Brian O'Donoghue

Sales Representative

Direct 647-405-3126 | bodonoghue@bosleyrealestate.com

The pandemic housing boom is winding down. Economists forecast a 10-20% price correction?

Economists are predicting that Canadian home prices will fall as much as 20 per cent this year as higher interest rates begin to hit the country’s booming real estate market. Mortgage rates are expected to climb again as the Bank of Canada aggressively hikes interest rates to deal with runaway inflation. Economists expect higher borrowing costs will lead to a significant price drop in some of the hottest markets.

Toronto-Dominion Bank economist Rishi Sondhi forecasts a double-digit percentage decline in the national average home price over the March to December period this year. Bank of Montreal senior economist Robert Kavcic predicts a 10-per-cent to 20- per-cent drop in the home price index in certain regions. “When we speak of housing correction it’s not a question of if, but where, how much and for how long,” Mr. Kavcic said in a research note.“Suburban markets in Ontario look shakiest,” he said.

The housing slowdown has been triggered by a rapid increase in borrowing costs over the past few months. The Bank of Canada’s next interest-rate announcement is scheduled for June 1. The central bank is widely expected to hike interest rates by another 50 basis points.

Realtors have described a sudden change in buyer sentiment. Some homes are not fetching any offers and sitting on the market for upward of a month. That is in contrast to the first two years of the pandemic when homes drew dozens of bidders and sold for hundreds of thousands of dollars over the listed price.

We are still seeing multiple offers happening in certain areas of the city, but we are not seeing the same frenzy that was present in the early months of the year. Showings have dropped off and buyers don’t seem to be in hurry to buy.

Don’t forget what CHMC said back in March 2020:

“Canada’s national housing agency is predicting home prices could plummet up to 18 per cent and mortgage arrears could soar to 20 per cent”

CMHC president and CEO Evan Siddall points to unforeseen circumstances as the reasons for their forecast error. CHMC lost its credibility after their failed housing crash prediction.

No one really knows what will happen to the real estate market. No one has a crystal ball to predict the future. We know we are state of change, and we will all learn to adjust to the changing market.

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The Pandemic Has Made Canadians Feel More Emotionally Connected to Their Homes


The pandemic has transformed many aspects of society, but perhaps none so much as the concept of home: for many of the Canadians who locked down in efforts to stop the spread of the virus, where they lived became their gym, restaurant, and office. That’s had a significant impact on how we view our homes, according to new national data.


In a recent survey conducted by Ipsos a full 75% of Canadians (based on a sample of 1,002 respondents aged 18+) agreed that their home has become more important to them due to the pandemic, with an additional 65% saying they feel a stronger emotional connection to it. This has been reflected in an intensified demand for residential ownership since 2020, says Ipsos, despite rising prices and the supply challenges facing those trying to break into the market. Not surprisingly, this enhanced appreciation of the emotional benefits of home was stronger among those who own (70%) compared to those who rent (59%).


The survey also found that the most important considerations among Canadians looking to move have shifted. According to respondents, as of March 2020, the top two considerations when deciding where to live were the level of comfort in their home (73% ranked this between 8 and 10 in terms of importance) and level of safety within their community (71%). This outweighs the 58% who indicated the cost to maintain their home was the most important factor.


Location seems to have fallen by the wayside when it comes to buyer considerations; proximity to work, school, or other regular commitments has become more important to only a minority (30%) of Canadians — likely due to an increase in remote school and work options over the last two years.


The data also reveals that many Canadians, especially younger ones, became all around more knowledgeable about the real estate market during the pandemic; eroding affordability and lack of available supply have been especially hot-button issues over the last two years. According to the Canadian Real Estate Association, the average price for a home nation-wide has exceeded the $800,000 for the first time, following an annual increase of 20.8%.


“Emotional connection and long-term investment intersect even more as Canadians adapt to the socio-economic shifts resulting from the pandemic. Just under half (48%) of Canadians agree that they have become more knowledgeable about the real estate market in Canada during the pandemic, and 41% say they are more likely to see purchasing a home as a capital investment because of the pandemic,” states the report. This is especially apparent among the 18 – 34 age group with 59% agreeing they’ve become more knowledgeable, compared to 48% of those aged 35 – 54, and 40% of those aged 55+. A total of 57% of the youngest age group also indicated they’re more likely to consider real estate as an investment opportunity.


“This highlights the impact the pandemic has had in broadening younger generations’ understanding of the market and perceptions of investment opportunities in the lead up to their peak home-buying years,” reads the release.


