MARKET UPDATE FOR THE WEEK ENDING JULY 7TH 2023

The average price of a home in the GTA is slightly higher than this time last year, but a bit flat month-over-month, according to the latest numbers from the Toronto Regional Real Estate Board (TRREB). Data shows that the average GTA price was about $1.182 million in June compared to roughly $1.146 million last June. Meanwhile, home sales are up 16.5 per cent from last June while listings dropped 3 per cent over the same period.

“We’ve definitely seen an improvement in the market. We were basically in a low this time last year as a result of increasing borrowing costs and their impact on the marketplace,” said Jason Mercer, the real estate board’s chief market analyst.

“We have seen a pretty strong uptake year-over-year in terms of sales.”

This suggests, he said, that buyers who “moved to the sidelines” when interest rate hikes started in 2022, may have accepted the higher borrowing costs, saved more for a down payment or are looking at a different type of home.

Released Thursday, the data shows that the average GTA home price was about $1.182 million in June compared to roughly $1.146 million last June and $1.196 million this past May.

There were 7,481 home sales reported in the region over the month of June. The market is now “tighter” Mercer said, with sales up year-over-year and listings down, which means there’s more competition for people trying to purchase a home.

“You can’t buy what’s not available for sale,” he said. “And I think that is starting to have an impact on sales, people just can’t find what they’re looking for.” The average price of a detached home in the city of Toronto was almost $1.8 million in June, up 2.6 per cent from last year, while the average price of a condo at $770,423 was down 0.2 per cent.

In the 905, the average price of a detached home was up 6.6 per cent year-over year to roughly $1.45 million, but the average condo price was down 2.7 per cent to $674,305.

There’s been more uncertainty in the market over the last month, with concerns around inflation and the Bank of Canada’s decision to raise interest rates again in July. After historic lows during the pandemic, the bank hiked rates eight times before leaving them unchanged in spring 2023.

The next rate announcement is on July 12. A majority of economists believe the Bank of Canada will raise interest rates by a quarter-point for a second straight time to 5.00% and then hold well into 2024.

“I think everyone’s looking very closely at both what the bank does in terms of its policy rate next week, but also what their expectations are for later in the year,” Mercer said.

MARKET UPDATE FOR THE WEEK ENDING JUNE 23RD 2023

More And More First-Time Home Buyers Are Getting Help From Family To Cover The Down Payment.

More than a third of homebuyers in the GTA were given a lump sum payment from parents or relatives to purchase their first property and nearly 75 per cent of first-time homebuyers in the GTA worried that their down payment would not be enough, according to a new survey.

The survey results, which were released Thursday, looked at key trends among first-time homebuyers who bought a residence within the last two years.

The biggest hurdle first-time homebuyers face is coming up with a substantial down payment. Using the ‘bank of mom and dad’ for a top-up on a down payment is not uncommon. First- time buyers in the GTA are often dual-income couples in their thirties.

According to the survey, 36 per cent of first-time homebuyers in the GTA say they received a lump sum payment from parents or relatives to purchase a home.About 29 per cent said they received financial help with their monthly mortgage payments.

Forty-four per cent of first-time homebuyers in the GTA said the financial assistance they received was a gift.

About 29 per cent of first-time homebuyers in the GTA said they purchased a home in a different neighbourhood or region than they had originally planned due to affordability issues and 37 per cent said they purchased a smaller home than they had planned.

Canadians continue to face challenges in entering the real estate market, be it high interest rates, strict mortgage qualification standards, or difficulty saving enough money in a reasonable time period for a down payment.

Still, they continue to prioritize home ownership, and view it as a milestone worth achieving. Most buyers surveyed were prepared to settle for what they could afford in order to get into the market.

If their down payment will not get them into their dream home, most buyers are prepared to settle for a smaller property or a condo in order to build equity towards an eventual move- up home.

According to the Toronto Regional Real Estate Board, the average price of a home in the GTA reached $1,196,101 in May up from $1,153,269 one month earlier.

MARKET UPDATE FOR THE WEEK ENDING JUNE 16TH 2023

Toronto rents just skyrocketed again and here’s how much you’ll need to spend.

