Brian O'Donoghue

Sales Representative

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


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?

Read full post


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.

Read full post

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.”

Read full post