An overwhelming majority of respondents indicated just how tough entering the market has been over the course of the pandemic, with 81% saying they believe there’s a severe supply shortage in Canada, especially among renters (87%) compared to homeowners (77%).

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It may be difficult to buy a home or a plot of land in Toronto, so why not try the metaverse? Ever since Facebook announced it would change its name to Meta and focus on building its own digital world, interest in metaverse real estate has skyrocketed. In fact, real estate sales in the metaverse surpassed $500 million in 2021 and could double in 2022, according to data from MetaMetrics Solutions. Are we ready for this?

 

It’s becoming increasingly clear that commercial real estate in the metaverse is going to play a huge part in the global real estate industry in the years to come. In fall 2021, Tokens.com inked a letter of intent to buy a 50% stake in a digital real estate portfolio owned by Metaverse Group, which then plans to market the offerings as the first REIT (real estate investment trust) for digital real estate. The Metaverse Group believes that a public listing could come in 2022 or 2023.

 

The popularity of buying and selling digital property means companies like the Metaverse Group work for the most part, on the same type of tasks related to buying, selling and marketing as a traditional real estate company. As prices rise and buyers seem frenzied over virtual land — some express skepticism that investing in digital real estate will prove to be prudent down the road.

 

Yet despite the high prices, interest in metaverse real estate continues to grow, especially as the pandemic has driven more people online and made them more apt to virtually socialize. You can go into the metaverse and go to a museum. You could meet other friends there regardless of where they’re geographically located. Those interested in metaverse real estate also have competition, namely celebrities who have not been shy about touting their digital real estate activity.

 

The attention and interest given to the Metaverse have not escaped other companies besides Meta, formerly Facebook, and Microsoft, who are also eager to jump in on the action.

 

Like traditional real estate which often maintains value even during tough economic times, metaverse properties continue to boom despite ebbs and flows with Bitcoin (BTC) and other cryptocurrencies.

 

Investment firms are even dipping their toes into the Metaverse and continue to learn more about how they can get involved. High prices, popularity and the ease of buying and selling virtual land (in contrast to traditional real estate) mean the Metaverse will be more than a buzzword. Like the domain name scramble during the early ages of the internet, savvy investors and buyers who snap up properties in prime locations will look very smart as more and more people jump into the metaverse.

 

Keep in mind when assessing the metaverse as an investment opportunity, you can equate it to cryptocurrencies; getting in early can make you rich – but could also get you burned.


As the Metaverse continues to grow and expand — so will digital real estate. You can’t apply the rules of the real world into the metaverse. Savvy buyers and investors would be smart to stay ahead of the curve and assume the metaverse real estate boom is here to stay.

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Canadian real estate prices are soaring, but the fastest growth is not coming from big cities. BMO chief economist Douglas Porter tells clients to really think hard about this growth. Home prices are now rising even faster than at the peak of the 1980’s real estate bubble. Most of that growth isn’t coming from emerging global hubs, but small towns. He asks investors to consider: Do all small towns have supply shortages? Or is the madness of the crowd taking over?

 

Canadian real estate prices are rising at a record rate, dismissing more supply and higher rates. Annual growth of the Canadian Real Estate Association (CREA) benchmark price reached 28% in January 2022, the “record” for the index. It’s not just a base-effect either, says the bank, with prices up 46.4% since January 2020. Most of this growth also isn’t occurring in larger cities, but small towns in the country.

 

Some of the wildest markets in the country are in smaller and medium-sized cities in Ontario. Not to pick on Brantford, but that fine city—previously known mostly as the home of Wayne Gretzky—has seen prices sky-rocket 86% in two short years.

 

A similar trend can be seen across Ontario’s “cottage country,” where prices rose the fastest. Places like Barrie, Welland, Tillsonburg, Woodstock, Chatham, and Guelph are further examples. These are all charming places that might be future global hubs at some point. However, they’re closing the gap between prices in Toronto so fast, they might be killing growth pre-maturely.

 

The CREA Home Price Index only goes back to the year 2000, so there might be questions about how it compares to the ‘80s bubble. For that, BMO has to use the average transaction price from land registries. But even on the somewhat more volatile average transaction price measure, where records go back to 1980, the two-year gain is also a record, at 48%.

 

In other words, the Canadian housing market has just seen bigger increases than ever witnessed through any two years of the great housing bubble of the late 1980s. Just as a reminder, that episode ultimately saw the overnight mortgage rate climb to 14% to suppress inflation and bring the market to heel. Prices then went into the wilderness for a decade.

 

If you think it’s different this time due to population growth, one should consider the pace in the 80s. At the height of the late-80s real estate bubble, population growth outpaced today’s recent cycle peak. In 1989, the population growth rate was more than a quarter larger than the 2018-2019 peak. It turns out immigrants stop moving to a place when the value proposition collapses. Shocking right?

