Corinne McCabe , Broker

Bosley Real Estate Ltd., Brokerage

Cell 416-888-9842 | info@corinnemccabe.com

Canada’s housing market isn’t melting down as you’ve been led to think.

Housing markets are unique for their location, type, quality, and size, so a decline in the average housing price is different from a decline in the price of an average house, which sometimes makes it difficult to decide whether it’s the right time to buy or sell. Adding to the confusion is that some metrics suggest prices are falling and others show an increase, though, overall, housing sales are down significantly compared to the peak activity in February, while average prices are down to a lesser extent.

 Let’s have a look at the numbers in the Greater Toronto Area (GTA) as an example to clarify how markets are moving. Sales in the GTA were down to 5,627 units in August, a year-over-year decline of 34.2 percent, while the average house price rose by a tiny 0.9 percent, according to the Toronto Regional Real Estate Board (TRREB) data.

But TRREB’s quality-and size-adjusted Home Price Index (HPI) is a better indicator of price movements, because smaller and lower-priced homes might sell more frequently during slowdowns, which can lower the average price.

 Compared to August last year, the HPI was up 8.9 percent, which seems a lot different from the dismal-sounding newspaper headlines and economist forecasts. What gives? It appears a lot depends upon how the metrics are generated. For example, instead of comparing current sales and prices with those from the same period a year ago, you could make the peak housing sales activity in March 2022 the benchmark. Any comparison with March will exaggerate the declines.

 Sales in the GTA in August were down 48.3 percent from the peak sales observed in March, a much more significant decline than the 34.2 percent drop from August last year. Similarly, average prices in August, not adjusted for quality or size, were down 18 percent from the peak prices observed in February.

So, are housing prices declining or climbing then? The answer depends upon perspective. If, say, someone bought a house at the peak of the housing market in February and is trying to sell the same property today, they are likely to experience a noticeable loss. However, most homebuyers stay at the same place for longer than just a few months.

Even the significant decline in housing sales relative to the peak in February hides the fact that sales activity in lower-priced homes has picked up since then. The number of homes sold for less than $600,000 in the GTA has increased by almost 70 percent since February, while sales for homes sold for more than $1.5 million declined by 71 percent.

 Total sales volume in 2022 will clearly be considerably less than observed last year. Housing experts attribute the decline to the increase in the cost of borrowing resulting from the steep rise in mortgage rates. But what is ignored in such pronouncements is a phenomenon known as the “forward buy,” where consumers move up their purchases to benefit from something. Last year’s ultra-low mortgage rates were partly responsible for the extraordinary sales volume because many households likely advanced their home purchase from 2022 to 2021, thereby boosting sales.

Housing sales in the GTA jumped by 28 percent in 2021 from the year before, reaching an all-time high of 121,642. Overall, over 100,000 more sales were recorded in 2021 by the Multiple Listing Service in Canada than the long-term annual average. The decline in sales in 2022 is partly because some of this year’s sales were lost to last year.

 These more nuanced statistics should help us realize that Canada is not experiencing a meltdown in housing markets. The magnitude of sale and price movements is in the expected range. And since the average number of days a property is on the market increased to 22 in August from 8 in February, buyers in the GTA can now take their time deciding. The days of multiple offers and rapid sales are over, at least for now, which should be good news for homebuyers.

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Sales of new condominiums in the greater Toronto area have declined by 19 percent in the second quarter of this year, while the average price per square foot reached a record high of $1,453, according to the latest report from real estate consulting firm Urbanation Inc.

 A total of 6,792 new condo units sold in Q2 of 2022, plummeting 24 percent compared to a year ago. Sales did however remain above the 10-year average. The drop in buying activity caused 11,703 new condo units to remain unsold. While new condo purchases slowed, the cost per square foot of these units surged by 20 percent on an annual basis, reaching an all-time high.

 Several driving factors were behind the price spike, including soaring construction costs, labour shortages, and higher-priced projects, according to the report. Looking ahead, rising interest rates and delayed approval timelines for projects will likely keep the cost of new condos elevated.

 “Prices are expected to hold firm amid low inventory and high development costs,” Shaun Hildebrand, president of Urbanation said in a press release on Tuesday. “The strength in the rental market and shift in demand towardsmore affordable ownership options should provide support for condominium activity as the market works through the effects of higher interest rates.”

The supply of presale condo units reached the third highest volume on record with 9,924 units to hit the market in Q2. The recent pullback in buying activity however has caused many projects to cancel or delay future launch plans. 

