TORONTO – A new condo report suggests first-time buyers, retirees and population growth will continue to fuel demand and price growth for the compact living spaces over the next few years.
The study by Genworth Canada found that average condo resale prices are expected to rise next year in seven of the eight metropolitan centres studied.
Prices in Toronto are projected to jump 2.5 per cent to $312,352.
The highest increase however, is expected to be in Edmonton where prices could rise 3.2 per cent.
Vancouver is the only city where condo prices are expected to drop, by two per cent to $348,152.
The report stands in contrast to warnings from economists and officials that the condo market in some hot markets is reaching bubble territory that could soon burst.
The Bank of Canada and federal Finance Minister Jim Flaherty have cautioned Canadians repeatedly to moderate borrowing on real estate, declaring household debt to be the domestic economy’s number one enemy.
The central bank noted certain segments of the housing market that have a persistent oversupply — such as condos in Toronto — face a higher risk of a price correction.
Genworth — which earns revenue from selling mortgage insurance — notes that rising prices for single-detached homes are driving first-time buyers to condos, but retirees also continue to prop up demand.
It suggests that the population is expected to grow in all eight cities studied over the next few years, while employment growth and low interest rates should also support the market.
“This data corroborates our view that the demand for condos in Canada, particularly at the price-point we insure, is well supported by our economy and our population,” said Brian Hurley, chairman and CEO of Genworth Canada.
“For those seeking to own a home affordably in urban centres, condos remain a good option.”
The Genworth Canada report, produced with the Conference Board of Canada, reviewed trends in Quebec City, Montreal, Ottawa, Toronto, Calgary, Edmonton, Vancouver and Victoria.
Census figures for 2011 released in February show multi-unit dwellings — a category that includes condominiums — making up roughly half of all new housing stock, a category traditionally led by detached homes.
The numbers also indicate that Canadians are flocking to urban centres. Toronto’s population jumped more than 17 per cent over the previous census period in 2006.
A recent CMHC report said housing starts and home sales have been strong in 2012 — particularly when it comes to multiple-dwelling units such as townhouses, condos and apartments — but will soften moderately in coming months into 2013.
Tuesday, September 4, 2012
Condo boom doesn't mean Toronto housing bubble: RBC
TORONTO - A new report wants to burst the idea of a Toronto housing bubble.
Yes, condo sales and construction are booming, but the Royal Bank of Canada report says there is no housing bubble because the city's number of new housing units is in line with demographic needs.
The Greater Toronto Area sees an influx of close to 100,000 people each year.
That translated to approximately 38,000 new households per year from 2006 to 2011, according to RBC and Statistics Canada data in the report.
One constraint to urban development is the Ontario government's plan to handle growth and development in the Greater Golden Horseshoe, which is known as "Places to Grow" and seeks to curb urban sprawl.
Faced with the task of accommodating the 38,000 new households, new housing in Toronto has nowhere to grow but up.
May 2012 saw a record 44,100 condos and apartments under construction, as well as 6,200 multiple units, which are detached and row houses.
The report's findings also aim to quell fears that scores of empty condominiums are piling up.
"Concerns that large numbers of newly built condo units are sitting empty are simply not supported by the statistics," the report, released Tuesday, says.
The report says approximately 7.5 per cent of the condo units completed in the previous 12 months are unoccupied, and estimates that unoccupied units represent close to 0.2 per cent of the stock of multiple units. Both figures are less than numbers from the 1980s when Toronto saw a housing bubble burst.
While investors represent a large share of condo buyers, concerns about property "flipping" might be overblown, the report adds.
Canada Mortgage and Housing Corporation reported last fall that only 10 to 15 per cent of new condos are listed for sale within 12 months of registration.
Tuesday's report says the majority of condo investment properties are actually helping to fill a gap in the rental market.
"The biggest risk that we see for the coming years is a possible mismatch between the types of condo units bought by investors and the types ultimately demanded for occupancy," says the report.
A mismatch could occur with a greater emphasis on small, single-unit apartments when currently about three-quarters of rental demand is for high-rise multi-family units.
However, the report is quick to dismiss these concerns, pointing to the demand for rental units.
The report suggests that recent changes that tightened mortgage rules will push more people into the rental market.
As of last month, the maximum amortization period dropped from 30 to 25 years for government-insured mortgages, and the refinancing limit was capped at 80 per cent down from its previous 85 per cent.
The report notes that while the city saw an 18 per cent increase in condo rental units, the rental vacancy rate dropped to 1.1 per cent last year.
Yes, condo sales and construction are booming, but the Royal Bank of Canada report says there is no housing bubble because the city's number of new housing units is in line with demographic needs.
The Greater Toronto Area sees an influx of close to 100,000 people each year.
That translated to approximately 38,000 new households per year from 2006 to 2011, according to RBC and Statistics Canada data in the report.
One constraint to urban development is the Ontario government's plan to handle growth and development in the Greater Golden Horseshoe, which is known as "Places to Grow" and seeks to curb urban sprawl.
Faced with the task of accommodating the 38,000 new households, new housing in Toronto has nowhere to grow but up.
May 2012 saw a record 44,100 condos and apartments under construction, as well as 6,200 multiple units, which are detached and row houses.
The report's findings also aim to quell fears that scores of empty condominiums are piling up.
"Concerns that large numbers of newly built condo units are sitting empty are simply not supported by the statistics," the report, released Tuesday, says.
The report says approximately 7.5 per cent of the condo units completed in the previous 12 months are unoccupied, and estimates that unoccupied units represent close to 0.2 per cent of the stock of multiple units. Both figures are less than numbers from the 1980s when Toronto saw a housing bubble burst.
While investors represent a large share of condo buyers, concerns about property "flipping" might be overblown, the report adds.
Canada Mortgage and Housing Corporation reported last fall that only 10 to 15 per cent of new condos are listed for sale within 12 months of registration.
Tuesday's report says the majority of condo investment properties are actually helping to fill a gap in the rental market.
"The biggest risk that we see for the coming years is a possible mismatch between the types of condo units bought by investors and the types ultimately demanded for occupancy," says the report.
A mismatch could occur with a greater emphasis on small, single-unit apartments when currently about three-quarters of rental demand is for high-rise multi-family units.
However, the report is quick to dismiss these concerns, pointing to the demand for rental units.
The report suggests that recent changes that tightened mortgage rules will push more people into the rental market.
As of last month, the maximum amortization period dropped from 30 to 25 years for government-insured mortgages, and the refinancing limit was capped at 80 per cent down from its previous 85 per cent.
The report notes that while the city saw an 18 per cent increase in condo rental units, the rental vacancy rate dropped to 1.1 per cent last year.
Wednesday, June 27, 2012
CMHC Rule Changes effective July 9, 2012
Since the 2008 credit crisis, the Department of Finance has been steadily been
clamping down on mortgage lending. We have had 3 rule changes. 2008, 2010,
2011 and now a 4th round of mortgage restrictions set to take effect on July 9,
2012. Not much time to prepare for the upcoming changes.
The changes: In order to qualify for a prime CMHC Insured mortgage.
Maximum amortization lowered to 25 years from 30 years
Maximum refinance Loan to Value lowered to 80% of the value
of the real estate from 85%
Gross Debt Service Ratio (GDS) and Total Debt Service Ratio
(TDS) are limited to 39% and 44% respectively. Currently
qualified Borrowers with Beacon scores above 680 do not have a
GDS qualification
Eliminate CMHC Insurance on any property over $1,000,000.
Today you can purchase a home with as little as 5% down, even
on the $1MM property. With the new rules you will need
$200,000 vs. $50,000.
If you have clients that are purchasing a home and need extended amortization
or an expanded qualification they need to have a deal in place by July 9, 2012
If they are refinancing their home to assist with the purchase of another
home or cottage later in the year, have them prepare financing now under the
old rules while there is still some time.
If you have a purchaser of a $1MM + home who may still require CMHC financing Act Now
Remember, 5% down payment financingis still available to qualified purchasers
clamping down on mortgage lending. We have had 3 rule changes. 2008, 2010,
2011 and now a 4th round of mortgage restrictions set to take effect on July 9,
2012. Not much time to prepare for the upcoming changes.
The changes: In order to qualify for a prime CMHC Insured mortgage.
Maximum amortization lowered to 25 years from 30 years
Maximum refinance Loan to Value lowered to 80% of the value
of the real estate from 85%
Gross Debt Service Ratio (GDS) and Total Debt Service Ratio
(TDS) are limited to 39% and 44% respectively. Currently
qualified Borrowers with Beacon scores above 680 do not have a
GDS qualification
Eliminate CMHC Insurance on any property over $1,000,000.
