Condo supplies in Toronto will help drive home prices down further
Radheyan Simonpillai
Toronto real estate prices are headed for a cliff. The condo market will drag it further down according to the Canada Mortgage and Housing Corporation (CMHC).
“Anticipated increases in the supply of condominium apartments will lead to softening prices next year,” says the CMHC in an email to NOW.
According to the CMHC, the lack of demand for oil on a global scale is another factor. Restricted mobility during the pandemic is leading to falling oil prices. That will further exacerbate the impact on oil-producing provinces and Canada’s economy. Extended mortgage deferral deadlines, lower mortgage rates and government stimulus packages are all meant to soften the blow.
Increase in Toronto real estate supply
According to the Canadian Bankers Association (CBA), more than 760,000 Canadians have opted to defer their mortgages or skip payments. That’s about 16 per cent among those with mortgages in bank portfolios.
There will be an increase in Toronto real estate supply from homeowners who can no longer defer mortgages. That supply will couple with inventory from the condo market fuelled partly by short-term rental restrictions during the pandemic.
“More units could also sit on the market longer as more buyers wait on the sidelines,” the CMHC says. They attribute that decline in demand to job losses and general financial uncertainty.
“A significant number of condominium units under construction (54,000 units currently) will make its way to the resale pool and will further increase supply.”
Condo rental market
The Toronto Regional Real Estate Board (TRREB) is reporting how hard the condominium rental market got hit in the year’s second quarter. According to TREBB, GTA realtors reported 7320 apartment rentals in Q2, which is down 24.8 per cent from the same time last year. Meanwhile, the number of rental listings were up by 42 per cent from last year.
“There are two key take-aways from the Q2 2020 rental market statistics,” says TRREB president Lisa Patel in a statement. “First, COVID-19 clearly impacted the demand for rental condominium apartments, due to restrictions on showing units and job losses across many sectors of the economy. Second, we saw the continuation of the pattern experienced over the past year, with year-over-year growth in rental listings far outstripping growth in rental transactions.”
Average condo rental prices also dipped to $2,083 for a one-bedroom and $2,713 for a two-bedroom.
“Increased choice led to more negotiating power for renters, resulting in year-over-year declines in average rents in the second quarter of 2020,” says TRREB’s chief market analyst, Jason Mercer, in a statement.
Condo sales
Home owners can no longer use Home Equity Line Of Credits as down payments on investment properties. WE Realty broker Odeen Eccleston tells NOW that the new CMHC rule will reduce the pool of potential buyers.
Re/Max Hallmark Realty broker Meray Mansour adds that declines in condo demand will be felt more outside of the central core. She says highly saturated areas like Yonge and Eglinton are also vulnerable. Mansour adds that COVID-19 is forcing people to spend a bulk of their time indoors while trying to keep social distance, so elevators and a lack of outdoor space has made condos less appealing.
However, the average condo sale prices still managed to rise by 5.1 per cent year-over-year to $619,707 in Q2, according to TREBB. That increase occurred while listings were down 21.6 per cent and sales dropped 50.8 per cent year-over-year.
Odeen Eccleston has observed an exodus from the city inspired by COVID-19. People who are working from home are now swapping out their expensive Toronto real estate for cottage country.
“They can get so much more for so much less in a lot of these cottage countries,” says Eccleston.
But for now, Eccleston and Mansour say the heat is still on in the Greater Toronto real estate market.
“In the 905, especially in the below $700K price range, its still on fire,” says Eccleston.
“I’ve even sold a few condos with multiple offers in the Beaches and surrounding areas,” Mansour adds. She notes that some condos remain appealing despite the trends. “In areas like the Beach and Leslieville, or places where condos are more low-rise loft or boutique style, the demand is still there. Especially condos with really large terraces.”
Both realtors are cautious of the impending downturn. However, they wonder if Toronto’s real estate market can whether it better than expected. For now, they’re telling sellers to be safe and act now before we reach that cliff.
Radheyan’s first assignment for NOW was reviewing the Ice Cube heist comedy First Sunday. That was back in January 2008. Born in Sri Lanka and raised in Scarborough, Rad currently lives in Leslieville with his wife and two adorable kids.
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.