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Canada’s real estate market forecasts a strong spring – supercharged by the bank of mom and dad

Economist Benjamin Tal is forecasting a strong spring market in Canadian real estate and, with it, an even larger presence for the “bank of mom and dad”.

 

“You basically see people trying to get into the market before it’s too late,” Mr. Tal says. Parents have become increasingly generous in recent months as they pull out the stops so their adult children can buy a first home or move up to a better one. FOMO – fear of missing out – has infused the market with interest rate hikes on the horizon. Mr. Tal, deputy chief economist at CIBC World Markets, says the share of first-time buyers receiving help from parents has been climbing steadily to about 30 per cent at the end of the third quarter last year from about 19 per cent in 2015. His most recent data show the share of young buyers receiving gifts had edged up an additional one per cent by the end of 2021. The gifts have been getting larger as the average price has soared. Mr. Tal says the parents injecting cash have not been motivated by the pandemic as much as the trajectory of prices. The size of the average gift had jumped another $10,000 by December from the $82,000 earlier in the fall. In a market as richly priced as Toronto, that gift was more likely to be in the $130,000 range last year. Parents are also sharing their abundance with adult children who simply want to improve their living circumstances now. Mr. Tal warns that older generations should be cautious about being too generous with their gifts – whether they are handing over cash, signing on as a guarantor on a mortgage, or buying an investment condo for a young child’s future. Mr. Tal at CIBC is forecasting that the Bank of Canada will begin to raise interest rates in March. The economist expects the growth in real estate prices to slow in the second half of 2022 as rates rise. A gradual increase in rates would moderate demand and prove healthy for the market, in his opinion. Mr. Tal believes population growth and limited supply will cushion real estate prices from a correction. But he cannot rule out a pullback after the unharnessed run-in prices, he adds. “When prices go up by 20 or 25 per cent during the course of a year there’s always a risk. One possible trigger would be a faster pace of rate hikes than Bay Street is expecting. Currently, the narrative shared by many economists is that the supply chain issues will clear up and inflation will subside. But there is also the chance that narrative won’t play out as predicted, he cautions.  Mr. Tal notes that economic downturns in 1990 and 2008 were triggered by central bankers raising rates too quickly. “That can shock the system.” He cautions that parents who want to help their children should not do so by jeopardizing their own finances. 

“I definitely suggest that they should not take on a lot of debt,” he says. “If you get yourself into a situation where you are risking your retirement, think twice.

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The average price of a Toronto condo is now $740,000 - Condo prices continue to rise in Toronto, like pretty much everything else lately, as more and more potential homebuyers look up to the sky for cheaper alternatives to detached homes.


Those who entered the condo market last year after prices dipped hard due to the pandemic are likely sitting pretty now, but many others are finding it increasingly hard to afford what used to be the affordable option for home ownership in Canada’s most populous city.


The Toronto Regional Real Estate Board (TRREB) is reporting a “record fourth quarter” for condominium apartment sales in 2021. A total of 5,336 condo units were sold in the City of Toronto proper between Oct. 1 and Dec. 31 of 2021 for an average price of $739,683, according to TRREB. The average price during this same period of time in 2020? Approximately $645,000.


This represents an average value increase of nearly $100,000 over the course of just 12 months — a solid return on one’s investment, whether a property was purchased in early 2020 while the market was lagging or pretty much any time before then.


The City of Toronto saw more condos sold than any other GTA region, followed by Peel and York Experts have been warning for a while that such a thing would happen as housing prices grew out of control. With even the suburbs growing unaffordable for most young first-time home buyers, the only places left to go for those looking to own is up into vertical communities, and the data is showing clear evidence of this trend.


The resurgence in the condo market was a key real estate story for 2021. First-time buyers, who arguably remained on the sidelines longer than existing home buyers during the earlier stages of the pandemic, re-entered the market with vigour last year.


TRREB’s Chief Market Analyst Jason Mercer predicted similarly, as other experts have, that condo prices will continue to rise at a clip well into 2022. “In the early days of the pandemic, we saw a spike in condominium apartment listings and a brief lull in condo price growth,” said Mercer. “The situation reversed dramatically in 2021, with the number of available units dropping in the face of strong demand. The resulting double-digit price growth will carry forward into 2022.”