Today you can purchase a home with as little as 5% down, even
on the $1MM property. With the new rules you will need
$200,000 vs. $50,000.
If you have clients that are purchasing a home and need extended amortization
or an expanded qualification they need to have a deal in place by July 9, 2012
If they are refinancing their home to assist with the purchase of another
home or cottage later in the year, have them prepare financing now under the
old rules while there is still some time.
If you have a purchaser of a $1MM + home who may still require CMHC financing Act Now
Remember, 5% down payment financingis still available to qualified purchasers
Monday, April 9, 2012
Collateral versus Standard Charge Mortgages
nother lender has moved to collateral charge mortgages so it's becoming increasingly important to understand the differences between a collateral and standard charge mortgage. Which is better for you? It all depends on your preferences and future needs.
Collateral charge is ideal if you want to be able to access your equity for debt consolidation, renovations, or to invest in property or investments easily and cost effectively. Your mortgage is registered for the same or more than the property value; 100% at ING, 125% with TD Bank, which is why you can access your equity. The downside is at renewal because your negotiating ability with your lender may be affected; it is harder to switch lenders without getting a new mortgage and paying legal fees. In addition, the lender may be able to seize equity to cover other debts with that same lender.
Offered by the majority of lenders, standard charge is ideal if you won't need to refinance your mortgage during your term, and if you want to have the ability to easily and cost effectively move from lender to lender at renewal. If you have a standard charge and need to borrow more, you have the option of a second mortgage or line of credit. Some lenders offer both – standard charge mortgages and HELOCs, which are often a collateral charge.
Whether you're buying your first or next home, getting ready for renewal, taking out some equity for debt consolidation, renovations, or investing, let us help you get the right mortgage type (collateral or standard charge) with the rate and features matched to your needs.
Collateral charge is ideal if you want to be able to access your equity for debt consolidation, renovations, or to invest in property or investments easily and cost effectively. Your mortgage is registered for the same or more than the property value; 100% at ING, 125% with TD Bank, which is why you can access your equity. The downside is at renewal because your negotiating ability with your lender may be affected; it is harder to switch lenders without getting a new mortgage and paying legal fees. In addition, the lender may be able to seize equity to cover other debts with that same lender.
Offered by the majority of lenders, standard charge is ideal if you won't need to refinance your mortgage during your term, and if you want to have the ability to easily and cost effectively move from lender to lender at renewal. If you have a standard charge and need to borrow more, you have the option of a second mortgage or line of credit. Some lenders offer both – standard charge mortgages and HELOCs, which are often a collateral charge.
Whether you're buying your first or next home, getting ready for renewal, taking out some equity for debt consolidation, renovations, or investing, let us help you get the right mortgage type (collateral or standard charge) with the rate and features matched to your needs.
Greater Toronto Area REALTORS Release March 2012 Resale Housing Market Charts
Friday, February 24, 2012
Why banks don’t fret about household debt
For all the talk about Canada's sky high household debt loads, you don’t see much action from Canada’s banks. In fact, for a brief moment there, Bank of Montreal (BMO-T58.18-0.12-0.21%) led a charge that forced a number of them, including Royal Bank of Canada (RY-T54.420.100.18%) and Toronto-Dominion Bank (TD-T78.99-0.17-0.21%), to lower their mortgage rates below 3 per cent.
The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?
Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.
Of course, this doesn’t make endless borrowing right. Everything may look good now, but the situation can very quickly deteriorate. As seen in the U.S. during the crisis, pretty much everything is correlated. Go through a big bout of unemployment, and suddenly credit card and mortgage payments become a big problem at the exact same time.
Enlarge this image
Streetwise
Why banks don’t fret about household debt
tim kiladze
Globe and Mail Update
Posted on Wednesday, February 22, 2012 10:49AM EST
139 comments
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Print/License
Decrease text size Increase text size
For all the talk about Canada's sky high household debt loads, you don’t see much action from Canada’s banks. In fact, for a brief moment there, Bank of Montreal (BMO-T58.18-0.12-0.21%) led a charge that forced a number of them, including Royal Bank of Canada (RY-T54.420.100.18%) and Toronto-Dominion Bank (TD-T78.99-0.17-0.21%), to lower their mortgage rates below 3 per cent.
More related to this story
The debate over Canadian debt data
Canadian banks call truce in easy-money mortgage battle
We’re living on borrowed money and borrowed time
Video
Why doesn't Ackman go for majority control at CP?
An anti-austerity protester draped with a Greek flag sits in front of police guarding parliament in Athens February 11, 2012 during a demonstration on the second day of a 48-hour strike by Greek workers unions.
Video
Does the euro zone need a disorderly Greek default?
Video
Settlement likely for ABCP investors
The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?
Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.
Of course, this doesn’t make endless borrowing right. Everything may look good now, but the situation can very quickly deteriorate. As seen in the U.S. during the crisis, pretty much everything is correlated. Go through a big bout of unemployment, and suddenly credit card and mortgage payments become a big problem at the exact same time.
Yet the banks have trouble acting on their own to prevent such a situation. If, say Scotia (BNS-T53.51-0.20-0.37%), were to hike its mortgage rates to deter borrowing, the other banks have no reason to follow suit. There just isn’t any urgency because their mortgage portfolios are all in good shape. And the banks can’t exactly come together on their own to hash out a plan because that would be collusion. That’s why you hear calls from people like TD's Ed Clark to get the government to consider tightening the mortgage requirements once again.
Still, in residential mortgage land, the percentage of loans whose payments are 90 or more days past due rose to only about 0.45 per cent during the crisis, according to the Canadian Bankers Association, and has since fallen to about 0.4 per cent. (Keep in mind that arrears of 90+ days are the worst kind, because they’re the most likely to be written off by the bank.) Twice in the 90s, this rate hit about 0.65 per cent, showing just how much better things look today.
As for credit cards, Canadians’ principal payment rates have been remarkably steady for the past decade. Over the eight years leading up to 2008, the payment rate averaged 33.4 per cent, according to Moodys, and during the crisis period of 2008-09, it only dropped to 30.6 per cent. For much of the past decade, payment rates in the U.S. and U.K. were in the 16 to 20 per cent range.
Of course, Canada saw some stress, and there was a big spike in credit card delinquencies in 2009 and 2010, but they have since come way down. Charge offs are now just north of 3 per cent, and the average for the decade before the crisis wreaked havoc was about 2.5 per cent.
The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?
Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.
Of course, this doesn’t make endless borrowing right. Everything may look good now, but the situation can very quickly deteriorate. As seen in the U.S. during the crisis, pretty much everything is correlated. Go through a big bout of unemployment, and suddenly credit card and mortgage payments become a big problem at the exact same time.
Enlarge this image
Streetwise
Why banks don’t fret about household debt
tim kiladze
Globe and Mail Update
Posted on Wednesday, February 22, 2012 10:49AM EST
139 comments
Print/License
Decrease text size Increase text size
For all the talk about Canada's sky high household debt loads, you don’t see much action from Canada’s banks. In fact, for a brief moment there, Bank of Montreal (BMO-T58.18-0.12-0.21%) led a charge that forced a number of them, including Royal Bank of Canada (RY-T54.420.100.18%) and Toronto-Dominion Bank (TD-T78.99-0.17-0.21%), to lower their mortgage rates below 3 per cent.
More related to this story
The debate over Canadian debt data
Canadian banks call truce in easy-money mortgage battle
We’re living on borrowed money and borrowed time
Video
Why doesn't Ackman go for majority control at CP?
An anti-austerity protester draped with a Greek flag sits in front of police guarding parliament in Athens February 11, 2012 during a demonstration on the second day of a 48-hour strike by Greek workers unions.
Video
Does the euro zone need a disorderly Greek default?
Video
Settlement likely for ABCP investors
The laissez-faire attitude has prompted outrage. How can they encourage borrowing when Canadian households’ ratio of debt to personal disposable income was last pegged at a high of 152.98 per cent?
Take a look at the banks' portfolios, as outlined in a recent Moody's report, and you’ll understand why. For credit cards, Canadians' payment rates are much, much better than the U.S. and the U.K., and have been for the past decade. As for mortgages, the percentage whose payments are 90 or more days past due is quite low -- and even lower than the peaks at two different periods during the 90s. On top of that, the banks insure these mortgages to offset losses.
Of course, this doesn’t make endless borrowing right. Everything may look good now, but the situation can very quickly deteriorate. As seen in the U.S. during the crisis, pretty much everything is correlated. Go through a big bout of unemployment, and suddenly credit card and mortgage payments become a big problem at the exact same time.