The data shows there were 35,000 new condo units anticipated to come to market for the region in 2022. In the first half of this year, roughly 16,000 units have launched and 10,000 more are expected, leaving 10,000 units on hold. Thisis a sign that the broader real estate slowdown has spread to the preconstruction market, where purchases are seenas bets on future housing because buyers wait years for their properties to be built.

Pre-construction buyers, the majority of whom are investors, have been spooked by the jump in interest rates even though they do not immediately need mortgages when they buy pre-construction condos. Typically, a 20-per-centdown payment is required to secure a pre-construction unit. The buyer pays the remainder after the condo is built.

 Urbanation estimates that, in the second half of this year, buyers of newly completed condos trying to recoup their expenses through rental income will face an average monthly shortfall of $1.06 per square foot, or the equivalent of nearly $700 per month on a 650-square-foot unit. By 2026, Urbanation predicts, that shortfall, or negative cash flow, will amount to $1.87 per square foot.

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A Bubble, Eh? Scotiabank’s “Very Pessimistic” Outlook Is Real Estate Prices Rise 10%

Here we go again with another prediction! Canadian real estate is so bubbly a large bank sees prices soaring in a downturn. Scotiabank (BNS) reported earnings today, filing the bank’s macroeconomic forecasts. These forecast scenarios help to determine outlook, and include a base case, optimistic case, and two pessimistic ones. Even in the bank’s worst-case scenario, they forecast home prices will still rise at a breakneck speed.  

Let’s start with what the bank thinks is the most probable outcome — the base case. This involves everything carrying on as is, with no improvement or deterioration. In the base case, the bank has forecast annual growth of 16.6% from April 2022. In contrast, they had forecast annual growth of just 9.9% back in January. Higher rates have somehow accelerated their forecast. Which is a little odd since they’re also forecasting the higher end for interest rates.

The best case, or optimistic scenario, sees slightly higher growth than the base. Home prices are expected to show annual growth of 19.5%. This is a huge jump from the 12.5% prediction in January. 

The worst-case scenario, called a “pessimistic scenario” involves another downturn. They split this one up into two, and the first one involves short-lived stagflation - (a mix of slow growth and high inflation). In this scenario, home prices fall. BNS doesn’t actually see prices falling in their worst-case scenario over the next 12 months. Prices are seen rising 11.4%, up from the 3% in January. Since the last forecast, a conflict broke out, inflation soared to a multi-decade high, and interest rates are climbing. Somehow this boosted their outlook.


Then there’s the “very pessimistic” scenario for BNS, in which things become unhinged. It involves high commodity prices, financial uncertainty, and supply chain disruption. But the point is this is a terrible economy in this case. BNS sees this driving home prices 9.8% higher, accelerating from the 3.5% drop forecast in February.

The strangely high forecast is at odds with their interest rate forecasts. BNS has one of the highest forecasts in the industry and has been outspoken about inflation. Somehow reducing leverage doesn’t impact their outlook.


Bank chief executives and finance chiefs stressed they still expect economies to grow as COVID-19-related headwinds ease. They noted that most households are in good financial health, as many stashed away extra savings during the pandemic, while unemployment remains low in a tight labour market. Businesses are borrowing to bulk up inventories as demand for products outstrips supply, and some sectors, such as commodities, are booming.

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Ontario to hike fines and penalties for ‘unethical’ condo development practices.


The Ontario government announced plans this week to increase penalties on real estate developers who behave in an unethical way, particularly as it concerns pricing on new condominium developments.


The change comes after widely publicized stories of buyers being asked to pay more than they expected for new condo developments after entering into preconstruction agreements with developers. These price hikes caught buyers by surprise and put them in a challenging position. Those who are unable or unwilling to pay the increases have their purchase cancelled and are abruptly forced back onto the market. Though they will get their money back, those who bought in years ago will now find their money doesn’t go as far in the current market.


Government and Consumer Services Minister Ross Romano said that the proposed new regulations will come into effect in 30 days and be retroactive to the date of Thursday’s announcement. The proposed changes would double penalties for developers found to be acting against the provinces Home Construction Regulatory Authority’s Code of Ethics for builders. Those found in violation could face fines up to $50,000 for individuals or $100,000 for corporations on a first offence. Repeat offenders could face even higher fines or have their operating licenses revoked.


You could also frame the price increases as price gouging on the part of the developer. In a market with such low supply, many have called for increased developments as a necessary need to help cool things off. If developers are allowed to freely increase prices on a whim, affordability remains incredibly hard to achieve and consumers bear the burden of corporate greed.