Toronto rents just skyrocketed again and here’s how much you’ll need to spend. It will now cost you well north of $2,800 to rent an apartment in Toronto, and renters looking to move into a new home will have to fork over more than 15% higher prices than this time last year.

The latest Rentals.ca and Urbanation National Rent Report shines a spotlight on rising rents across the country in May. Average rents rose by 6.5% nationwide last month, though that figure pales in comparison to the rate of rent price increases in the nation’s largest urban centre.

The City of Toronto ranked second on the list of 35 cities for average one-bedroom monthly rent in May, at $2,538, and third place for two-bedroom rent averages, at $3,286. That’s a 17.5% year- over-year spike in one-bedroom rents and a 12.4% increase for two-bedroom rents.

Overall rents in Toronto increased by 15.5% year-over-year in May to a new average of $2,808 for purpose-built and condominium rentals.

Prices have indeed experienced a surge in the last year, but when measured on a month-over- month basis, average rents decreased in Toronto last month.

The April average rent price clocked in at $2,822, meaning it’s a whole $14 more affordable to sign a lease than it was one month earlier.

Eight other Greater Toronto Area cities and areas were on the list, including Mississauga, Vaughan, Burlington, Etobicoke, North York, Scarborough, Brampton, Oshawa, Oakville, and Richmond Hill.

“Higher rents are on the horizon with interest rates at a 22-year high, rising home prices, and record immigration,” said Matt Danison, CEO of Rentals.ca Network.

“Gen Z could become the ‘Boomerang Generation’ moving back in with the parents or the ‘Roommate Generation’ splitting rent as it’s unaffordable for many Canadians to pay rent on their own,” says Danison, adding that “governments at all levels need to come up with creative solutions to increase housing supply.”

MARKET UPDATE FOR THE WEEK ENDING JUNE 9TH 2023

Just as Canada’s housing market was starting to rebound, the Bank of Canada has dealt it another blow. The bank’s decision to raise its key interest rate 25 basis points to 4.75 per cent on June 7 could put downward pressure on home prices, which have rebounded faster than the bank had expected. This latest interest rate hike could add to the financial burden of some variable mortgage holders and those renewing fixed rate loans this year.

The rise brings the policy rate to the highest it’s been since April 2001.

May was the fourth consecutive month in which the average selling price of a home rose in the GTA up to nearly $1.2 million, only 1.2 per cent behind the same month last year.

Benchmark home prices in Toronto increased 3.2 per cent in May to $1.14 million on a seasonally adjusted basis, the biggest increase since the market peaked in February 2022, according to the Toronto Regional Real Estate Board.

Meanwhile in Vancouver, the Real Estate Board of Greater Vancouver said May home sales rose 15.7 per cent from a year earlier, while prices increased for the sixth consecutive month, showing signs of heating up heading into the summer.

Rising rates have an oversized psychological impact on people buying and selling properties in this country, and so it might create a small stall in the market. They say that the lack of homes listed for sale in the Toronto area will continue to buoy prices for the foreseeable future.

Home buyers have adjusted to the higher rates of the last year and aren’t likely to step back again because of an additional quarter-point on their mortgage. Even before the first of the last nine rate rises, the mortgage stress test required home buyers to qualify for a loan at a higher rate than their bank actually charges.

People assume buyers will be immediately impacted by a rate rise, but anybody who is actively in the market has a pre-approval locked in.

There will be pain in some quarters, however, said Ron Butler of Butler Mortgage. Some variable mortgage holders will hit the trigger where the interest portion of their loan surpasses the total mortgage payment, often pushing them into longer amortization periods.

For those with fixed rate loans renewing this year, Wednesday’s interest rate increase “is a real blow,” because, after falling March through May, those rates have been rising again and the central bank’s announcement means all chances of rate cuts this year have vanished, he said.

“Some of the better options in the 4 per cent range that existed just three or four weeks ago are gone. It’s going to be nothing but rates that start with a five or possibly even rates that start with a six,” said Butler.

MARKET UPDATE FOR THE WEEK ENDING JUNE 2ND 2023

Canadian Banks Report 1 In 4 Mortgages Are 35 Years Or Longer.