Yet the banks have trouble acting on their own to prevent such a situation. If, say Scotia (BNS-T53.51-0.20-0.37%), were to hike its mortgage rates to deter borrowing, the other banks have no reason to follow suit. There just isn’t any urgency because their mortgage portfolios are all in good shape. And the banks can’t exactly come together on their own to hash out a plan because that would be collusion. That’s why you hear calls from people like TD's Ed Clark to get the government to consider tightening the mortgage requirements once again.
Still, in residential mortgage land, the percentage of loans whose payments are 90 or more days past due rose to only about 0.45 per cent during the crisis, according to the Canadian Bankers Association, and has since fallen to about 0.4 per cent. (Keep in mind that arrears of 90+ days are the worst kind, because they’re the most likely to be written off by the bank.) Twice in the 90s, this rate hit about 0.65 per cent, showing just how much better things look today.
As for credit cards, Canadians’ principal payment rates have been remarkably steady for the past decade. Over the eight years leading up to 2008, the payment rate averaged 33.4 per cent, according to Moodys, and during the crisis period of 2008-09, it only dropped to 30.6 per cent. For much of the past decade, payment rates in the U.S. and U.K. were in the 16 to 20 per cent range.
Of course, Canada saw some stress, and there was a big spike in credit card delinquencies in 2009 and 2010, but they have since come way down. Charge offs are now just north of 3 per cent, and the average for the decade before the crisis wreaked havoc was about 2.5 per cent.
Wednesday, February 8, 2012
Toronto real estate: Average detached house $606,600
The Canadian Real Estate Association has launched a new system for tracking home and condo sales prices aimed at giving buyers and sellers a more precise picture of what’s happening right in their neighbourhoods.
The new system will track Canadian and regional home sales and price escalations based on “benchmark prices.” Those benchmarks are based on quantitative factors (the number of rooms, bathrooms, age of home) and qualitative factors (proximity to schools, parks) and are intended to shine a light on highly localized factors that may be skewing prices up or down but not necessarily reflect market conditions.
CREA has also established a new MLS Home Price Index — similar to the Consumer Price Index which measures price inflation — that tracks prices relative to January, 2005 based on house type, be it single-family homes with one or two storeys, townhouses, row homes or condo apartments.
As of January, the benchmark price of a single-family home in Toronto hit $606,600 — $100,000 more than the $499,800 benchmark price for a similar home in the rest of Canada. That Toronto home cost 50.3 per cent more than it would have in January, 2005.
Over time, far more localized data will become available for MLS districts that should paint a clearer picture of neighbourhood trends.
“One of the key goals is to take a little bit of volatility out of housing statistics,” says Jason Mercer, senior analyst for the Toronto Real Estate Board. “It’s going to provide a good tool for consumers to understand where their home fits into the market.”
CREA will continue to release its traditional Canada-wide and regional breakdowns of average and median home prices, which it claims are often “misinterpreted” and can swing significantly, as national prices did last year when there was a rush of foreign investors snapping up homes in high-end Vancouver neighbourhoods.
Right now, just five major real estate boards across Canada are part of the new system — the GTA, Greater Vancouver, the Fraser Valley, Calgary, and Greater Montreal.
Eight more boards will start using the new measures this year, and another eight boards next year.
The new system will track Canadian and regional home sales and price escalations based on “benchmark prices.” Those benchmarks are based on quantitative factors (the number of rooms, bathrooms, age of home) and qualitative factors (proximity to schools, parks) and are intended to shine a light on highly localized factors that may be skewing prices up or down but not necessarily reflect market conditions.
CREA has also established a new MLS Home Price Index — similar to the Consumer Price Index which measures price inflation — that tracks prices relative to January, 2005 based on house type, be it single-family homes with one or two storeys, townhouses, row homes or condo apartments.
As of January, the benchmark price of a single-family home in Toronto hit $606,600 — $100,000 more than the $499,800 benchmark price for a similar home in the rest of Canada. That Toronto home cost 50.3 per cent more than it would have in January, 2005.
Over time, far more localized data will become available for MLS districts that should paint a clearer picture of neighbourhood trends.
“One of the key goals is to take a little bit of volatility out of housing statistics,” says Jason Mercer, senior analyst for the Toronto Real Estate Board. “It’s going to provide a good tool for consumers to understand where their home fits into the market.”
CREA will continue to release its traditional Canada-wide and regional breakdowns of average and median home prices, which it claims are often “misinterpreted” and can swing significantly, as national prices did last year when there was a rush of foreign investors snapping up homes in high-end Vancouver neighbourhoods.
Right now, just five major real estate boards across Canada are part of the new system — the GTA, Greater Vancouver, the Fraser Valley, Calgary, and Greater Montreal.
Eight more boards will start using the new measures this year, and another eight boards next year.
Wednesday, February 1, 2012
Canadian housing is ‘pricey,’ but far from a bubble: BMO
OTTAWA—The Bank of Montreal says Canada’s somewhat pricey housing market is likely to cool, not crash.
The bank’s economists say the only real trouble spot is Vancouver, where there are plenty of vacant high-priced condos going begging.
The report suggests that alarms about Canada’s housing market by international observers, from the International Monetary Fund to The Economist magazine, are exaggerated or simplistic.
Even Toronto’s hot condo market — one of the subjects of many of the warnings — is more likely to cool rather than collapse, the economists say.
A comparison of house prices to household incomes shows an increase from a decade ago, but not an excessive one, the report points out.
Nor are most Canadians close to an American-style debt wall that preceded the subprime crash in 2007.
Nevertheless, the BMO economists say house values are somewhat pricey and expect sales, starts and prices to flatten out this year.
The bank’s economists say the only real trouble spot is Vancouver, where there are plenty of vacant high-priced condos going begging.
The report suggests that alarms about Canada’s housing market by international observers, from the International Monetary Fund to The Economist magazine, are exaggerated or simplistic.
Even Toronto’s hot condo market — one of the subjects of many of the warnings — is more likely to cool rather than collapse, the economists say.
A comparison of house prices to household incomes shows an increase from a decade ago, but not an excessive one, the report points out.
Nor are most Canadians close to an American-style debt wall that preceded the subprime crash in 2007.
Nevertheless, the BMO economists say house values are somewhat pricey and expect sales, starts and prices to flatten out this year.
2012: A Housing Market Flatline
According to a new report from BMO Economics, there won’t be much fanfare in the housing market this year, but there won’t be much cause for concern either. They predict that, through 2012, both prices and sales will be flat.
“While seasonally adjusted sales did manage to rise 1.8 per cent from the prior month in December, sales were up a moderate 4.6 per cent from year-ago levels," according to Douglas Porter, Deputy Chief Economist, BMO Capital Markets. "Most signs continue to indicate that the market is broadly balanced on a national basis. The supply of existing homes for sale is 5.8 months, and the ratio of new listings to sales is also well within long-term norms."
Porter expects 2012 to be a year of moderation. "We look for both sales and prices to be roughly flat this year. That could be just what the policy doctor ordered, allowing incomes to catch up to higher prices."
"While the housing market is showing moderation, it's always important for Canadians to examine ways to reduce overall housing costs," said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal.
Right now, as markets begin show signs of moderation, and as interest rates remain fairly low, now is a good time for Canadians to stress test their mortgages, and work towards shrinking their likely sizeable debt load, before the market and the economy change gears downwards.
With slowing economic conditions, many forecasters expect that 2012 will reflect a slowdown in the housing market.
One notable exception to that is Royal LePage, who expects the housing market in 2012 to continue its’ ascent. They forecast moderate growth through this year, with a market slowdown not appearing until 2013.
“While seasonally adjusted sales did manage to rise 1.8 per cent from the prior month in December, sales were up a moderate 4.6 per cent from year-ago levels," according to Douglas Porter, Deputy Chief Economist, BMO Capital Markets. "Most signs continue to indicate that the market is broadly balanced on a national basis. The supply of existing homes for sale is 5.8 months, and the ratio of new listings to sales is also well within long-term norms."
Porter expects 2012 to be a year of moderation. "We look for both sales and prices to be roughly flat this year. That could be just what the policy doctor ordered, allowing incomes to catch up to higher prices."
"While the housing market is showing moderation, it's always important for Canadians to examine ways to reduce overall housing costs," said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal.
Right now, as markets begin show signs of moderation, and as interest rates remain fairly low, now is a good time for Canadians to stress test their mortgages, and work towards shrinking their likely sizeable debt load, before the market and the economy change gears downwards.
With slowing economic conditions, many forecasters expect that 2012 will reflect a slowdown in the housing market.
One notable exception to that is Royal LePage, who expects the housing market in 2012 to continue its’ ascent. They forecast moderate growth through this year, with a market slowdown not appearing until 2013.