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How Baby Boomers are breaking Canada’s real estate market - In one of the tightest real estate markets ever recorded in Canada, Boomers are not letting go of their homes. It appears the real-estate wealthy Boomers are to blame for yet again disrupting markets. Traditionally, seniors sell their family homes and downsize or move into retirement communities. Born between 1946 and 1964, Boomers, who own a substantial share of Canadian real estate, are breaking that trend. They are ageing in place.


More than 20 percent of Canada’s population will be 65 within the next five years and they aren’t yet ready to move into retirement communities or nursing homes. It has been well-documented that the pandemic has intensified the problem in Canada. Boomers witnessed the tragedy that occurred during the pandemic in Canada’s long-term care and retirement facilities and are cautious of that future.


A 2020 Royal Society of Canada report that looked at long-term care in Canada during the early waves of the pandemic, highlighted its damaging state. Canada experienced a far higher proportion of total country COVID-19 deaths in nursing homes than other comparable countries — 81 percent in Canada, compared to 28 percent in Australia, 31 percent in the US and 66 percent in Spain. By March of 2021, more than 50 percent of all deaths from COVID occurred in nursing and seniors’ homes, according to the Public Health Agency of Canada.


Boomers are deciding to renovate or hire private help inside their homes. Because of the equity accrued in their homes, many can hire private help to ensure they can stay in the homes they own in communities they love for as long as possible. This trend was also noted in a study this past summer that found a majority of Boomer homeowners - 52 percent- would prefer to renovate their current property over moving. The study also found 75 percent of Boomers own their own home, and 17 percent own more than one property.


The trend is creating a bottleneck in supply for first-time buyers and young families. Millennials are starting to have families and have struggled because there is less housing supply for growing families.


In Canada, the ageing-in-place trend is running smack into one of the tightest real estate markets ever recorded. There are currently fewer properties listed for sale in Canada than at any point on record. A report by the Bank of Nova Scotia found that Ontario, Alberta, and Manitoba have the lowest housing stock per capita.


Yet another factor cited in the trend for Boomers to stay in their homes has been the rise in reverse mortgages. Canadians aged 55 and over are able to draw on a portion of their home equity to boost their liquid income while staying in their homes.


Home Equity Bank, a major provider of reverse mortgage products in Canada, recently disclosed that the country’s homeowners are now carrying more than $5 billion worth of its reverse mortgages, the largest amount ever.

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 A new report is urging Canada to consider a luxury tax on homes valued at over $1 million as a means to rein in surging real estate prices.


Home prices across Canada have skyrocketed over the past year, with month after month of record-breaking sales.

On Wednesday, non-profit advocate group Generation Squeeze released a report, funded by the Canada Housing and Mortgage Corporation, and in it, they recommended an annual surtax on all homes valued over $1 million. According to the report, homes at this price point make up just 9% of all homes, or 1,362,789 households in Canada.


In theory, the proposed surtax would reduce the tax shelter that reportedly incentives Canadians to rely on growing property prices as a strategy for savings and wealth accumulation. Since 1972, the report explains that Canadian tax policy has sheltered principal residences from taxation to help homeowners build wealth, but this has generated a “number of significant, unintended problems,” such as inflated demand and average housing costs.


The tax, as laid out in the report, would start at 0.2% and increase to 0.5% for homes between $1.5 and $2 million and go up to 1% for homes over $2 million. These taxes are estimated to bring in $4.54 billion in annual revenue.


The report noted that the government could use the collected tax to provide portable housing benefits for renters or other recommendations from the Lab, including investments in new green co-op and purpose-built rentals.


Generation Squeeze, who compiled the report with input from 80 experts, recommends that the tax be deferrable, meaning it would not need to be paid until the home is sold or the property is inherited. This would address any issues arising from individuals with limited income or whose home value is beyond their own wealth.

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December capped off a record year for real estate in the Greater Toronto Area — both in sales and price. According to the Toronto Regional Real Estate Board, 121,712 sales were reported through its MLS® System in 2021 — up an astounding 28% from 2020 which was a hot market, and 7.7% over the previous record high set in 2016. But as demand remained strong, the number of new listings on the market couldn’t keep up, with just a 6.2% increase in new listings compared to 2020.The average sale price for the GTA was up 24% from the prior year to $1,157,849, and the City of Toronto was up 15.5% to an average of $1,033,029.


While some 6,031 sales were reported in the GTA in the twelfth month of 2021, this was 15.7% below 2020’s all-time December record of 7,154. That said, prices simply did not slow down, as all home types saw between an 18% (condos), 25% (semi-detached) and 28% (detached) increase year-over-year.