Whether or not a price increase is, in fact, a necessary result of material costs or an attempt to increase profits will vary from case to case, and in reality, could lie somewhere in the middle. Though measures are set to be put in place next month, the province will still have to undergo lengthy investigations and deliberation on a case-by-case basis to reach a clear decision on whether to impose penalties.


“We’ve given notice. Developers need to take notice that we are not going to accept this behaviour,” said Minister Romano. “These are all tools that we are giving our regulatory authority to ensure that we are protecting the little guy.” A consultation process is underway for the proposed rules. Overall, consumer protections are a benefit to buyers. However, the actual impacts of such regulations rely on a proactive and diligent regulatory body, and some have concerns on how stringently these new regulations will be enforced.

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Almost A Quarter of Canadians Now Permanently Work from Home, Up Over 300%


As public health restrictions linger, more companies realize they don’t need office space. Statistics Canada data shows new public health restrictions had more people work from home in January. Nearly a quarter of labor now permanently works from home, with that share rising sharply in big cities. This shift can change cities from places for work, to places that compete for quality of life.

 

Canada’s national statistics agency has found cities adopting the trend much faster. Urban areas have seen 25.6% of the labor force adopt a permanent work from home arrangement in January. In rural regions, the share working from home is 17.2%, much lower than in the cities. More workplaces realize they don’t need an office as they’re forced to work remotely longer. Stat Can notes the 2016 Census revealed only 7.5% of workers did so at the time. The pandemic has accelerated this trend by years. In just 5 years, the share of the population working from home is over 300% higher.

 

Two very expensive housing markets now lead for those who permanently work from home. The share of labor working from home is highest in Ottawa (40%), with Toronto (34.7%) not far behind. Both cities have seen housing soar in price, partially due to the proximity to work. Having such a large share of highly mobile labor should be a concern for policymakers. They’re now located in the city for quality of life, not because they have to be.

 

Testing the waters? A significant share of workplaces has now adopted “hybrid” arrangements. Another 1 in 20 workers in the Labour Force Survey said they go into work some days and work from home the remainder. Some of the world’s largest companies have been using this to test the waters for a more decentralized office. This allows them to tap a much larger talent pool while testing if the situation is still manageable.


A highly mobile workforce can also lead to deflationary pressures in expensive markets. Top talent from all over the country is now competing, much of it in more affordable regions. This can eliminate the pressure of housing on higher wages for expensive regions. At the same time, it can be a boost for wages in more affordable regions that have less competition. Once again, this won’t be clear until the new “normal” is revealed.


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Doug Ford dropped rent control on new units in 2018. Since then, thousands have come online and tenants facing double-digit increases ask: was it worth it?


In 2018, the Ontario government introduced legislation that scrapped rent control on new builds. So, if you move into an apartment, a condo unit, or a basement unit that was first occupied as a residential space after November 15, 2018, there will be no legal limit set on how much your landlord will be able to raise your rent. In other words, the rent for the brand-new basement apartment unit that you’ll be moving into next month (the one you chose to rent because it is more affordable than apartments or condos) could become unaffordable for you in a year if your landlord wishes to raise your rent to make more profit. People in Toronto and other unaffordable cities in Ontario will once again face economic eviction in an unregulated rental market.


The government said it was meant to encourage more builds and increase the housing supply. The provincial government, backed by some academics and industry players, says the rent control exemption is a way to incentivize the development of much-needed rental supply with hopes of pushing rents down. But other academics and advocates argue the trade-off for tenants facing a lack of stability is too steep, and that the number of units actually built since the policy came into force hasn’t been enough to address demand.


This rental control was paused during the pandemic, but tenants in new builds will soon face a return to unrestricted rent hikes as the freeze came to an end at the end of 2021. Apartments that do fall under rent control have to follow Ontario’s rent increase guideline, which is capped at 1.2 per cent for 2022.


More than 7,500 purpose-built rental units have been built in Toronto alone since the policy was enacted, says market research firm Urbanation, plus an untold number of condos and other homes rented out by investors. And as the years go on, more and more tenants are finding themselves in units without rent control and facing the prospect of large rent spikes.


And with a pandemic-era rent freeze ending last month, Urbanation president Shaun Hildebrand expects some tenants who signed leases mid-COVID-19 — when some landlords offered lower rents or incentives amid lower demand — may see higher-than-expected jumps. “I think some tenants are going to face a bit of a shock,” he said. He thinks more renters ought to be aware of the rules and whether their unit qualifies before signing a lease.


The NDP is trying to pass a bill – The Rent Stabilization Act - that would ensure that when you move into a new apartment you pay the same rent as the previous tenant did. The bill is to stabilize rents and crack down on renovictions.