Saturday, January 28, 2012
Why it’s a good time to buy a home
I believe there has never been a better time to buy a home. I’ve been in the industry for 28 years as a lawyer and I haven’t seen so many positive signs for housing, whether you are thinking or buying or locking in a mortgage.
Here’s why:
Mortgage rates at historic lows: They can’t get any lower. Four to five-year fixed mortgages at 3 per cent are unheard of. It is lower than the variable rate that most Canadians have been paying for years. Rates have nowhere to go but up, either later this year or next. If you are paying a variable interest rate, lock in now.
Canada’s appeal: This country has everything going for it — a stable banking and political environment, steady real estate market, the natural resources people want and few social tensions. That makes us a safe haven in a volatile world.
Our immigrant draw: Because of the above, we’re a draw for immigrants, often wealthy ones. When they get here, they need a home. So in my view while the real estate market may level off in some areas of Ontario, it should stay strong in most of the GTA and likely Canada’s other large urban centres as well.
Mortgage defaults: According to CMHC, over 99 per cent of Canadians pay their mortgages on time. It quite a different picture in the U.S. where 7 million homes are in foreclosure and perhaps another 7 million homeowners are under water. This represents almost 15 per cent of all homes. So while the American housing market will likely be weak for the next few years, this should not occur in Canada. Our banks are not dumping homes onto the market, so there is no downward pressure on prices.
Recourse Mortgages: In many U.S. states, if you can’t pay your mortgage, the only thing the bank can do is foreclose; they cannot sue you for any shortfall. So when homes go under water, owners give the keys back to the bank. In Canada, loans are almost all Recourse, meaning if you don’t pay and there is a shortfall, the lender can sue you for the difference. This is another reason why, in my opinion, even if times do get tough, Canadian homeowners will find a way to make the payments until things improve.
Income-to-price ratio: Another misleading statistic is that in major markets, like Toronto, the average price of a home is now 4.6 times the income of the average Canadian. This same statistic was found just before the U.S. and UK markets went into the tank. However, if you look at median incomes of Canadians against the median cost of homes, this average comes down to around 3.5, which is not dangerous. Using averages are wrong. A person receiving social assistance will not buy a home, and should not be included in any relevant statistic.
High consumer debt: The warnings about rising debt ratios must be examined carefully. The Governor of the Bank of Canada is worried that the average personal debt ratio is now 156 per cent in Canada. This means a household making $100,000 per year, owes $156,000, two-thirds of which is mortgage debt. Why is this so bad? At an interest rate of 3 or even 5 per cent, the amount needed to service the debt is manageable. Most people do not pay off their mortgages in one year. Still, this is another good reason to consolidate your debt now, at these low interest rates, and lock in.
No guarantees: Nobody can predict the future and there’s always the possibility of a major economic shock. Yet, in a U.S. presidential election year, politicians will do whatever is necessary to prevent it. If the economy goes into the tank, so do re-election chances. The U.S. is already showing signs of economic recovery.
No matter what, do not take on a monthly payment higher than what you can afford. Meet with your lender or mortgage broker in advance to figure out what you can afford before you start looking for a home. It may be the best time to buy, but you need to buy smart.
Here’s why:
Mortgage rates at historic lows: They can’t get any lower. Four to five-year fixed mortgages at 3 per cent are unheard of. It is lower than the variable rate that most Canadians have been paying for years. Rates have nowhere to go but up, either later this year or next. If you are paying a variable interest rate, lock in now.
Canada’s appeal: This country has everything going for it — a stable banking and political environment, steady real estate market, the natural resources people want and few social tensions. That makes us a safe haven in a volatile world.
Our immigrant draw: Because of the above, we’re a draw for immigrants, often wealthy ones. When they get here, they need a home. So in my view while the real estate market may level off in some areas of Ontario, it should stay strong in most of the GTA and likely Canada’s other large urban centres as well.
Mortgage defaults: According to CMHC, over 99 per cent of Canadians pay their mortgages on time. It quite a different picture in the U.S. where 7 million homes are in foreclosure and perhaps another 7 million homeowners are under water. This represents almost 15 per cent of all homes. So while the American housing market will likely be weak for the next few years, this should not occur in Canada. Our banks are not dumping homes onto the market, so there is no downward pressure on prices.
Recourse Mortgages: In many U.S. states, if you can’t pay your mortgage, the only thing the bank can do is foreclose; they cannot sue you for any shortfall. So when homes go under water, owners give the keys back to the bank. In Canada, loans are almost all Recourse, meaning if you don’t pay and there is a shortfall, the lender can sue you for the difference. This is another reason why, in my opinion, even if times do get tough, Canadian homeowners will find a way to make the payments until things improve.
Income-to-price ratio: Another misleading statistic is that in major markets, like Toronto, the average price of a home is now 4.6 times the income of the average Canadian. This same statistic was found just before the U.S. and UK markets went into the tank. However, if you look at median incomes of Canadians against the median cost of homes, this average comes down to around 3.5, which is not dangerous. Using averages are wrong. A person receiving social assistance will not buy a home, and should not be included in any relevant statistic.
High consumer debt: The warnings about rising debt ratios must be examined carefully. The Governor of the Bank of Canada is worried that the average personal debt ratio is now 156 per cent in Canada. This means a household making $100,000 per year, owes $156,000, two-thirds of which is mortgage debt. Why is this so bad? At an interest rate of 3 or even 5 per cent, the amount needed to service the debt is manageable. Most people do not pay off their mortgages in one year. Still, this is another good reason to consolidate your debt now, at these low interest rates, and lock in.
No guarantees: Nobody can predict the future and there’s always the possibility of a major economic shock. Yet, in a U.S. presidential election year, politicians will do whatever is necessary to prevent it. If the economy goes into the tank, so do re-election chances. The U.S. is already showing signs of economic recovery.
No matter what, do not take on a monthly payment higher than what you can afford. Meet with your lender or mortgage broker in advance to figure out what you can afford before you start looking for a home. It may be the best time to buy, but you need to buy smart.
Rundown city-owned houses up for sale
Leslie Wallace found an anxious crowd waiting yesterday as he arrived at a dilapidated Crawford St. house for one of the shortest open houses in real estate history — half an hour.
More than two dozen potential buyers lined the walkway and spilled onto the street in front of the well-worn Toronto Community Housing property, a detached, three-storey brick home listed for almost $1 million.
“I’ve never seen anything like this,” says Wallace, who’s been selling real estate in central Toronto for 28 years. “The amount of interest in these properties is overwhelming.”
The city is hoping to sell off close to 700 stand-alone houses scattered from Scarborough to Etobicoke to free up cash for much-needed repairs to its decades-old stock of multi-unit assisted housing. And the race is on.
With interest rates at historic lows and a drastically short supply of homes for sale across Toronto, buyers are clearly banking on deals —and a rare chance to live on some of the most desirable streets in the city.
So far city council has approved a sell-off of 27 homes, 10 of which still need approval from the province. Five have sold so far, in the east-end Beach neighbourhood and the city pocketed $3.28 million.
The city has set a Jan. 30 deadline for offers on the three homes Wallace now has listed on Crawford, an eclectic, family friendly street near Christie that stretches south of Queen St. to north of Bloor St.
Two others will hit MLS in the next few weeks.
The properties are being listed in a slow and staggered fashion to not flood the market. And while the properties all need tens of thousands in work, realtors are predicting intense bidding wars.
When it comes to Crawford, it’s clearly not about the house so much as location, location, location.
All three properties back onto major parks — either Christie Pits or Trinity Bellwoods.
In fact, one home — a battered, boarded-up brick semi that’s listed for $495,000 — is tucked so tightly up against sprawling Christie Pits Park that kids could almost jump into the pool from the second-storey bedroom window.
Just a handful of houses to the north is another brick semi that, apart from the serious mould problem in its one bathroom, is remarkably well kept. More stunning is the land it sits on — a 43.6 by 110 foot lot with a private drive big enough to fit a small house.
All three homes are just steps from shopping and the Queen or Bloor Sts. transit lines.
The biggest, the three-storey detached that has drawn so much interest, is crying out for a gutting and is listed at a relatively steep $995,000. It sits on an overgrown 33 by 118 foot lot and can only be shown for half an hour a few times each week so as not to disrupt the three generations of one family who still call it home.
But at Thursday’s supposedly brief showing there was such a rush of interest, Wallace was still struggling to lock the door after an hour. He was just stepping across the hardwood flooring to the foyer when a High Park couple — their teenage daughter in tow — walked in the house and headed up the stairs.
“Even though they all need renovations, people can see that this is a really hot area,” says Wallace, urging the family to be quick. “You’re steps from Ossington, Little Italy, Queen St. West and close to the downtown.