The death of the downtown condo throughout 2020 could not have been more turned on its head in 2021. So much so that TRREB credits the condo recovery in the 416 as a leading reason behind the resurgence of sales within the City of Toronto. While sales in the surrounding GTA were up an impressive 23.6% compared to 2020, the City of Toronto saw a significantly higher increase in its annual rate, with 2021 clocking in a rather stunning 36.8% above 2020 — a more than 50% higher jump in sales than the suburbs. In other words, if 2020 was the great migration from Toronto, 2021 was the great return.

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Canada’s Gen Z shows surprising optimism when it comes to owning a home according to a new survey out of Vancouver. Gen Z (born 1997- 2012) is all too aware of pressing affordability challenges in major Canadian cities, notably Toronto and Vancouver. The survey results showed that 75% of urban Gen Z intend to own a primary residence in their lifetimes, with 11% already having done so. Moreover, while 82% of respondents expressed uneasiness about being priced out of their desired neighbourhoods, 70% want to purchase a single-family home during their peak-income earning years. Perhaps unsurprisingly, saving enough money for a down payment and considering other living expenses remains the major concern of more than a quarter of Gen Z respondents.


According to the survey, 50% had given up on the dream of owning a single-family home, but one of the things we must realize is this demographic is just coming into the workforce and starting to accumulate assets, and the interesting thing is 11% have already bought a home, so over time their earning potential will increase. Adding to that Gen Z is on the cusp of receiving a massive generational wealth transfer from their parents. So, economically, their buying potential will only improve over time.


In Toronto, 73% of Gen Z reported aspirations to own a primary residence, while 46% are “very likely” to, 28% are “somewhat likely” to, and 11% already do. But 84% of respondents who haven’t bought a home are worried they won’t be able to in their communities of choice because of surging price points, with fewer than half of this group “very worried,” according to the survey.


More than the other metropolitan areas surveyed, Toronto received the largest share of Gen Z respondents who said that current living expenses are the biggest hurdle to saving enough money for a down payment on a home. Additionally, 18% of respondents reported student loan payments were a big barrier. Owning a single-family home was also more pronounced among survey respondents in Toronto than in the other cities surveyed, with 72% declaring they would like to own one during their peak earning years, while 13% and 11% respectively preferred an attached home and a condo, and 3% stating that they want to own a duplex or triplex unit.


But 52% of respondents in the GTA have abandoned aspirations to own a detached home because the average price of which is now $1,540,432. Still, 38% of the city’s Gen Z respondents believe their first home will be a single-family dwelling.

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Auto lovers can soon park their toy in its own condo. This is going to be a luxury item people don’t need, but people are going to want to have this. Metropolitan Commercial Realty is planning to convert a multistorey 1970’s-era industrial warehouse in Etobicoke into a palace for storing cars, appropriately named ToyBx.


But while the plan has a decent chance of finding enough Toronto-area car lovers willing to buy one of the 195 separate units (each capable of holding at least four cars with a car-stacker rig) and 39 penthouse suites, all spread across three floors, some have seen the idea as an extreme example of a land-use system so broken that it’s easier to create apartments for cars than for humans.


They have not released pricing details to the public yet, but buyers could expect rates close to what a parking space costs in downtown Toronto residential condominiums, somewhere between $80,000 to $120,000, and the units start at 565 square feet.


Car storage is not just for the super-rich. People collect them for emotional reasons. A ’67 Camaro is just as important to the owner as the $300,000 Ferrari is to the person who parks it over the winter. In neighbourhoods where houses are historically protected, a lot of times they only have one-car parking and for those who can afford some of the high-end condos, parking is limited.


The company doing this is not insensitive to concerns from housing activists, but the building is smack in the middle of an area zoned for industrial uses by the City of Toronto and they don’t foresee a path to rezoning the land. The building in question was formerly part of a distillery. It was built out of concrete to serve as fireproof storage for aging spirts. As such, it’s practically a bomb shelter, with floors that could manage the weight of thousands of tonnes of liquor. The embodied carbon alone of the 180,000 square-foot structure makes re-using it a greener option than tearing it down.

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 Prospective homebuyers in the Greater Toronto Area found dramatically fewer homes on the market last month than they did a year ago. October was another record-setting month for Toronto and the GTA with the average year-over-year selling price up 19.3% to $1,155,345. The Toronto Regional Real Estate Board said that 9,783 homes in the region changed hands last month, down nearly 7% from a record 10,503 in October 2020. Despite the fall, the result was still the second-highest level for the month of October even as the number of new listings fell by about a third compared with a year ago.


TRREB interpreted the numbers as a sign of tightening conditions in a market that is already among Canada’s most expensive and prone to some of the country’s most fierce bidding wars. House prices continued to lead the market as they have throughout the pandemic, but condos also showed double-digit price growth in October. The average price for a condo in Toronto is $739,647 and in the GTA $703,698 TRREB’s data showed new listings decreased to 11,740 in October, a more than 34% drop from 17,806 during the same month last year.