 Canadian first-time home buyers are 36 years old on average. That means they won’t have that starter condo paid off by the time they retire, according to recent bank reports. Four of the Big Five banks reported a large share of their portfolio had amortizations longer than 30 years in Q2 2023. Most of them have at least 35 years or longer remaining, as they extend terms to prevent over-leveraged buyers from defaulting.

An amortizing loan is one that’s gradually paid off over time, with each payment reducing the balance. Banks in Canada are limited to offering a maximum amortization of 30 years, meaning you have about 30 years to pay off the loan. Make your payments to cover the interest plus some principal, and you get close to zero. Straightforward, right?

 In circumstances where the payment is insufficient to cover interest, it begins to accumulate. Rather than the balance getting closer to zero, it increases as time passes. This is called negative amortization, because the time required extends rather than winding down. 

 A combination of inadequate stress testing and poor regulatory control has led to a lot of negative amortizations. Despite being limited to 30 years at contract, banks estimate the “current customer payment basis” will be longer. Sometimes a lot longer.

 A large share of the mortgage portfolios at Canadian banks have amortizations longer than 30 years. Leading is BMO (31% of its portfolio), followed by TD (27%), CIBC (27%), and RBC (26%). Only one of the Big Five proved to be an exception— Scotiabank at just 0.7% of its mortgage portfolio were amortizations of 30 years or longer. Many assumed it was a temporary issue last year and would resolve by Q2 2023. That wasn’t the case, with these banks only reporting slightly lower rates than last year.

 The practice may not be an official thing in Canada, but it seems to have the regulator’s blessing. Earlier this month, OSFI (Office of the Superintendent of Financial Institutions) wrote to Parliament to explain that removing the ability to extend mortgage amortizations might result in more delinquencies and create downward pressure on home prices.

 It sounds noble to prevent defaults this way. However, existing owners are paying much less than average rents, and usually for a lot more space. Buyers prior to 2021 also likely secured their home for significantly less than recent market prices. An increase in payment is unlikely to be burdensome to most, considering stress testing started in 2018.

 That leaves recent buyers as the biggest group that needs these longer amortizations. While you might be thinking they’re first-time buyers that need a break, the odds are they’re investors. Over leveraged investors that can’t pay their mortgage and require special accommodations to prevent default sounds familiar, but it’s hard to remember where from.

MARKET UPDATE FOR THE WEEK ENDING MAY 19TH 2023

The real estate price correction appears to be over in Canada after a yearlong slump that saw prices drop by almost 18% in Toronto, according to a new report from RBC.

The spring market was a turning point for the country’s housing market as April home resales spurted 11.3% month over month nationwide, marking the strongest monthly advance in almost three years, the report said.

Prices rose in back-to-back months for the first time since early 2022 — before the Bank of Canada’s aggressive rate hikes — and demand-supply conditions suddenly appear tight.

“Resurging demand and low inventories have put sellers back in the driver’s seat in most major markets, including Toronto, Vancouver, Calgary and Halifax,” said Robert Hogue, senior economist at RBC.

While activity is still running at 11% less than just before the pandemic, that may not last for long if more sellers enter the market. New listings have significantly lagged behind resales, but if prices continue upward sellers might be more inclined to jump back into the market, Hogue said.

Rising prices could spur more sellers into action. We suspect many have been waiting out the correction until conditions turned in their favour. A rise in supply would help unlock more of the pent-up demand that built over the past year.

According to the Toronto Regional Real Estate Board, the average home price in Toronto rose to $1.15 million in April from $1.03 million in January (when prices likely bottomed out in Toronto) or almost a 10% increase.

On the ground, there is a frenzy of activity in downtown Toronto as homes receive multiple offers and are spending less time on the market.

The spring market comeback is a surprise for Hogue, who originally forecast a claw back for real estate prices and sales once prices bottomed out in the summer.

But there are still various factors at play that could cool the market again. The Bank of Canada has paused rate hikes, but more could be announced if inflation doesn’t continue to go down. Inflation rose to 4.4% in April from 4.3 per cent in March, the bank announced on Tuesday.

And more inventory could enter the market with the provincial government’s push to create more housing, along with the record number of condo new builds coming to the market.