“I’ve had clients says they would just paint and live here — that they don’t need granite countertops because it’s a big house and they like parks.”
The High Park family says otherwise.
“You’d need about 20 (reno) containers and you could easily sink $300,000 to $400,000 into this house,” says the experienced renovator as he, his wife and teenaged daughter give the house a final once-over from the sidewalk.
“Who knows what’s going to happen to the Toronto market,” he says, sizing up the cluttered porch and worn windows. “I prefer High Park, but my kids really want to live here because it’s close to everything.”
Their daughter’s glee is palpable, as is the pain on her parents’ face.
The three head home to crunch some numbers — and talk about booking a return visit for Sunday.
More than two dozen potential buyers lined the walkway and spilled onto the street in front of the well-worn Toronto Community Housing property, a detached, three-storey brick home listed for almost $1 million.
“I’ve never seen anything like this,” says Wallace, who’s been selling real estate in central Toronto for 28 years. “The amount of interest in these properties is overwhelming.”
The city is hoping to sell off close to 700 stand-alone houses scattered from Scarborough to Etobicoke to free up cash for much-needed repairs to its decades-old stock of multi-unit assisted housing. And the race is on.
With interest rates at historic lows and a drastically short supply of homes for sale across Toronto, buyers are clearly banking on deals —and a rare chance to live on some of the most desirable streets in the city.
So far city council has approved a sell-off of 27 homes, 10 of which still need approval from the province. Five have sold so far, in the east-end Beach neighbourhood and the city pocketed $3.28 million.
The city has set a Jan. 30 deadline for offers on the three homes Wallace now has listed on Crawford, an eclectic, family friendly street near Christie that stretches south of Queen St. to north of Bloor St.
Two others will hit MLS in the next few weeks.
The properties are being listed in a slow and staggered fashion to not flood the market. And while the properties all need tens of thousands in work, realtors are predicting intense bidding wars.
When it comes to Crawford, it’s clearly not about the house so much as location, location, location.
All three properties back onto major parks — either Christie Pits or Trinity Bellwoods.
In fact, one home — a battered, boarded-up brick semi that’s listed for $495,000 — is tucked so tightly up against sprawling Christie Pits Park that kids could almost jump into the pool from the second-storey bedroom window.
Just a handful of houses to the north is another brick semi that, apart from the serious mould problem in its one bathroom, is remarkably well kept. More stunning is the land it sits on — a 43.6 by 110 foot lot with a private drive big enough to fit a small house.
All three homes are just steps from shopping and the Queen or Bloor Sts. transit lines.
The biggest, the three-storey detached that has drawn so much interest, is crying out for a gutting and is listed at a relatively steep $995,000. It sits on an overgrown 33 by 118 foot lot and can only be shown for half an hour a few times each week so as not to disrupt the three generations of one family who still call it home.
But at Thursday’s supposedly brief showing there was such a rush of interest, Wallace was still struggling to lock the door after an hour. He was just stepping across the hardwood flooring to the foyer when a High Park couple — their teenage daughter in tow — walked in the house and headed up the stairs.
“Even though they all need renovations, people can see that this is a really hot area,” says Wallace, urging the family to be quick. “You’re steps from Ossington, Little Italy, Queen St. West and close to the downtown.
“I’ve had clients says they would just paint and live here — that they don’t need granite countertops because it’s a big house and they like parks.”
The High Park family says otherwise.
“You’d need about 20 (reno) containers and you could easily sink $300,000 to $400,000 into this house,” says the experienced renovator as he, his wife and teenaged daughter give the house a final once-over from the sidewalk.
“Who knows what’s going to happen to the Toronto market,” he says, sizing up the cluttered porch and worn windows. “I prefer High Park, but my kids really want to live here because it’s close to everything.”
Their daughter’s glee is palpable, as is the pain on her parents’ face.
The three head home to crunch some numbers — and talk about booking a return visit for Sunday.
Tuesday, January 24, 2012
Toronto real estate safe as houses
TORONTO - Eileen Campbell looks around her lovely 900-sq.-ft. downtown Toronto condo and sighs.
For the past seven years, the chef has made her two-bedroom corner unit at 550 Front St. W. really feel like home by gutting the kitchen, installing a quartz counter top and opening up the space.
Campbell, 65, moved west after living in a home in the Beach area, loving that she no longer has to maintain a backyard or shovel snow off a driveway.
And being a foodie, she’s close to hip restaurants along the King West strip. She’s also able to enjoy summers out in her terrace with her little chihuahua — that is, when there isn’t a dust storm from nearby construction of other condos going up along the waterfront.
But retirement is nearing for Campbell and she’s made the decision move again — to a house in the Niagara Region.
Economists forecast Toronto’s booming condo market will experience a crisis in a few years with too much supply and sagging demand, starting in 2013.
So for Campbell, this is the ideal time to sell and is listing her property at $449,800.
“In my mind, if there is that much inventory for people to choose from, would they choose (to buy) a brand-new place or a place that’s been here for a while?” she said. “I don’t want to wait to find out. I’d rather get my equity out now and move onto something else.”
Several of Canada’s biggest banks recently warned about a possible correction in the housing market. Still, prices of homes keep rising, according to the Toronto Real Estate Board (TREB) with mortgage rates remaining low, hovering around 3%.
In fact, the Economist recently declared Canada as one of nine countries where “home prices are overvalued by about 25% or more” and among four countries where prices are in line with those in the United States “at the peak of its bubble.”
While many fear Toronto’s real estate bubble is on the verge of bursting, analyst are cautioning buyers and sellers to relax.
“I do not believe that Toronto, as a whole, is in a bubble,” explains Don Campbell, president of the Real Estate Investment Network. “I think it’s more like a balloon where the air is going to start leaking out.”
Housing will continue to stay strong throughout downtown communities and surrounding areas, such as Leslieville and the Junction, where many newcomers may choose to buy homes because downtown is too expensive, Campbell said. Where there is trouble is the new condo market.
“I believe we’re going to feel an over supply in 2013 because we’ve got a record number of condos coming onto the market in 2012,” he says. “In addition, there have been a lot of development applications put forward to the City of Toronto at the end of December. We’re already starting to see a slowdown in foreign money going into the condo market.”
When those who bought new condos are handed their keys with the intention of immediately flipping the property, they’ll be others doing the same.
“Therefore, you’re going to have an oversupply of the situation come on,” Campbell adds. “That oversupply won’t last for a long time — not like the U.S. — but it’s going to keep a real cap on value.”
Craig Alexander, chief economist for TD Canada Trust, says many first-time home buyers jumped into the real estate market in 2009 because of record-low mortgage rates. The market remained strong in 2010, but it began moderating in 2011.
“I think in the coming year we’ll see the housing market pretty flat,” he predicts.
“I don’t see the likelihood of a major correction coming this year. I do think there’s over-valuation in the market, but I don’t see a major housing bubble in the GTA. I think when we see interest rates rise, we’ll see housing prices decline but it won’t be a dramatic decline.”
The big risk to the so-called bubble occurs when there’s a sharp spike in unemployment or as interest rates shoot up. Alexander figures interest rates should increase by a modest rate — 1% in 2013 and 1% in 2014.
“Torontonians need to be careful not to over-extend themselves because eventually, interest rates will rise,” he said. “I feel like the little boy that cried wolf because every year I tell people that rates could rise and then they don’t. But I always have to remind people that the wolf does show up at the end of the story.”
Richard Silver, the president of the Toronto Real Estate Board (TREB), said the seller’s market has transitioned to a balanced market with more listings now than a year ago.
“Anything that came on the market had multiple offers and buyers had to get a lot more aggressive,” he said.
“They had to get their ducks in a row — like their financing and building inspections and had to make decisions quickly. Now, buyers have more time. They can look around.”
With the new condo sales, it really depends on what is happening in foreign investors, Silver said.
“A lot of (condo deals) happen offshore … that’s a really big part of the market,” he said. “We’re very lucky in Toronto. Right now, there’s a lot of shovels going in the ground. I look at New York and there’s hardly anything being built. Yet, in Toronto, it’s gangbusters.”
TREB had second-best year on record for sales in 2011 with 89,347 — up 4% from the previous year.
According to the real estate board, $465,000 is the average price of a single-family home in 2011. So, what does that get you in the GTA? Surprisingly, not as much as you’d think.
In Toronto, that amount will get you a 800-900-sq.-ft. condo, though it will be renovated and in move-in condition.