Detached homes hit an average price of $1.54 million in the GTA soaring 27% compared to last October. Detached homes in Toronto continued to be the most expensive residential properties selling for an average of $1.78 million up 21%. In the City of Toronto, home prices moved quickly but not quite as fast as they did in the 905 region. Compared to the same month last year, a typical home is now 15.6% ($155,600) higher. Extremely fast growth but this tells us suburban home prices are growing even faster.


Rising interest rates, something the Bank of Canada signaled last week could happen as early as spring and could push some home buyers to the sidelines if they are on the edge of being able to afford a home. Adding to that, over the next year, we’re set to see much stronger population growth as borders start to open more and allow for more immigration.

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Investors who own multiple properties within the city has in recent years overtaken first-time homebuyers as the biggest slice of Toronto’s home-purchasing market, according to a recent report by Teranet.


As recently as 2016, Teranet — Ontario’s title search and registration provider, found the most common kind of person purchasing a Toronto home was a first-time buyer. But from 2016 to 2018, things changed. Multiple-home owners — a group that includes real estate investors as well as those who own a vacation home like a cottage — became the most common kind of homebuyer throughout the city. This year, between January and August, Teranet found that multiple property owners made up 29 percent of Toronto purchases, nudging first-time buyers at 28.5 percent.


And across the country, Equifax Canada has noted a multi-year surge in people with more than three mortgages, with a 7.7 percent increase between June 2020 and June 2021.


While some believe investors are taking away supply from prospective homeowners looking for their primary residence, others say they have the potential to provide needed rental supply. Experts say the exact degree to which investors have affected that growth is unclear. John Pasalis, president of Realosophy Realty, presented it as a sort of chicken-or-egg question: did the surge in investors lead to rising home prices, or did rising prices attract more investors?


Either way, he sees the increase in multi-home ownership as yet another challenge facing hopeful buyers searching for their own home, particularly in the competitive single-family house sphere. Pasalis noted that investors were often attracted to average or below-average homes where they saw potential to increase the property’s value. With more capital at their disposal, Pasalis said investors could often be more aggressive in bidding wars.


As of the last census report, slightly more than half of Toronto households owned their homes — 53 percent versus the 47 percent who rented. Of homeowners, 61 percent lived in single-detached, semi-detached, or row houses, while 87 percent of renters were in apartments.


He believes there’s more to the equation, though, noting some older properties are in a state where they require extensive renovations to be in livable shape. Not everyone has the time or money to do those kinds of renovations, he said, particularly someone who barely eked out a down payment.

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September marked the transition from the slower summer market to the busier fall market in the Greater Toronto Area (GTA). Every year, we generally see an uptick in sales, average selling price and listings after Labour Day, and September was no different. Sales increased relative to August, and in September, 9,046 sales were logged through MLS, making it the third-highest mark on record for the month of September. The 905 area of the GTA represented the majority of the sales, with 5,649 transactions.


The GTA suburbs are seeing prices rise much faster. For all home types, the average selling price was up 18.3% year-over-year to $1,136,280 in the GTA. The City of Toronto saw prices move in the same direction, but at a slower rate. The average sale price for the City of Toronto is $1,090,196 up 6.7% year-to-date.That would mean suburban price growth is significantly outpacing growth in the City of Toronto.


Detached property types within the 416 area are the priciest on the market, having grown 19.5 per cent annually in value to an average of $1,778,928.


On an annual basis, September sales were down 18 percent from 2020’s record-breaking levels. This is mostly due to the lower quantities of new listings, which TRREB says have dropped 34 percent year-over-year. Across the GTA, 13,483 new listings were added to the market last month, approximately 7,000 less from the 20,441 homes that came online during the same period last year. The majority of listings that became available in September were recorded in the 905 area, with 7,537 new properties. TRREB attributed a resurgence in the condo market as a factor behind the higher share of listings sold during September.


Jason Mercer, TRREB’s chief market analyst, pointed out that last month’s price growth was supported by the low-rise market segments, which include detached, semi-detached, and townhome properties.


“However, competition between buyers for condo apartments has picked up markedly over the past year, which has led to an acceleration in price growth over the past few months as first-time buyers re-entered the ownership market,” he said. “Look for this trend to continue.”