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A wave of change is sweeping through the profession of city planning. A staff report going before council’s Planning and Housing Committee signals real changes coming to the city’s house-centric neighbourhoods. The report is the boldest and most progressive planning policy to emerge from city hall since the amalgamation of Toronto in 1998, where zoning rules expressly forbids anything except detached homes. The plan suggests “multiplexes” – buildings with two, three, four or more apartments to be allowed on the leafy streets where they are currently forbidden.


What kind of city do we want? How can we make room for housing to create the kind of city that works? Planning has been obsessed with protecting neighbourhood character. Toronto’s Neighbourhoods are reserved mostly for houses. This is known as “exclusionary zoning,” and in 2021 it locks down much of the city for multimillionaires. For years low rise residential areas In Toronto were basically off-limits to any kind of redevelopment except teardowns. Even more modest ventures, such as replacing a single-family home with a triplex, could face hurdles.


Toronto is considering reform through a planning effort called “Expanding Housing Options in Neighbourhoods.” Such neighbourhoods cover half of Toronto’s buildable land. It notes that increasing the population of these areas supports public transit, reduces carbon emissions by letting people walk or cycle, and uses existing infrastructure such as parks and schools more efficiently.


The reality is that even progressive city councillors who throw around terms like affordable housing fear the wrath of the NIMBY: “Not In My Back Yard”– highly organized residents’ associations that oppose development at every turn especially where they live.


Yet the city’s planning policies such as the principle of protecting stable neighbourhoods, are evolving bit by bit. Last year, council adopted a report which cautiously puts forward the notion of permitting missing-middle-type projects, such as garden suites, to go up in low-rise residential areas. And look at Toronto’s new laneway-housing future. The city’s architects provided proof of the concept for laneway housing back in the late ’80s. City Hall held back the future’s arrival with red tape, as it does, for about 30 years. In 2018, it finally passed a bylaw permitting the construction of laneway housing. Laneway housing provides new rental housing opportunities within established neighbourhoods, contributing to a wider range of housing options. 


Let’s be a modern voice of reason as opposed to homeowners who fear change, and city councillors who fear homeowners. Let’s take a risk.


Bosley Real Estate Ltd. is a full-service boutique brokerage operating in Toronto, Muskoka, Niagara-on-the-Lake, Port Hope, Cambridge, and Thornbury Ontario since 1928. We have three centrally located offices in Toronto and over 250 sales representatives selling and leasing homes and condominiums in all the vibrant communities we work in. Our brand is well recognized internationally thanks to our unique affiliation with Leading Real Estate Companies of the World. Our sales teams meet weekly to discuss market conditions, trending topics, and anecdotes that more accurately reflect the true temperature of the real estate market.

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Canadians are changing provinces at the fastest rate since the 90’s real estate bubble. Canadians haven’t fled their province in such a large volume in over three decades. Interprovincial migration reached 123,500 people in Q2 2021. This is an increase of 55.1% from the previous quarter, and the largest migration since Q3 1991. That was smack in the middle of the last affordability crisis, and the end of the early 1990s real estate bubble. Migration and quality of life improvements tend to go hand in hand. 


Ontario was by far the biggest loser, with many more people leaving than arriving. Net migration was -11,857 people in Q2 2021. It was the largest outflow for the province since the early 1980s. Other provinces also saw substantial outflows, but not nearly as big as Ontario. Big losses were seen in Alberta (-5,447), Manitoba (-3,513), and Saskatchewan (-3,362). Since it’s interprovincial migration, one province’s loss is another’s gain. British Columbia was the biggest winner, with net migration reaching 15,300 people in Q2 2021. Both Nova Scotia (4,700), and New Brunswick (2,100) also saw substantial gains. Life on the coasts must be appealing. The other provinces made minor increases, PEI (869), Newfoundland (806), and Quebec (626).


This migration reveals a lot about the province from the perspective of the people that live there. Provinces with big gains strike the right balance of local retention and attractiveness. Affordability was a major factor for people looking to move. These provinces are winning people over with a better quality of life.


Even though Ontario lost a number of people this year, immigration to Canada’s largest province, Ontario, welcomed nearly 83,000 newcomers in 2020. Ontario’s share of all immigration to Canada remained unchanged compared to 2019, with the province welcoming 45 per cent of the country’s newcomers. In 2019, 62% of immigrants indicated they would settle in Ontario. A variety of factors suggest that Ontario should see a significant recovery in its permanent residence status of new comers this year.

