their kids in new schools. When it’s time to close, it will be relatively early in the summer, you most likely won’t have to deal with a heat wave when packing moving boxes.
Spring is a great time to showcase your home as well. With the snow finally gone, lawns are visible and houses just appear to be more attractive in the spring. There are no sub-zero temperatures or icy driveways to deter buyers from venturing outside of their homes. By the end of March, some annual flowers will be in fresh bloom and trees will begin to bud, and a feeling of a new beginning will be in the air.
With holiday debts and bills finally paid off, buyers are in higher spirits and aren’t as stressed about making a big purchase. Additionally, most buyers will have the benefit of a tax return in the Spring–this is especially helpful for first-time buyers who are feeling the impact of the increase in the minimum down payment. Remember, many people are entering the market for the first time, so be ready for people who are on the hunt for condos for sale in Toronto.
Competition among buyers is very stiff, and they’re willing to bid to the very end. Bidding wars occur most frequently in the Spring than at any other time of year because home buyers want the perfect move-in date. Use this to your advantage to ensure you make the most of your home sale.
Although Spring isn’t officially here until the Equinox on March 20, it’s definitely sprung early for buyers in the Greater Toronto Area. If you’re planning on selling your house, now is the perfect time to consult your GTA Real Estate Agent. The window of opportunity is wide open, so take advantage of it before other sellers start adding to the mix. While the market conditions will guarantee your house will sell, you want to get the best dollar for it.
It’s that time of year when many of us are feeling the holiday bloat from all the festive cheer we partook over the past month and are now considering our new year’s resolutions. While many of us are adding “lose weight,” “eat healthier” or “get to the gym four times a week,” we often forget that we’ve made these resolutions in the past, and were lucky if we stuck to them for more than a month. With 2016 quickly approaching, now is the perfect time to take a look at our spending habits over the past year to assess where we are financially, and set some clear goals or money resolutions for the new year. As some goals, such as planning your retirement may affect your loved ones, it would be best to sit down with your family to discuss them. Not only will your family be aware of your goals, but they can acts as accountability partners if you fall off track. Here is a list of some resolutions that you might want to add to your list—also, eating healthier is always a good resolution.
Create a new budget You and your family may have experienced a significant change in 2015, such as a new baby, purchasing your first home, or helping your child through her first year at university. Playing the guessing game can be tough as we might not know how things will play out until several months have passed, but try your best to sit down with a pen and paper and write out your expenses in as great detail as possible. Although it’s important to revisit your budget annually, try to visit it quarterly as this might help you adjust expenditures accordingly.
Take advantage of TFSA and RRSP contribution room If you haven’t maxed out your contributions in the past and have some money kicking around, why not place it in a TFSA or RRSP. Maybe you’ve landed a new job or received a promotion—and are receiving a higher income than last year. A smart way to ensure that money gets set aside is to set up preauthorized transfers to your TFSA and RRSP. You’ll thank yourself when tax time rolls around in 2017 and also feel accomplished knowing you’ve contributed to your nest egg or retirement.
Reevaluate your mortgage situation
Will your mortgage term be coming to an end before you have your house paid off? If you have three years left on your amortization, but paying off your home won’t be possible for another four years, you might want to consider refinancing options. Chances are mortgage rates are not going to get any lower than they are now, and if your term is up in four years, who knows how high the interest rates will be. Reassess your situation, take advantage of low lending rates and breathe a sigh of relief knowing you’re making the most out of one of your biggest investments—your home.
Teach your kids about budgeting
Whether you have a son in middle school or a daughter in university, it’s never too early to teach your child about the importance of budgeting. Take some time to sit down with your young one to discuss his or her allowance. If they’ve been itching to get that bike that Santa didn’t leave in their stocking, you can teach them how to put away a portion of their allowance, birthday money, or money from their paper route to buy that bike. If your child wants a bike by June, he would have five months to save for it. On top of lunch money, entertainment, a long-term savings account and even donations (we should teach our kids about philanthropy), figure out what is left every month/week and how much of it needs to go to the bike. For those of us with older kids off at university, check in to discuss their plans after post-secondary, as well as how much debt has been accumulated. Depending on the financial institution and repayment terms, help your child prepare for the next step after graduation. If your child is lucky enough to land a job after he or she graduates and if you’re planning on helping him/her with their payments, discuss a fair amount that needs to go directly to paying their debt.
Purchase an investment property
If you’ve been considering buying a rental property, early 2016 would be a fantastic time to do so. With rock-bottom lending rates that will undoubtedly rise in the near future, purchasing a multi-dwelling house is something you might want to consider. Investing rental in Toronto or the GTA can be a source of residual income with the population of the GTA rising with young professionals. If you have any questions, talk to a real estate investment expert who will point you in the right direction. Also, make sure you hire a property manager to ensure your rental home is in good hands.