“There was only one house that turned up (on a search) – it was on Dufferin, there were no pictures, so it would’ve been an absolute fixer-upper for $465,000,” said Kimball Sarin, a broker with Bosley Real Estate, who has been in the real estate business for a decade. “Whereas this price range for condos, you could get a decent space in move-in conditions. You can sometimes get two bedrooms.”
If you’re looking for a house in Toronto, you’ll likely have to scour Leslieville or the Junction area — places that are roughly 20 minutes outside the downtown core.
“I find people who are looking for only condos don’t even want to discuss moving outwards, they just want to be downtown,” Sarin said. “They’re mostly younger people, 20s-30s typically, first-time buyers. We’re also getting a lot of empty-nesters. People that are going to be selling a larger house.”
Catherine McIsaac, a Sutton Group sales representative, said parts of the 905 are slowly catching up with the rising prices in Toronto. The only detached property available in Oakville was a 1,500-2,000-sq.-ft. three-bedroom family home in the West Oak Trails with an unfinished basement.
In Mississauga, the Marilyn Monroe building — a unique curvy condo tower at 50 Absolute Ave. near Square One — fits in the $465,000 budget. That price fetches a two-bedroom plus den, 997-sq.-ft. unit which costs about $428,400.
With an influx of 100,000 people to the GTA each year, many renters are moving into condos purchased by offshore investors because there aren’t many developers building rental properties anymore.
“There are several new condo developments in the area,” said Tanya Crepulja of Sutton Group Realty. “Condos accounted for about 1/4 of the sales in the GTA, which shows there’s high demand for this type of product.”
The only affordable area for single family homes was in Durham Region. Royal LePage Frank Real Estate sales representative Alexis Appleby said you could get a decent home for around $380,000. And the further you head east towards Oshawa, the cheaper it gets.
York Region, on the other hand, is experiencing a serious lack of inventory.
In Richmond Hill alone, last week there were only 13 freehold houses available for under $500,000 — representing 6.5% of the total number of houses on the market in that area.
“I think that paints a picture of how almost desperate the inventory situation is,” said Jim Common, sales representative for RE/MAX. “The average days on market at this price point is 15 days. There are 200 homes for sale in Richmond Hill — 66 of those are over $1 million. I think interest rates will eventually increase and that will bust the bubble.”
And prices are expected to keep climbing in 2012. According to TREB economist Jason Mercer, he predicts the average price of a home will rise to $480,000 this year.
That makes it tougher for first-time home buyers to save and bank away a down payment for a decent home.
Trellawny Graham, a 32-year-old who works in advertising, bought a house in November. She ended up purchasing a two-bedroom, 1000-square-feet home in Oshawa because that was the only area she could afford.
“I can get so much more for my money,” she said. “I find places closer to (the city) are just double or triple the price and not even as nice as mine. It sits on deep plot of land. I was able to get my house for $185,900. It was just scary to think if I’d ever find a house that I can actually afford to buy.”
Toronto real estate lawyer James Fraser said as worrisome Canada’s housing market is, it is incomparable to the U.S. because Canadian buyers and banks are both prudent.
“Our foreclosure rate has not budged at all during the recession – it’s less than 1%,” he said. “If someone’s thrown out of a job, then that’s going to be an extremely stressful situation and people could lose their houses. But I don’t see the same factors that have devastated the US housing market — I’m not seeing people get into the housing market when they can’t afford it.”
For the past seven years, the chef has made her two-bedroom corner unit at 550 Front St. W. really feel like home by gutting the kitchen, installing a quartz counter top and opening up the space.
Campbell, 65, moved west after living in a home in the Beach area, loving that she no longer has to maintain a backyard or shovel snow off a driveway.
And being a foodie, she’s close to hip restaurants along the King West strip. She’s also able to enjoy summers out in her terrace with her little chihuahua — that is, when there isn’t a dust storm from nearby construction of other condos going up along the waterfront.
But retirement is nearing for Campbell and she’s made the decision move again — to a house in the Niagara Region.
Economists forecast Toronto’s booming condo market will experience a crisis in a few years with too much supply and sagging demand, starting in 2013.
So for Campbell, this is the ideal time to sell and is listing her property at $449,800.
“In my mind, if there is that much inventory for people to choose from, would they choose (to buy) a brand-new place or a place that’s been here for a while?” she said. “I don’t want to wait to find out. I’d rather get my equity out now and move onto something else.”
Several of Canada’s biggest banks recently warned about a possible correction in the housing market. Still, prices of homes keep rising, according to the Toronto Real Estate Board (TREB) with mortgage rates remaining low, hovering around 3%.
In fact, the Economist recently declared Canada as one of nine countries where “home prices are overvalued by about 25% or more” and among four countries where prices are in line with those in the United States “at the peak of its bubble.”
While many fear Toronto’s real estate bubble is on the verge of bursting, analyst are cautioning buyers and sellers to relax.
“I do not believe that Toronto, as a whole, is in a bubble,” explains Don Campbell, president of the Real Estate Investment Network. “I think it’s more like a balloon where the air is going to start leaking out.”
Housing will continue to stay strong throughout downtown communities and surrounding areas, such as Leslieville and the Junction, where many newcomers may choose to buy homes because downtown is too expensive, Campbell said. Where there is trouble is the new condo market.
“I believe we’re going to feel an over supply in 2013 because we’ve got a record number of condos coming onto the market in 2012,” he says. “In addition, there have been a lot of development applications put forward to the City of Toronto at the end of December. We’re already starting to see a slowdown in foreign money going into the condo market.”
When those who bought new condos are handed their keys with the intention of immediately flipping the property, they’ll be others doing the same.
“Therefore, you’re going to have an oversupply of the situation come on,” Campbell adds. “That oversupply won’t last for a long time — not like the U.S. — but it’s going to keep a real cap on value.”
Craig Alexander, chief economist for TD Canada Trust, says many first-time home buyers jumped into the real estate market in 2009 because of record-low mortgage rates. The market remained strong in 2010, but it began moderating in 2011.
“I think in the coming year we’ll see the housing market pretty flat,” he predicts.
“I don’t see the likelihood of a major correction coming this year. I do think there’s over-valuation in the market, but I don’t see a major housing bubble in the GTA. I think when we see interest rates rise, we’ll see housing prices decline but it won’t be a dramatic decline.”
The big risk to the so-called bubble occurs when there’s a sharp spike in unemployment or as interest rates shoot up. Alexander figures interest rates should increase by a modest rate — 1% in 2013 and 1% in 2014.
“Torontonians need to be careful not to over-extend themselves because eventually, interest rates will rise,” he said. “I feel like the little boy that cried wolf because every year I tell people that rates could rise and then they don’t. But I always have to remind people that the wolf does show up at the end of the story.”
Richard Silver, the president of the Toronto Real Estate Board (TREB), said the seller’s market has transitioned to a balanced market with more listings now than a year ago.
“Anything that came on the market had multiple offers and buyers had to get a lot more aggressive,” he said.
“They had to get their ducks in a row — like their financing and building inspections and had to make decisions quickly. Now, buyers have more time. They can look around.”
With the new condo sales, it really depends on what is happening in foreign investors, Silver said.
“A lot of (condo deals) happen offshore … that’s a really big part of the market,” he said. “We’re very lucky in Toronto. Right now, there’s a lot of shovels going in the ground. I look at New York and there’s hardly anything being built. Yet, in Toronto, it’s gangbusters.”
TREB had second-best year on record for sales in 2011 with 89,347 — up 4% from the previous year.
According to the real estate board, $465,000 is the average price of a single-family home in 2011. So, what does that get you in the GTA? Surprisingly, not as much as you’d think.
In Toronto, that amount will get you a 800-900-sq.-ft. condo, though it will be renovated and in move-in condition.
“There was only one house that turned up (on a search) – it was on Dufferin, there were no pictures, so it would’ve been an absolute fixer-upper for $465,000,” said Kimball Sarin, a broker with Bosley Real Estate, who has been in the real estate business for a decade. “Whereas this price range for condos, you could get a decent space in move-in conditions. You can sometimes get two bedrooms.”
If you’re looking for a house in Toronto, you’ll likely have to scour Leslieville or the Junction area — places that are roughly 20 minutes outside the downtown core.
“I find people who are looking for only condos don’t even want to discuss moving outwards, they just want to be downtown,” Sarin said. “They’re mostly younger people, 20s-30s typically, first-time buyers. We’re also getting a lot of empty-nesters. People that are going to be selling a larger house.”
Catherine McIsaac, a Sutton Group sales representative, said parts of the 905 are slowly catching up with the rising prices in Toronto. The only detached property available in Oakville was a 1,500-2,000-sq.-ft. three-bedroom family home in the West Oak Trails with an unfinished basement.