Bosley Real Estate Ltd. is a full-service boutique brokerage operating in Toronto, Muskoka, Niagara-on-the-Lake, Port Hope, Cambridge, and Thornbury Ontario since 1928. We have three centrally located offices in Toronto and over 250 sales representatives selling and leasing homes and condominiums in all the vibrant communities we work in. Our brand is well recognized internationally thanks to our unique affiliation with Leading Real Estate Companies of the World. Our sales teams meet weekly to discuss market conditions, trending topics, and anecdotes that more accurately reflect the true temperature of the real estate market.

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Condominium markets in some of Canada’s biggest cities have strongly rebounded this year, and analysts say the market could once again return to pre-pandemic red-hot conditions as rental demand surges and inventory is shrinking. 


The condo market, which had been hot for years, cooled quickly last year during the pandemic as investors fled, spooked by the exodus of renters from cities to live with families or find cheaper places elsewhere. Short-term rental demand dried up and first-time buyers flocked to the suburbs and smaller towns to work from home.


This year, the rental market is rebounding on the prospect of white-collar employees and students returning to offices and universities and a strong bounce back in immigration. Younger buyers are also returning to condos after prices for bigger homes surged during the pandemic. 


“Market confidence has rebounded very quickly,” particularly in Toronto’s downtown core, said Shaun Hildebrand, president of Toronto real estate research firm Urbanation.


In the second quarter, the downtown market made up the highest proportion of Greater Toronto Area condo resales in a decade, which “speaks to a renewed level of confidence, not only in the condo market generally, but more specifically in the downtown market,” Mr. Hildebrand said. 


About 12,700 condos sold across the GTA from January to April, surpassing the 10,300 transactions ahead of the previous market peak in 2017. And while they fell following a March high, they remained 15 per cent higher than pre-pandemic levels. The average price per square foot for a resale condo in Toronto is $1,066 and for new construction condos its $1,104 per square foot.


Shrinking available supply is further boosting the condo sales market. Construction started on about 1,143 apartment and condo units in June in the Toronto area, down over a third from a year ago and almost half the level of two years ago. And while ongoing construction of condos was at a record 86,149 units in the second quarter, about 92 per cent of these were already pre-sold. The pullback in demand last year, combined with scarcity of land downtown, has dampened the launch of new projects, Mr. Hildebrand said. 


“Developers are somewhat reactionary,” he said. “Now that demand for downtown condos has returned, we will see more condos launching.”

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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 advisor 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.


Bosley Real Estate Ltd. is a full-service boutique brokerage operating in Toronto, Muskoka, Niagara-on-the-Lake, Port Hope and Cambridge, Ontario since 1928. We have three centrally located offices in Toronto and over 250 sales representatives selling and leasing homes and condominiums in all the vibrant communities we work in. Our brand is well recognized internationally thanks to our unique affiliation with Leading Real Estate Companies of the World. Our sales teams meet weekly to discuss market conditions, trending topics, and anecdotes that more accurately reflect the true temperature of the real estate market.

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There are early signs that the rental market may be starting a comeback. In the first quarter of 2021, average condominium apartment rents were down on a year-over-year basis, however growth in rental transactions outstripped growth in the number of units listed over the same period, suggesting that rental market conditions are starting to tighten up once again.


In the GTA there were 13,168 reported condo rentals during the first quarter of this year. This represents an increase of 81% compared to 7,251 rentals in Q1 of 2020. The number of condos listed for rent during the first quarter of this year was up 78% compared to the same time last year. The number of condo apartment rentals reported in the first quarter represented a new record for the first three months of the year. This suggests we are accounting for pent-up rental demand from 2020. Strong rental demand is also an indicator of broader economic recovery with people willing to sign rental agreements because they are confident in their future job and income prospects. 

The average one-bedroom condominium apartment rent was down by 16% year-over-year in Q1 2021 to $1,820 compared to $2,187 in Q1 2020. The average two-bedroom condominium apartment rent was down by 13% over the same period to $2,447 compared to $2,812.

“The rental market will continue to contend with COVID-19 as the third wave keeps the GTA in a lockdown during the second quarter. However, market dynamics were set in motion in the first quarter to generate strengthening rental conditions as the year progresses — particularly later in the second half as the population becomes vaccinated, offices start to reopen, immigration rises, and post-secondary students potentially return to in-class learning. These variables are obviously subject to change and dependent upon exogenous factors, but as each day passes and housing prices get more expensive, the upside for the rental market rises.” Shaun Hildebrand, Urbanation.