Hey, Big Saver!
Some people are great at saving and before they know it, they have a piggy bank that’s bursting at the seams. If you find yourself maxing out your RRSP and TFSA contributions, and are satisfied with your investments, why not plan a paradise getaway or donate to your favourite cause. Treating yourself now and then never hurts, however, using your money toward meaningful experiences with your loved ones will create memories that are priceless.
The Priority Pyramid
Remember that when making a financial plan it’s wise to follow a priority pyramid to help employ the best strategies to successfully complete Operation: Financial Resolutions 2016.
In an announcement made last week by Toronto Real Estate Board President Mark McClean, GTA home sales showed the best results on record to date. With 8,804 home sales reported through TREB’s MLS® system, October was a favourable month for Greater Toronto Area REALTORS®.
Additionally, The MLS® Home Price Index (HPI) Composite Benchmark was up by 10.3 per cent year over year in October. Over the same period, the average selling price for all home types combined was up by 7.3 per cent to $630,876. Price growth continued to be driven by the low-rise market segments.
Source: Toronto Real Estate Board
Although sales are robust and predicted to climb in the upcoming year, some believe that the province-wide municipal land transfer tax that the Wynne government plans to introduce could affect the market. When asked their opinions on the new tax, the vast majority of Ontario residents surveyed opposed it.
In mortgage-related news, Stats Canada released new data on the labour force, which showed improvement during the month of October. A total of 44,000 new jobs were created, the majority of which, however, were part-time. There was also a substantial increase in employment in the manufacturing sector, which shows hope for the state of our Loonie. If this trend continues, we could head toward a more sustainable economy. How does this all affect mortgage rates? It is predicted it is less likely that we will experience another cut in the Bank of Canada’s lending rate, and mortgage rates will eventually rise. Last week, five-year fixed mortgage rates increased across the board and range between 2.54% to 2.69%. There is no need to worry, as there is no sign of a significant spike, just a more optimistic outlook for our economy. Another contributing factor to a change in rates is what our neighbours to the south are planning—it’s a matter of time before their rates go up, and inevitably, we must follow suit.
This morning, CHMC released its Fourth Quarter report of 2015
Does 2015 CMHC Fourth Quarter Report support promises made by the Liberals?
Members of the media had full plates for the majority of October–Between the Federal election and Post-Season baseball, it’s been difficult to cover much else. Now, with Trudeau’s win and the Blue Jays’ loss, Canadian consumers can set their sights back on the health of our Economy–and the future of the Housing Sector.
This morning, the Canadian Mortgage and Housing Corporation released its Fourth Quarter report, which includes economic forecasts for 2016 and 2017. For those who recall promises made during the 78-day federal campaign, this report may offer some insight on what’s to come in 2016 and 2017. A highlight of the report focused on migration to Ontario, with the increase of new residents expected to outpace other parts of the country. Despite modest movement in recent years, Ontario’s economy is predicted to gain momentum in 2016 and 2017. Improving business conditions and expansion will increase hiring in the province, enabling job growth to rise to 1.6 per cent and 1.3 per cent in 2016 and 2017, as well as the unemployment rate to hover around 6.5 and 6.4 per cent respectively. This is one contributing factor to the appeal Ontario has to migrants, both nationally and internationally.
The CMHC quarterly report could not have been released at a more appropriate time. Following the federal election and Trudeau’s win, we can better gauge what type of action we’ll see in the housing sector. During their campaign, the Liberals focused on the best interests of the middle class; the high-tax battle, maximizing savings, and the accessibility of affordable housing. The high cost of housing in hubs such as Toronto and Vancouver has limited home ownership to those whose incomes far surpass the national average. In response to this issue, the Liberals propose new incentives for first-time homebuyers, including breaks on mortgage policies, as well increased amortization periods. To the discerning consumer, the promises sound more like suggestions, as nothing has been set in stone. Additionally, the Liberals propose to make changes to the Home Buyers’ Plan. Implemented in 1992, the Home Buyers’ Plan (HBP) allows Canadian residents to withdraw up to $25,000 from their RRSPs, tax-free to use toward the down payment of their first home. Participants of the HBP are given 15 years to replenish the amount withdrawn from their RRSPs. Although the withdraw limit isn’t expected to increase, the Liberal party proposes to make the HBP more accessible, by opening up eligibility beyond first-time homebuyers. Although interest rates are forecast to rise, the increase would be slight at worst, and are not expected to have a substantial impact on home buying.
Good news for Investors and Renters
Benefits that are also included in Trudeau’s plans surround the 10-year investment in social housing infrastructure, focusing on affordable housing and facilities dedicated to seniors. The investment will fund new buildings, as well as refurbish existing housing. As an investor, you will experience tax breaks and new capital investments will not be charged GST. This initiative is to encourage the construction of new affordable rental housing, as well as converting other multi-dwelling units and freehold homes into rentals.