In Mississauga, the Marilyn Monroe building — a unique curvy condo tower at 50 Absolute Ave. near Square One — fits in the $465,000 budget. That price fetches a two-bedroom plus den, 997-sq.-ft. unit which costs about $428,400.
With an influx of 100,000 people to the GTA each year, many renters are moving into condos purchased by offshore investors because there aren’t many developers building rental properties anymore.
“There are several new condo developments in the area,” said Tanya Crepulja of Sutton Group Realty. “Condos accounted for about 1/4 of the sales in the GTA, which shows there’s high demand for this type of product.”
The only affordable area for single family homes was in Durham Region. Royal LePage Frank Real Estate sales representative Alexis Appleby said you could get a decent home for around $380,000. And the further you head east towards Oshawa, the cheaper it gets.
York Region, on the other hand, is experiencing a serious lack of inventory.
In Richmond Hill alone, last week there were only 13 freehold houses available for under $500,000 — representing 6.5% of the total number of houses on the market in that area.
“I think that paints a picture of how almost desperate the inventory situation is,” said Jim Common, sales representative for RE/MAX. “The average days on market at this price point is 15 days. There are 200 homes for sale in Richmond Hill — 66 of those are over $1 million. I think interest rates will eventually increase and that will bust the bubble.”
And prices are expected to keep climbing in 2012. According to TREB economist Jason Mercer, he predicts the average price of a home will rise to $480,000 this year.
That makes it tougher for first-time home buyers to save and bank away a down payment for a decent home.
Trellawny Graham, a 32-year-old who works in advertising, bought a house in November. She ended up purchasing a two-bedroom, 1000-square-feet home in Oshawa because that was the only area she could afford.
“I can get so much more for my money,” she said. “I find places closer to (the city) are just double or triple the price and not even as nice as mine. It sits on deep plot of land. I was able to get my house for $185,900. It was just scary to think if I’d ever find a house that I can actually afford to buy.”
Toronto real estate lawyer James Fraser said as worrisome Canada’s housing market is, it is incomparable to the U.S. because Canadian buyers and banks are both prudent.
“Our foreclosure rate has not budged at all during the recession – it’s less than 1%,” he said. “If someone’s thrown out of a job, then that’s going to be an extremely stressful situation and people could lose their houses. But I don’t see the same factors that have devastated the US housing market — I’m not seeing people get into the housing market when they can’t afford it.”
Wednesday, January 11, 2012
Most Canadians Wrongly Believe Canada is in Recession
There are times that a little bit of information can be a dangerous thing.
This is apparently being reflected by many Canadians in terms of their views and attitudes on the Canadian economy. According to a recent survey sponsored by the Economic Club of Canada, many Canadians believe that we are in recession, when in fact we are not.
The poll found that only 25% of respondents feel optimistic about the economy, which represents a drop of more than 10% from last year. A staggering 70% of respondents believe that the country is experiencing a mild recession, while economists insist that, while the economy faces some challenges currently, we most certainly not in a recession.
It’s no big surprise, really. Everywhere Canadians turn these days there is negative economic data, cautious warnings about slowing economic growth, dwindling consumer spending in the face of elevated household debt levels and employment uncertainty.
Coupled with the constant media attention on the fact that the Euro zone is likely facing a recession, it is not entirely unexpected that Canadians, who may not have access to all the data, or the training to interpret it, may think that the country is in fact, in a recession.
It’s not just misperception either; the findings of this online poll suggest that there is a disconnect between the crunching of numbers, presentation of data, and the way that Canadians actually feel about their economic prospects in general.
While most Canadians do not have economic training, many do feel that they are involved with it- in that they are on the receiving end of the financial impact.
While things are perhaps not optimum, they could be much worse economists argue. Economic growth is slow, but is expected to sluggishly tick along; while unemployment is increasing, it is still lower than it has been in the past. Some pockets of the country are even experiencing a job boom.
The housing market, for instance, continues to outshine and outpace the economy, taking advantage of the sound fundamentals that propel the market for growth. While many expect the market to moderate in 2012, it is still expected to grow at a reasonable pace.
As Leslie Penney, Vice President, APlus Mortgage Group/Mortgage Alliance told Propertywire.ca, people in his local market are, for the most part, generally optimistic: “Personally, I feel that clients here in Newfoundland are pretty upbeat about the economy. Right now the housing market is fairly healthy and employment prospects haven’t been better. So the euphoria of a well to-do economy is in the air here right now. “
“Now, that’s not to say that people still aren’t worried. All you have to do is turn the television on and most of what you see would make you believe the world is experiencing another Great Depression. And many people believe that here in Canada we have it coming to us yet, but in dealing with clients this is where we become crucial.”
As Penney points out too, there is a clear role for Mortgage Professionals to help cut through all the news reports and statistics: “Of course, as professionals, we need to remain upbeat about the economy ourselves. Not to create the notion for our clients that everything is rosy, but to explain and confirm things like how our economy is built on strong financial practices, and that the trouble that we see in other places such as the US and Europe, were brought on by acts of greed and complacency, particularly when it comes to the banking sectors. By doing so I believe we can clarify many of the stories that these people are seeing on television and reading in the newspapers about the world is going to collapse.”
This is apparently being reflected by many Canadians in terms of their views and attitudes on the Canadian economy. According to a recent survey sponsored by the Economic Club of Canada, many Canadians believe that we are in recession, when in fact we are not.
The poll found that only 25% of respondents feel optimistic about the economy, which represents a drop of more than 10% from last year. A staggering 70% of respondents believe that the country is experiencing a mild recession, while economists insist that, while the economy faces some challenges currently, we most certainly not in a recession.
It’s no big surprise, really. Everywhere Canadians turn these days there is negative economic data, cautious warnings about slowing economic growth, dwindling consumer spending in the face of elevated household debt levels and employment uncertainty.
Coupled with the constant media attention on the fact that the Euro zone is likely facing a recession, it is not entirely unexpected that Canadians, who may not have access to all the data, or the training to interpret it, may think that the country is in fact, in a recession.
It’s not just misperception either; the findings of this online poll suggest that there is a disconnect between the crunching of numbers, presentation of data, and the way that Canadians actually feel about their economic prospects in general.
While most Canadians do not have economic training, many do feel that they are involved with it- in that they are on the receiving end of the financial impact.
While things are perhaps not optimum, they could be much worse economists argue. Economic growth is slow, but is expected to sluggishly tick along; while unemployment is increasing, it is still lower than it has been in the past. Some pockets of the country are even experiencing a job boom.
The housing market, for instance, continues to outshine and outpace the economy, taking advantage of the sound fundamentals that propel the market for growth. While many expect the market to moderate in 2012, it is still expected to grow at a reasonable pace.
As Leslie Penney, Vice President, APlus Mortgage Group/Mortgage Alliance told Propertywire.ca, people in his local market are, for the most part, generally optimistic: “Personally, I feel that clients here in Newfoundland are pretty upbeat about the economy. Right now the housing market is fairly healthy and employment prospects haven’t been better. So the euphoria of a well to-do economy is in the air here right now. “
“Now, that’s not to say that people still aren’t worried. All you have to do is turn the television on and most of what you see would make you believe the world is experiencing another Great Depression. And many people believe that here in Canada we have it coming to us yet, but in dealing with clients this is where we become crucial.”
As Penney points out too, there is a clear role for Mortgage Professionals to help cut through all the news reports and statistics: “Of course, as professionals, we need to remain upbeat about the economy ourselves. Not to create the notion for our clients that everything is rosy, but to explain and confirm things like how our economy is built on strong financial practices, and that the trouble that we see in other places such as the US and Europe, were brought on by acts of greed and complacency, particularly when it comes to the banking sectors. By doing so I believe we can clarify many of the stories that these people are seeing on television and reading in the newspapers about the world is going to collapse.”
Monday, January 9, 2012
When is a condo not a condo?
When looking for a condominium, be aware that different buildings may have very different types ownership.
Freehold Units
Most condos are freehold strata units, where typically you have fee simple ownership of your unit. The land as well as common areas are owned collectively by all the owners. With most freehold condos, you pay monthly strata fees for upkeep.
Leasehold Units
Here you have a lease from a landlord for the right to use the unit for a specific number of years. Many leaseholds are created for 99 years, and you may only purchase your unit for the part of the lease that remains.
Co-op Units
With this arrangement you purchase shares in a co-operative association which owns the land and building including individual units and common areas, and you have a leasehold interest in your unit. You usually pay monthly dues to the co-op board to cover the building’s taxes and upkeep.
Condo buying tip
Monthly condo fees can affect how much home you can afford. By choosing a property where the monthly fees are just $200 lower, you can boost your purchasing power by $18,000.