Expectations of further interest rate hikes with an expected increase of supply in Toronto may cool off prices and activity again. Yet, affordability remains a top concern in Toronto as building new housing takes time.

MARKET UPDATE FOR THE WEEK ENDING MAY 12TH 2023

Toronto city council approves up to four-unit multiplexes in all neighbourhoods

Multiplexes can now be built in all neighbourhoods, meaning duplexes, triplexes and fourplexes can be built, without special permissions, in all neighbourhoods from Rosedale to Westmount that are currently dominated by detached and semi-detached houses across Toronto after approval from the city council Wednesday, a move intended to increase low-rise housing options in existing communities.

This controversial move to expand as-of-right permissions for multi-unit residences is a centrepiece of the city’s housing action plan to meet a target set by Premier Doug Ford’s provincial government of adding 285,000 homes by 2031. Previously, 70 per cent of Toronto’s residential areas only permitted single detached homes with zoning amendments and additional approvals required if another form of housing was proposed.

The plan to remove the exclusionary zoning policy has faced significant opposition from many residents’ associations who argue that the changes could have negative consequences, including increased traffic, lack of parking options and a loss of trees. Some organizations, including the Federation of North Toronto Residents’ Associations, representing 30 neighbourhood groups, called on the city to defer the decision until a new mayor is elected next month. They also said it would be better to pilot the plan in select communities rather than make a widespread rollout in order to monitor and make adjustments if issues arise.

The new framework, allows new multiplexes to be built up to 10 metres high, or three storeys, as long as the design keeps with an area’s existing “physical features.” In areas where taller buildings are already allowed, four-storey multiplexes may be possible, the new rules say — and where the lot is large enough, the rules allow a multiplex abutting a garden or laneway suite. That would total five residential units on larger lots.

City staff are also expected to advance further policy changes in the coming years to boost density, starting with a final set of recommendations on allowing four- to six-storey walk-up apartments on major streets in residential areas, which staff expect to release later in 2023.

Toronto will launch a monitoring program to track the uptake and distribution of multiplexes across the city, as well as document concerns or barriers that arise, including impact on parking and trees. A report is scheduled to come back to council by early 2026 or sooner if 200 multiplex building permits have been received by the city.

MARKET UPDATE FOR THE WEEK ENDING MAY 5TH 2023

Competition Is Heating Up in the GTA Real Estate Market as Prices Pick Back Up

With the spring market in full swing, competition for real estate in the Greater Toronto Area (GTA) is heating up as a consistently low number of listings leaves would-be buyers with few options.

Sales were on the up and up in April, reaching 7,531, according to new data from the Toronto Real Estate Board (TRREB). This marks a rather significant 9.2% jump from March sales but, notably, is a 5.2% drop from the sales seen in April of last year. At the same time, the number of new listings in the GTA has remained relatively flat, far from keeping pace with the jump in sales. With a grand total of 11,364 new listings in April, this marks a 1.6% increase over March and a 38.3% decline on an annual basis.

“Many buyers have come to terms with higher borrowing costs and are taking advantage of lower selling prices compared to this time last year,” said TRREB President Paul Baron. “The issue moving forward will not be the demand for ownership housing, but rather the ability to meet this demand with adequate supply. This is a policy issue that requires a sustained effort from all levels of government.”

Those lower selling prices, however, are changing. With fewer listings and more buyers, market conditions are unsurprisingly tight, helping to push prices up. The average selling price in April all across the GTA hit $1,153,269 — a slight, but not negligible, 4% increase from just one month prior.

Price increases were seen across all housing types, but the biggest change was found in townhomes, where a 5.5% month-over-month increase brought the new average price to $986,121. It was followed by semi-detached homes with a 4.4% jump to $1,135,599, condos with a 2.8% jump to $724,118, and detached homes with a 1.4% jump to $1,489,258.

“As demand for ownership housing has picked up relative to supply, we are seeing renewed upward pressure on home prices. For a short period of time, higher borrowing costs trumped the impact of the constrained housing supply in the GTA. Renewed competition between buyers is once again shining the spotlight on the persistent lack of listings and resulting impact on affordability,” said TRREB Chief Market Analyst Jason Mercer.