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The Canadian election is over, and the country’s leadership remains largely unchanged. However, a laundry list of election promises means big changes to real estate are coming. Most of the promised plan seeks to create more demand for housing, which softens price drops. Expect more of the same currently being done, but with a revamped buying and selling process. Here are some of the promises the Liberals are proposing under the “Home Buyer’s Bill of Rights”


• Banning bidding wars – Sellers would be required to tell buyers the dollar amounts of competing offers on properties. Currently, most bids on homes are “blind,” meaning buyers are unaware what others are offering to pay

• Ban foreign buyers from buying residential properties for two years

• A new tax-free savings account for first-time buyers

• Establishing a legal right for buyers to conduct home inspections

• An anti-flipping tax if the property is sold within 12 months of purchase

• The pricing history of properties to be made public

• Lenders to give mortgage deferrals for up to six months if a homeowner loses their job

• Realtors would be required to disclose if they are representing both buyer and seller (double-representation situations are seen as potential sources of conflict of interest)

• 25% lower rates on CMHC mortgage insurance

•Renovictions – slap a tax on what they deem excessive rent increases where landlords oust tenants to renovate units and jack up the rent

• To build, preserve or revitalize nearly 1.4 million homes over four years

• Investing $4 billion in a new Housing Accelerator Fund for municipalities

• Pledging $1 billion in loans and grants to develop a new rent-to-own program between landlords and renters


Most of these measures are regulated at the provincial level currently. It’s unclear how the Liberals would push through the majority of changes because real estate law falls under provincial and territorial jurisdiction.

For example, the industry is super duper upset about a ban on the blind bidding process. The implementation at the federal level would require criminalizing the process. Regardless of whether you’re in favor of the ban or not, going over provincial territory isn’t easy.


This brings us to our last point — these are promises, not definitive plans. A lot can change between now and implementation, especially if home prices weaken.

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 The August consumer price index (CPI) inflation rate was released this week and it’s up to 4.1%. The last time the rate was higher was in March, 2003 (4.2 per cent). Probably the biggest factor in this year ’s inflation surge is simply the reality that consumer prices fell to unusual lows last year, and it’s against these low prices that we are measuring the current price environment.


But from a broader historical perspective, 4.1% is, comparatively, nothing. Inflation was north of 10% in the mid-1970s and again in the early 1980s. In the early 1990s, when the Bank of Canada formally adopted maintaining low and steady inflation as its primary monetary policy objective, inflation still hovered around 5%. But since the central bank set its inflation target at 2% in 1995 – using interest rates to help steer inflation toward that rate – inflation has averaged very close to that target.


Interest rates are considered the bigger weapon to slow inflation, but the bank has said that it doesn’t want to turn to rate hikes until the economy has returned to full capacity. The exact moment when interest rates start to rise will be determined by economic indicators such as employment bounce back and whether inflation goes down on its own, but the Bank of Canada is currently projecting it will hike rates next year. It will also inevitably be influenced by what the U.S. central bank does, simply because getting too far out of sync with U.S. rates affects the loonie and our exports.


Interest rates certainly have an impact on the price of houses. They had a strong upward effect on house prices as rates fell, and the opposite will almost certainly happen if interest rates begin to rise. In Canada’s hottest markets, including Greater Vancouver and Toronto regional housing data released early this month showed little sign of cooling in August. 

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Is the real estate market slowing down? We are getting asked that question a lot these days. A summer slowdown is normal for the real estate market as we transition from the intensity of the spring market into the summer market, and this shift happens almost every year. Last year was different because we experienced the spring market in June and July because of the pandemic lockdown.

 

It’s still a seller’s market. There are still plenty of buyers out there and demand still outweighs supply. But we are seeing diversions, now that a majority of the population is vaccinated and buyer’s attention is focused on trips, events, and visiting friends and family rather than solely on their home search.

 

Homeowners planning to sell should not worry that the bottom is falling out of the market, but expectations should change compared to previous months. Here’s what the shift might look like:

 

• Fewer total offers on competitive homes

• Fewer properties selling within the first week

• Fewer homes being listed for sale

• Buyers being able to negotiate a better deal

• Less extreme price escalations

• Listing your home at market value – if you had an offer date set intentionally listing low and were hoping for a bidding war and you didn’t get what you hoped for, then re-listing at market value might be the right strategy

 

As markets stabilize and demand begins to moderate – something that was signalled in the data for May – one of the greatest challenges for agents in their role as trusted advisors is identifying those expectations and realigning them. Agents who play the long game will attest to the benefit of educating their clients with real-time data to manage expectations upfront, over dealing with disappointment and frustration down the road.