Freehold Units
Most condos are freehold strata units, where typically you have fee simple ownership of your unit. The land as well as common areas are owned collectively by all the owners. With most freehold condos, you pay monthly strata fees for upkeep.
Leasehold Units
Here you have a lease from a landlord for the right to use the unit for a specific number of years. Many leaseholds are created for 99 years, and you may only purchase your unit for the part of the lease that remains.
Co-op Units
With this arrangement you purchase shares in a co-operative association which owns the land and building including individual units and common areas, and you have a leasehold interest in your unit. You usually pay monthly dues to the co-op board to cover the building’s taxes and upkeep.
Condo buying tip
Monthly condo fees can affect how much home you can afford. By choosing a property where the monthly fees are just $200 lower, you can boost your purchasing power by $18,000.
Understanding your credit report and credit score – Part 1
What many prospective borrowers don't realize is that the pricing of mortgages and other loans is based in part on their credit-worthiness. Consumers need to be aware of how their credit is evaluated by lenders, and how they can work to avoid so-called "bruised credit" – people with a lower credit score can find themselves paying a higher interest rate, or even denied access to certain types of loans.
A credit report is a detailed history of how consistently you meet your financial obligations, and provides a picture of your financial health based on your past behaviour. A credit score is a three-digit number, usually between 300 and 900, representing your overall credit-worthiness, based on personal information from your credit report and other sources.
Both your credit report and score are important. When deciding whether or not to grant a mortgage loan, lenders refer to an applicant's credit report and score, along with a range of other factors such as income, employment history, and size of down payment.
The higher your score the more likely you are to be approved for a mortgage and receive favourable rates because the lender considers you to be a better credit risk. Several factors are used by the two main credit agencies in Canada (Equifax Canada and TransUnion Canada) to calculate credit scores:
Debt payment history.
Amounts owed compared to your current credit limits with lenders.
How often you seek new credit.
Length of time you have had credit accounts.
Type of credit, such as car loans, lines of credit, credit cards.
A credit report is a detailed history of how consistently you meet your financial obligations, and provides a picture of your financial health based on your past behaviour. A credit score is a three-digit number, usually between 300 and 900, representing your overall credit-worthiness, based on personal information from your credit report and other sources.
Both your credit report and score are important. When deciding whether or not to grant a mortgage loan, lenders refer to an applicant's credit report and score, along with a range of other factors such as income, employment history, and size of down payment.
The higher your score the more likely you are to be approved for a mortgage and receive favourable rates because the lender considers you to be a better credit risk. Several factors are used by the two main credit agencies in Canada (Equifax Canada and TransUnion Canada) to calculate credit scores:
Debt payment history.
Amounts owed compared to your current credit limits with lenders.
How often you seek new credit.
Length of time you have had credit accounts.
Type of credit, such as car loans, lines of credit, credit cards.
Thursday, January 5, 2012
Why Real Estate Investing Makes Sense
Statistics show that investing in real estate makes a lot of sense. More people have become millionaires owning real estate than any other investment. Many of us know someone who invested in real estate and have become wealthy. Real estate is one of the safest and most profitable means of creating wealth. Banks will even lend money for the purchase of real estate because they know it is one of the safest and most profitable investments available. Here is just some simple reasons why real estate makes sense.
1. Proven Track Record
If you look at the average real estate prices you will see a trend where real estate prices continue to go higher. If one examines real estate prices five years ago compared to today you will see that prices are much higher. The same can be said if one looks back 10, 15 and 20 years back, you will find real estate prices have always increased. Just look at the value of your own home. Most likely it has increased from when you last purchased the home. There is an old saying,” invest in real estate and wait, not wait to invest in real estate.” A smart investor once said, "do whatever it takes but buy one property a year and soon you will be wealthy". Real Estate has always been the greatest wealth-builder in history, unlike the volatile stock market where it’s difficult for the average person to make money. Also as the population continues to grow and more immigrants settle in our great country than the demand for real estate will only continue to grow and push real estate prices higher.
2. Ownership
Real Estate is a tangible asset and you control when to sell. Obviously the longer you keep your investment the great your profits.
3. Leveraging
With a small down payment you have the ability to own a property with little money down that carries. Leverage, plain and simple, is debt; it's using other people's money to buy, which actually allows you to use less of your own money to get more property. This is what is referred to as the “Power of Leveraging”.
4. Capital Appreciation
Appreciation is the increase in value of a property over time due to inflation, supply and demand, capital improvements and other factors. When rents or occupancy rates increase it translates into higher property values. Occasionally we have hot real estate markets which further push real estate prices higher.
5. Mortgage Reduction
While you are receiving rent each month from your tenant you are actually building equity as your mortgage is being paid down. Over time your cash flow is increasing because your rent is increasing but your mortgage is being paid down.
6. Good Overall Returns
The power of Real Estate investing provides investors with stable rents, increased property values, and tax savings.
7. Predictable Revenue
In the long run the cash flow from the real estate investment provides consistent income during our retirement years.
8. Operating Capital
Real Estate provides monthly cash flow to give the investment the ability to withstand economic downturns or temporary shortfalls.
9. Refinancing Opportunities
The power of refinancing allows real estate investors the ability to borrow against the equity in their properties to purchase additional properties. This simple strategy has made many average people become millionaires.
10. Tax Efficiency
Owning real estate has many tax advantages. Investors should speak to their own accountants to determine the best tax strategy for their particular situation. Real Estate is treated more favorable than other investments and taxes are deferred until property is sold.
11. Diversification
Real Estate is a great way to diversify and you still have security, liquidity, and long term appreciation. Which are all the basics of good investing?
12. Efficient & Synergistic
Investing with Invest@Ease provides investors with cost savings and efficiency which is usually unattainable to individual investors if they went at it alone.
13. Flexibility
With Invest@Ease investors can start at their own comfort level, and buy additional investments as they become more comfortable.
14. Bottom Line
Real Estate has a great track record of providing cash flow, tax advantages and appreciation over the long term.
1. Proven Track Record
If you look at the average real estate prices you will see a trend where real estate prices continue to go higher. If one examines real estate prices five years ago compared to today you will see that prices are much higher. The same can be said if one looks back 10, 15 and 20 years back, you will find real estate prices have always increased. Just look at the value of your own home. Most likely it has increased from when you last purchased the home. There is an old saying,” invest in real estate and wait, not wait to invest in real estate.” A smart investor once said, "do whatever it takes but buy one property a year and soon you will be wealthy". Real Estate has always been the greatest wealth-builder in history, unlike the volatile stock market where it’s difficult for the average person to make money. Also as the population continues to grow and more immigrants settle in our great country than the demand for real estate will only continue to grow and push real estate prices higher.
2. Ownership
Real Estate is a tangible asset and you control when to sell. Obviously the longer you keep your investment the great your profits.
3. Leveraging
With a small down payment you have the ability to own a property with little money down that carries. Leverage, plain and simple, is debt; it's using other people's money to buy, which actually allows you to use less of your own money to get more property. This is what is referred to as the “Power of Leveraging”.
4. Capital Appreciation
Appreciation is the increase in value of a property over time due to inflation, supply and demand, capital improvements and other factors. When rents or occupancy rates increase it translates into higher property values. Occasionally we have hot real estate markets which further push real estate prices higher.
5. Mortgage Reduction
While you are receiving rent each month from your tenant you are actually building equity as your mortgage is being paid down. Over time your cash flow is increasing because your rent is increasing but your mortgage is being paid down.
6. Good Overall Returns
The power of Real Estate investing provides investors with stable rents, increased property values, and tax savings.
7. Predictable Revenue
In the long run the cash flow from the real estate investment provides consistent income during our retirement years.
8. Operating Capital
Real Estate provides monthly cash flow to give the investment the ability to withstand economic downturns or temporary shortfalls.
9. Refinancing Opportunities
The power of refinancing allows real estate investors the ability to borrow against the equity in their properties to purchase additional properties. This simple strategy has made many average people become millionaires.
10. Tax Efficiency
Owning real estate has many tax advantages. Investors should speak to their own accountants to determine the best tax strategy for their particular situation. Real Estate is treated more favorable than other investments and taxes are deferred until property is sold.
11. Diversification
Real Estate is a great way to diversify and you still have security, liquidity, and long term appreciation. Which are all the basics of good investing?
12. Efficient & Synergistic
Investing with Invest@Ease provides investors with cost savings and efficiency which is usually unattainable to individual investors if they went at it alone.
13. Flexibility
With Invest@Ease investors can start at their own comfort level, and buy additional investments as they become more comfortable.
14. Bottom Line
Real Estate has a great track record of providing cash flow, tax advantages and appreciation over the long term.
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