Bosley Real Estate Ltd. is a full-service boutique brokerage operating in Toronto, Muskoka, Niagara-on-the-Lake, Port Hope and Cambridge, Ontario since 1928. We have three centrally located offices in Toronto and over 250 sales representatives selling and leasing homes and condominiums in all the vibrant communities we work in. Our brand is well recognized internationally thanks to our unique affiliation with Leading Real Estate Companies of the World. Our sales teams meet weekly to discuss market conditions, trending topics, and anecdotes that more accurately reflect the true temperature of the real estate market.

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The spoils of pandemic wealth have added billions to Canadian households and to their total wealth unexpectedly during this past year. In every province, net worth is on the rise. About two-thirds of the average wealth gain came from rising home values, with the rest owing to a surge of savings. It’s a situation that bears little resemblance to past recessions. Disposable income is up sharply, home prices have never been higher and stock markets erased their losses months ago.


Ontario saw its average household wealth rise by close to $50,000 or 7.2%. Roughly three-quarters of that was driven by real estate. In the Toronto and Ottawa areas, the average gain in home values was around $43,000 over nine months in 2020. The wealthy have certainly benefited. In high-income annual neighbourhoods, where average annual household income is between $190K and $300K, home values rose by an average of $106,000. In lower-income areas, it was less than $10,000. Keep in mind these are just averages. Some home values have way exceeded these numbers.


The key driver of wealth was savings. Over the first nine months in 2020, households in Canada saved in excess of $200 billion. The vast majority going to deposits, which include savings accounts, GIC’s and term deposits. The rest was used to pay down debt like credit cards.


The other side of the net-worth equation is debt. Statscan figures show Canadians lowered their non-mortgage debt last year, but also added $118 billion in mortgages, the largest annual increase on record. The value of real estate assets climbed by significantly more than mortgage debt, helping to bolster wealth. The Bank of Canada announced this week it wouldn’t be raising interest rates until inflation consistently stays around two per cent, something it doesn’t believe will happen until some time in 2023. Mortgage rates have already started to edge up as markets start to take note of several positive economic signals.

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More than two-thirds of Toronto condo investors are planning to sell their properties rather than pay the new vacant home tax, according to a new Toronto Regional Real Estate Board (TRREB) report. Toronto City Council voted to create an implementation plan for a vacant homes tax in the city which would take effect sometime in 2022. The tax would encourage owners to sell or rent out their vacant properties, which would increase housing supply, the City of Toronto said in a news release. Those who do not would need to pay the tax, and proceeds would go toward building new housing supply.


A total of 40 % of those polled at the end of last year said that they intend to sell their investment property in the next year in part due to a prospective vacancy tax, as well as further restrictions on Airbnbs. TRREB has been up front in asking the City to be prudent with its implementation of the tax, calling for exemptions for snowbirds, U.S. citizens, commuters, and other groups.


Using data from Vancouver’s implementation of a vacant home tax as an example, if one per cent of Toronto’s housing stock is vacant, at a tax rate of one per cent on the average Toronto home’s current assessed value, this could equal $55 million to $66 million in tax revenue per year. Toronto’s tax rate will be determined in the tax development process. Determining how a home is deemed vacant will be part of the tax development process, but residential property owners would be required to make a declaration each year about the occupancy status of the home.


On another subject, TRREB is applauding Toronto City Council for listening to the concerns we expressed and has decided to NOT implement an increase to the Municipal Land Transfer Tax on homes priced over $2 million. Had it been approved the portion of the property value over $2 million would have been subject to a 3.5% land transfer tax rate, up from 2.5% - a 40% increase.

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This week the Toronto Regional Real Estate Board (TRREB) released its annual Market Year in Review & Outlook Report for 2021, projecting optimism for a booming Greater Toronto Area (GTA) real estate market in 2021. The report forecasts near-record sales numbers of 100,000 units, with average selling prices expected to break records and exceed the $1 million mark.


The blazing start to the year comes from a strong finish in 2020. January recorded 6,928 sales which represents an over 50% increase measured year-over-year against January 2020. Sales growth was recorded in all market segments, including condominiums in both the 416 and surrounding 905 regions. New listings also increased year-over-year, though at a less pronounced rate, which led to a tightening of market conditions versus the previous January.


The average selling price for January 2021 spiked 15.5% year-over-year to $967,885, driven primarily by the low-rise market segments as condominium apartment prices dropped in Toronto during this period. Despite this, TRREB expects that the continued growth of condominium sales could soon lead to sales growth outpacing listing growth, and renewed condo price appreciation.