It is predicted that high-rise unit ownership and rental demand will continue to be supported by first-time buyers with limited funds, as well an influx of Baby Boomers, who are looking for a maintenance-free lifestyle. Resale housing will remain vigorous over the course of the forecast, with numbers ranging between 193,000 and 225,000 units in 2016, before easing to the range of 175,000 to 220,000 units in 2017. Ontario home prices are predicted to grow, however, at a slower rate than previous years. This is due to a more balanced market, an increase in new listings, and the demand for more cost-effective housing options such as condominiums and townhomes. For Investors looking to expand their portfolios, this report, coupled with the results of the recent election should be kept in consideration when purchasing an income property. With several consumers turning toward more affordable housing options, new condominium and purpose-built rental segment are predicted to be solid investments.
If you’re a parent of a Millennial kid (an adult child), then your you might want to plan your empty (or not so empty) nest arrangements accordingly
All jokes aside, more and more Millennials are moving back home, despite higher incomes and educations than previous generations. Do you have a Millennial kid (18-34 years of age) that wants to come back to crowd the nest? Click here for some pointers for living with adult children.
New hope for buyers as supply of new listings in Toronto exceeds demand for the first time since January
In August, sellers continued to ride the wave of the GTA Housing Market, as Toronto home prices climbed 10 per cent. Last week, Toronto Real Estate Board President Mark McClean announced that GTA REALTORS® reported 7,998 residential sales through the TREB MLS® System for the month of August. In a year over year comparison, this figure represented a 5.7 increase compared to 7,568 sales reported in August 2014.
For the first time since January, the supply of new listings in Toronto exceeded the demand, however, active listings toward the end of August were still down compared to the same time last year. Although the increase in new listings is encouraging, it will likely take several months for the market to balance out. Until then, GTA housing market conditions remain in the seller’s favour.
“Buyers in the GTA remain confident in their ability to purchase and pay for a home over the long term. They see ownership housing as a quality investment that has historically produced positive returns while at the same time providing owners with a place to live in their chosen community,” said Mr. McLean.
Both the MLS® Home Price Index (HPI) Composite Benchmark and the average selling price for all home types combined were up substantially in August compared to the same period in 2014, an increase of about 10 per cent in a year-over-year comparison.
(Source: Toronto Real Estate Board)
Market Bears anxiously await a bubble to burst, however, if the health of the city’s economy serves as any indicator, this “bubble” is nonexistent … and crash? Not likely. As for residential sales, we can expect them to slow in the upcoming months, however, they will remain hot compared to markets in other Canadian cities – with the exception of Vancouver of course.
What do cooler nights, Canada’s largest annual community event, The Canadian National exhibition and slowing housing sales all have in common? They are friendly reminders that summer is coming to an end. Maybe not the last one — not in the GTA at least.
Although the short season is winding down, the Toronto real estate market remains hot and it is expected that housing prices in one of Canada’s strongest markets will continue to increase for the rest of year. Supply for homes, particularly low-rise residential units is scarce in the city, unable to meet demand. This stark imbalance has caused the prices of homes to skyrocket to record numbers over the past year, making affordability for the average Torontonian further out of reach.
The condo market, however, is benefiting from low-rise scarcity as well as low-interest rates. Despite data released by the CMHC in the first quarter, stating the number of unsold Toronto condos was at a 21-year high, sales of high-rise units have actually increased significantly and as a whole in Toronto, have been very strong this year. The “pileup” of unsold inventory, which is a key factor in determining the health of the condo market, dropped 13 per cent in Q2 of 2015, in a year-over-year comparison according to a survey released last week by Urbanation, a condo research and development firm.
If you’re considering purchasing a condo, now’s the time to do it. Between baby boomers looking to downsize, and young professionals purchasing a less costly alternative to a house, Toronto condos are being snatched up – and quickly. Although the prices of condominiums have not faced the drastic spike in price as detached homes have, they will inevitably increase — as will mortgage rates. In Urbanation’s survey, it was also reported that prices for resale condos were up 6.8 per cent across the GTA in the second quarter, to an average of $453 per square foot, as sales spiked 21 per cent. Bidding wars have even started to affect condos, as larger units are becoming highly coveted among families and those interested in long-term ownership. The better supplied new condo sector, however, saw more moderate price increases of 2 per cent during the quarter, pushing the average price to $566 per square foot.
Owning real estate will remain one of the best investments you can make. Whether it’s a low-rise nest-egg or high-rise real estate investment unit with continual positive cash flow, the sooner you enter the marketplace, the sooner you benefit from the low mortgage rates, as well as the inevitable rise in housing prices.
Opinions will vary, and each individual is entitled to his or her own, however, when it comes to housing one has to consider the following: The health of a real estate market is closely related to local demographic and immigration needs.