 

The more interesting trend we have been seeing is a month-over-month decline in home sales since the peak reached in March. March to May is typically a period when home sales are increasing from one month to the next, but the effects that COVID-19 has had on the real estate market continue to distort the traditional seasonal trends in the market. The average house price in May was $1,312,334 while the median was $1,140,000, up 32% and 33% respectively over last year.

 

There has been some cooling over the previous month, and a slight shift away from a tight seller’s market to a more balanced model was likely to emerge. Nobody ever thought that this frenzy could continue at this pace. A balanced market can make for great buying opportunities, especially for first-time buyers.

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What will downtown Toronto look like when the pandemic is over? Will the core regain its former glory? Among those who could work remotely, many swapped their micro-condos for houses with big backyards in small towns.


The question is not whether downtown Toronto will rebound from Covid, but how. What innovations and improvements can emerge from this pandemic? An army of city planners, advisory committees and think tanks have spent the last year pondering this question. They envision a downtown that’s no longer just a place where commuters converge, but a vibrant neighbourhood unto itself.


There are currently more cranes in the sky in Toronto than in New York and Los Angeles combined, building a staggering number of residential units. Urban thinkers are predicting that developers will start converting vacant office spaces into condos, perhaps with their own built-in co-working spaces. The city expects the number of people living south of Bloor to double within 20 years, and developers are keen to cash in on the demand. Before the pandemic, Toronto was the fastest-growing metropolitan city in North America.


For all the destruction the pandemic has caused, it has also provided Toronto with a window to catch up, to build enough homes for everyone who wants to live here. The people behind the downtown’s newest towers see Covid as a pause in the city’s growth, not a full stop, and they are betting big on the promise that Toronto will eventually resume its pre-pandemic hot streak.


Last winter, even as the city was anticipating the dreaded third wave, nearly two-thirds of people who worked downtown pre-pandemic said they’d be comfortable returning to work. The figure will only rise as the virus wanes and other parts of the city core - the clubs, theatres, and restaurants reopen. Toronto Life

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 Canada’s bank regulators are pondering whether to change the mortgage stress test rules to make it tougher for consumers to buy a home and take some heat out of the housing market. The Office of the Superintendent of Financial Institutions (OSFI) announced that it is reconsidering the stress test that requires borrowers to qualify for uninsured loans at two percentage points above the market rate or the Bank of Canada’s five-year rate – whichever is higher. The minimum qualifying rate adds a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of some change in circumstances, such as a loss of income or a rise in interest rates.


Under the current stress-test a household with an annual income of $100,000 and a 20% down payment would qualify for a home valued at $651,000, according to Ratehub.ca. That is based on a five-year fixed-rate mortgage of 1.78% amortized over 30 years. The proposed changes would mean the same household would qualify for a home worth about $618,000 – five percent less. You would need to wait to get a bigger down payment or alter your search criteria.


The GTA has seen home prices rising year over year, by percentages into the double digits, but the market gains are being fuelled by real demand rather than speculation, as it was in the overheated markets of 2016 and early 2017.


OSFI says it will decide what it will do by May 24 and if so, changes would take effect by June 1st. It is unknown if the federal government will introduce additional measures when it unveils its budget on Monday. Although Canada’s bank regulator plans to make it harder for borrowers to qualify for a mortgage, economists do not expect this to have a big impact on prices, nor break market psychology that home prices will continue to rise.

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Toronto has been ranked among the five most expensive cities for real estate in the entire world. A new report which looks at average income versus housing prices, found that housing affordability worldwide continued to deteriorate throughout the pandemic. Toronto scored 9.9, compared to the worst offender, Hong Kong, which scored 20.7, Vancouver was ranked second at 13.0, followed by Sydney 11.8, Auckland at 10.0 and San Francisco at 9.6. Other stats have shown you now need to have an annual income of at least $178,499 to afford to enter the Toronto market, with the average price for a detached home in the city now more than $1.5 million.


Thanks to low interest rates and a desire to have more space during pandemic lockdowns, the housing market has followed up a decade of steady gains. The term bubble is starting to be used in connection with real estate. The effect of rising prices on affordability is a worry among some who feel they will never be able to afford a house.


Older generations, especially those who bought homes during the high-interestrate era of the early 1980’s experienced affordability problems of their own. Imagine paying over 18% interest on a 30-year fixed mortgage? Affordability dropped to an all-time low and priced most Canadians out of the market. So why are current buyers unwilling to equate the challenges of previous generations to the current situation?


While some economists are warning the Toronto housing market could be approaching a bubble, others are stopping short of using that term. What’s different now? Economists believe the “fundamentals” of the Toronto market -the economy, interest rates, population growth and the sources of demand for housing are far more solid than they were in the late 1980s.

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