Earlier this month, the Toronto Real Estate Board (TREB) released its Market Watch report for February 2018. The report revealed that the price of Toronto homes continued to rise 4.2% over January’s prices, in spite of declining real estate sales. The rise in home prices in February comes after the implementation of stricter mortgage lending rules which were recently implemented.
TREB February 2018 Market Watch
The latest TREB Market Watch shows that while 2018 is off to a slow start compared to years prior, buyers are adjusting to the higher costs of borrowing. The report shows that Toronto real estate prices climbed 4.2% over January’s prices, down 34.9% from February 2017. While the price of real estate is down from 2017, they are still 12% higher than those of February 2016 – a rise which TREB calls “an annualized increase well above the rate of inflation for the past two years”. The Market Watch also stated that the MLS Home Price Index Composite Benchmark rose by 3.2% for the entire TREB market. This benchmark rise was due to apartments and townhouses, which saw rises of 18.8% and 7.5% year-over-year.
The effects of the new mortgage rules
Toronto Real Estate Board President Tim Syrianos commented on the implementation of the strict new mortgage lending rules, saying “prospective home buyers are still coming to terms with the psychological impact of the Fair Housing Plan, and some have also had to reevaluate their plans due to the new OFSI-mandated mortgage stress test guidelines and generally higher borrowing costs”. The tough new mortgage qualification process requires a stress test that does not favour first-time home buyers, which may be one of the primary reasons for a slow start in Toronto real estate sales in the late winter and early spring.
In TREB’s 2018 Outlook, the Board projected a slow start to the year in contrast with previous year’s high sales counts. TREB reported 7,955 real estate sales in February 2017 at average prices of $767,818, compared to 5,175 sales in February 2018 at an average price of $876,363. The Toronto real estate market were in the midst of a boom throughout much of 2017, driving up both sales and prices – the slow start to the year comes as no surprise to TREB officials, who according to Jason Mercer, director of market analysis, believe that sales will continue to pick up as 2018 progresses and buyers become more adjusted to the new lending rules and other housing regulations.
What this means for landlords
While the sales of Toronto-area homes are down from the boom period of early-mid 2017, housing prices continue to rise throughout the city. This has created favourable conditions for landlords in the current market, as it will most likely mean many more Toronto residents will be looking to rent, biding their time and waiting for sales and prices to align, rather than jump in and buy in a market with consistently increasing prices. There is also the fact that a significant number of people who would have qualified for a mortgage in 2017 would not be able to do so under the new “stress-test” rules, and these people will probably be renting until they can increase their incomes – perhaps for at least another few years. The Toronto real estate market appears to be heading for a hot spring season, and tenants will be continuing to look for long-term rental opportunities. Those who got into the rental market before the implementation of the new mortgage lending stress test will be able to capitalize on these favourable conditions. It is also imperative that you set your prices correctly, as a tenant you get now may be renting for a long period of time. A property management company can help you with this vital step in ensuring that your rental is profitable to you long-term.
For more information on how Highgate Properties can help you capitalize on favourable Toronto real estate market conditions through experienced and knowledgeable property management, contact us today.
Read the entire February TREB Market Watch here.