Is the real estate market picking up steam at an uncomfortable pace? One just has to look at the number of multiple offers and wild bidding wars to know that demand is at an all time high. Hopefully as we start moving into the spring market lets hope listings become more plentiful, especially after this long weekend and the kids are back at school. Let us take this weekend to be with family and see what next weeks brings us. Happy Family Day!

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Toronto’s vacancy rate on apartments hit 5.7% in the fourth quarter of 2020, the highest level the city has recorded in 50 years, after nearly a decade of being under 2%. As the pandemic pushed tenants outside the core of the city, the vacancy rate in the 905 areas surrounding Toronto remained at a much tighter 2%. These results are just an example to just how drastically the pandemic altered the rental market.

As vacancy rates rose last year, rents declined. A study from Rentals.ca last week showed the average monthly rent for a one-bedroom apartment in Toronto fell 20% year-over-year in December to $1,832 and a 17.5% drop for a two bedroom to $2,416. Condo leasing activity soared 25% last year to a record 38,366 units. The average rent for condos, unlike apartments, dropped 14% to $2,076 across the Toronto region, the lowest since mid 2017. Rentals.ca predicts rents could continue to decline for the next three or four months because of weaker demand and more supply.

The freehold market on the other hand is starting off with a bang! The biggest source of concern are listings. The buyers are out there circling, and the weather has been kind to us, but the multiple offers are starting up again. Stories of a townhouse in Mississauga having 71 offers to a house in Oshawa having 47 offers. With low borrowing costs and high demand, the supply issue again is of concern. Are potential sellers reluctant to list their properties for sale in this uncertain market? The buyers are out there waiting. We remain cautiously optimistic!
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Toronto’s real estate market ended 2020 with a bang, as a December home-buying spree helped to push the average selling price to a record high of $929,699. After a steep drop in the spring due to the pandemic, the market took off in the second half of the year. The 13.5% increase over 2019’s average was led by single family homes where limited supply pushed prices up. The 905 areas outside Toronto saw the most pronounced price and sales gains. The number of homes sold in 2020 in the Greater Toronto Area totaled 95,151, up from 87,751 in 2019, and the third-best year on record.

In contrast, condo listings far outstripped growth in sales. The choice for condo buyers led to more bargaining power and a dip in the average sale price during the last few months of the year. For the City of Toronto, the average sale price in December was $625,828 down 4.7% from last years average of $656,233. What we are starting to find is that, with condo prices softening a little bit (they are down about 10 per cent in the downtown core for the year) there’s way more selection, far fewer bidding wars and interest rates as low as 1%. This has excited investors.

Sean Hildebrand from Urbanation thinks the soaring prices of single-family homes will also push more buyers back to the condo market. As of November, the average price gap between condos and detached houses was $596,000. The gap between a condo and a semi-detached or townhome was about $217,000. Both of those were at their second-highest levels since the market peaked in late 2016-early 2017, he said. “This could really start to swing demand towards condos in the second half of the year,” said Hildebrand.

Looking to the new year, 2021 prices are still competitive from 2020, and one thing the forecasts seem to agree on, is that whatever happens in the next few years, the long-term outlook for Canada’s housing markets is bright.
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With listings in both the freehold and condo sectors slowing down as we near the end of the month, the debate rages on. Should buyers wait until the New Year to purchase a new home or jump into the market now? There are different points of view on this topic. If you wait there will be more choice BUT you will be competing with all the other buyers who are also waiting for the spring market. More buyers bidding on the same home will drive prices higher. If you buy now there is less choice but fewer buyers. Still, demand for single-family homes supported by low interest rates and teleworkers, will keep the housing market resilient overall. What’s driving the market now is the lack of inventory. 

We have entered what is universally known as the “holiday season” and the freehold market seems to respect this, so we are not surprised to see the number of listings declining from the previous week, down by 19%. We did see a nice jump in sales, up 20% week-over-week. We believe the ultra low mortgage rates (some banks as low as 1.85% for a five-year term) are keeping buyers interested and this has resulted in 54% of freehold properties selling at or above their advertised price. 

The condo market saw a modest decline of 15% in new listings compared to last week but saw a small 3% uptick in sales. Forecasters expect the economy to improve next year now that there will be Covid vaccines available in the new year. For the short term, the winter will provide some good entry positions given the relatively soft nature of the condo market. There is plenty of choice out there now!
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Toronto Condo Prices Down 9% from Peak - Recent news articles about Toronto’s condo market range from pessimistic to optimistic leaving many wondering what exactly is happening. In early October condo listings surged 215% in downtown Toronto, while a couple of weeks later an article titled “Toronto condo prices rise over 8% even as new listings surge”. 

