The Canadian housing market outlook for 2020 started strong. Ontario, the country’s most highly populated province, continues to attract homebuyers. While the coronavirus pandemic may shift this expectation in the short-term, the market will rebound quickly.
For buyers who want to purchase a home in Ontario, it can be challenging to decide where to settle down. Home prices vary across the province, and external factors can affect how much these prices increase. In 2019, among cities in Ontario, Oakville was the housing market with the most expensive sale price while Cornwall was the housing market with the least expensive sale price.
Here are some factors that determine Ontario real estate prices:
Low-interest rates
The Bank of Canada has reduced interest rates to 0.25%, from 1.25%. This new rate will stimulate more demand in the market to help lift the economy. However, low inventory will cause price increases, since sellers will want to get the best possible price.
The positive is that homebuyers are able to borrow more money at a reduced rate. This could lead to huge cost savings over time for buyers.
Some first-time buyers were challenged in entering the market previously due to the mortgage stress test. However, the lower interest rate can help buyers qualify for a mortgage and buy a larger or better home in areas outside of the Greater Toronto Area (GTA), which are more affordable.
Differences between Ontario’s housing markets
In Ontario, various housing markets outside the GTA are generally less volatile. Many people start their home search outside of the city, where greater affordability can be found.
In February, the average residential selling price in Toronto was up by 16.7%, to $910,290. A year-over-year double-digit price increase was seen in detached houses and condominiums. Great news for homeowners and sellers, but challenging for buyers on a budget.
Price-conscious buyers are thus choosing to live in the suburbs or rural areas of the province and commute to Toronto for work. The closer you get to the city, the more expensive housing becomes.
In other parts of Ontario, house prices are lower, since they don’t experience the level of demand seen in Toronto. This means homebuyers can take advantage of lower mortgage rates and less expensive property prices to purchase homes in these areas.
Yet, there are other cities in Ontario that are now showing similar trends to Toronto. For example, Ottawa and Windsor were experiencing seller’s market conditions, showing substantial year-over-year increases in average residential sale price at 11.7% and 11% between 2018 and 2019. Both cities continue to attract young professionals, especially with improved transportation features such as the Ottawa LRT.
The Niagara region also saw strong growth between 2018 and 2019, with average residential sale price increasing almost 13%.
Supply and demand
Especially in large cities like Toronto and Vancouver, it is challenging to purchase an affordable home because of high demand and low supply. In Toronto due to land shortages and the influx of immigrants, more people need homes to live in. At the start of 2020, the Toronto Regional Real Estate Board (TRREB) shared that shrinking inventory had led to a double-digit jump in housing prices.
Whether homebuyers move to Toronto for job opportunities, better amenities or to be closer to transit, as this city continues to develop, it is expected that demand will grow alongside it.
According to a recent report by the Ontario Ministry of Finance, the population in this province is expected to increase by 38% by 2046. This is a jump from an estimated 14.3 million in 2018 to almost 19.8 million.
Yet, the number of listings continues to dwindle in the Toronto market. These market conditions result in bidding wars and more competition for desired homes. A seller’s market continues to prevail, making it difficult to enter this market as a buyer.
Seasonal real estate trends
Seasonality trends in the Ontario market can also play a role in real estate price increases.
During the winter, many people pause home searching to avoid poor weather conditions. If sellers are intent to sell during the winter season, the decrease in demand may require sellers to lower their asking price.
Spring and summer are when Canadians come out of “hibernation” to purchase homes. For sellers, the good weather can boost curb appeal to make their homes look better to homebuyers. Therefore, sellers can increase prices because of demand.
When the fall season rolls around, it can bring less inventory on the market because of the busy home purchasing activity which happened during the spring and summer seasons. Yet, demand remains stable, so homebuyers can expect competition when trying to secure the house they desire.
Ontario’s real estate prices haven’t shown signs of decreasing. Trends from earlier this year show that market activity continues despite social distancing measures from the coronavirus pandemic. Many housing markets in Ontario are considered seller’s markets. Yet, homebuyers can leverage low-interest rates to qualify for mortgages, purchase homes in areas with less demand, and use seasonal real estate trends to try to get a leg up on the competition.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