Jason Mercer, chief market analyst with the TRREB is saying “there is still enough competition between buyers to support average selling prices substantially above last year’s levels.” While this is technically true, it leaves one with the impression that condo prices are trending up when in fact average condo prices have been trending down over the past seven months. To better understand how prices can be up over last year but still be trending down we’ll need to look at some data on the downtown Toronto condo market (the area south of Bloor between the DVP and Dufferin) since it’s the hardest hit area in the GTA. 

Condo prices downtown were relatively steady during the first three quarters of 2019. The average price for a downtown condo in the third quarter of 2019 was $714K. But in the last quarter of 2019 and the first quarter of 2020 the market changed significantly. A sudden surge in demand coupled with very tight inventory resulted in a very competitive market which pushed average prices up to $820K in the first quarter of 2020, a $100K (15%) increase in just six months. Since then average condo prices downtown fell by 9% to just under $750K. 

We typically don’t analyze changes in home prices or sales on a month over month or quarter over quarter basis. Real estate is a seasonal business, so we typically compare prices and sales against the same period last year. But the risk with only comparing home prices year over year is that it can sometimes give us a false impression of the market today. That’s why the statement below from Urbanation’s Shaun Hildebrand really captures what is happening in the condo market today: 

“It’s very likely that by the first quarter of 2021 we could be in a situation where we see double digit year over year declines in average condo prices downtown, and that’s under a scenario where prices remain flat from where they are right now.”

Shaun’s prediction was not based on a forecast of the future, but a better understanding of where the market is today. Condo prices are already down 9% from their peak, and even if they remain flat for the next five months, we will see close to a double-digit year over year decline in downtown condo prices in the first quarter. The bigger question will be whether or not condo prices stay flat over the next five months or whether we will see more downward pressure on prices. (Move Smartly Report)
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The Toronto region had its fourth consecutive month of record sales volumes in October with 10,563 homes sold, up 25% from October 2019 and the Toronto Real Estate Board is forecasting record or near-record sales to continue through the balance of the year. The average sale price for the GTA was up 13.7% to $968,318 and for the City of Toronto it was up 10.8% to $1,025,925. Detached homes led the way, with sales up 33.9% and an average sale price of $1,204,844, an increase of 14.8%.


New listings for all categories of homes rose to 17,802 across the GTA, up 36% from October 2019. Condo listings more than doubled to 6,193, compared to October 2019. Sales of condominium apartments fell 8.5% in the City of Toronto compared to the same month in 2019, with prices up just .8% to $668,161. Active listings are up 158% in Toronto to 5,719 units. As the pandemic slowed economic development and halted tourism in the city, the short and long-term rental income many investors relied upon dried up. If you are looking to buy a condo it’s a buyer’s market now and you will benefit from more choice available.


The strongest gains across all re-sale housing categories occurred in the 905 communities outside Toronto, where buyers can often afford a little more space. Suburban areas that once lagged desirable city addresses are now roaring hot as home buyers wearied by lockdowns seek bigger yards and larger living spaces. Tight downtown condo markets that previously commanded expensive rents are now thick with supply. And the flow of immigrants that typically fuel demand for housing of all types has slowed to a trickle.

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Canadian real estate prices are growing at a breakneck speed. More homes were sold in July than any other month on record, with data going back more than 40 years. The performance of the housing market during this pandemic recession has been a big surprise. The price of a typical home across Canada reached $637,600 in July, a 7.56% increase compared to the same month last year. Canadian real estate buyers are shrugging off the pandemic, as a temporary inconvenience. The Canadian Real Estate Association (CREA) data shows prices made a huge increase, not just in known “hot” markets like Toronto, Ottawa, and Montreal but in almost every real estate market across Canada.

 

The massive increases this year represents a significant portion of gains made over the past 3 years. Montreal real estate prices are up 14.04% in July, compared to last year - making up almost half of the 29.21% increase made over the past 3 years. Toronto’s 10.11% increase over the past 12-months, contrasts with a 14.51% increase over the past 3 years. In Vancouver, prices increased 4.83% over the past 12-months, but just 1.61% over the past 3 years. For Toronto, this means the past year has seen growth twice as fast as the previous two years.

 

Sales have also been helped by low mortgage rates with rates for five-year fixed-rate mortgages being offered at less than two percent. The robust price growth right across the country, comes even as indicators like employment, rental rates, and immigration fall. When prices rise across the board despite a breakdown of these indicators, its almost certainly a result of too much easy credit.

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