The Toronto real estate market has returned with a vengeance since the two-month reprieve at the start of the coronavirus pandemic. Homebuyer demand is fierce and homeowners are cashing in on skyrocketing valuations. Many have returned to the market in search of either the home of their dreams or the opportunity to cash in on some serious profit. After all, the average selling price for a home in Toronto is $1.045 million.
Record-setting sales activity and prices are expanding to the surrounding Toronto area, whether it is north of the city or east of the metropolis. Across the Greater Toronto Area (GTA), housing prices and residential sales are going through the roof, despite the COVID-19 public health crisis still occurring.
Historically low interest rates, evolving consumer trends, strengthening demand, and the fear of missing out are driving this bullish Toronto real estate market. But are some places performing better than others? While the entire region is doing well, it is worth pointing out three Greater Toronto real estate areas to highlight just how incredible the situation has become over the last year.
Burlington
Burlington has seen eye-popping growth in real estate prices and sales this past year. Burlington could start to recover from ultra-low inventory levels amid increased listings, but this might not be enough to alleviate the dramatic surge in housing valuations.
According to the REALTORS® Association of Hamilton and Burlington (RAHB), residential sales increased 54 per cent in February month-over-month, to 1,271 transactions. Higher transactions were seen across multiple properties: single-family (+14.9 per cent), townhomes (+11.9 per cent), and apartment-style condo units (31.3 per cent).
The average price advanced 7.7% to $848,719. Here were how the three main property classifications performed in February:
“There are several pandemic-related factors which have contributed to the high demand for housing combined with the low supply levels we have experienced in our market area,” said RAHB President Donna Bacher in a news release. “The good news is the number of new listings broke a 10-year record for February and our active listings increased by 28 per cent from January 2021. As we recover from these ultra-low inventory numbers, buyers should start to see more selection and a bit less competition. Additionally, new listing numbers should stay strong and inventory levels should continue to increase to a more normal level as more of the RAHB market area moves out of lockdown and control zones.”
Aurora
The Aurora real estate market has been skyrocketing over the last year. Located just north of Toronto, it has benefited from families that no longer want to reside within the major urban centre, but still want to be close to Toronto’s amenities.
In February, residential sales climbed 47.5 per cent to 118 units, with growth seen in both single-family detached and townhome properties.
Prices did take a breather in February, falling 2.52 per cent month-over-month. However, real estate prices remained above the $1 million mark, with average prices coming in at $1.238 million. These prices might start to cool down, too, even with spring on the horizon, because of supply.
Pickering
Pickering remains a very attractive place in the Greater Toronto Area (GTA), especially for young families looking to plant roots. It maintains plenty of amenities while still being relatively close to downtown Toronto via the impressive public transit infrastructure.
But homebuyers are realizing this, too. Therefore, they are scooping up the limited housing stocks on the open market. This is reflected in the sky-high valuation of homes across the city.
Residential sales soared 105.61 per cent to 183 in February. But it was the price growth that crossed a record threshold. The average price for a home in Pickering rose 0.83 per cent to $1,008,209. But while this is impressive for the area, Pickering might see some easing as new supply comes online.
The Canadian Real Estate Association (CREA) recently published a report suggesting that record home sales would continue this year, anticipating that 701,000 properties will change hands and the national average home price would increase 16.5 per cent to $665,000. This, according to CREA, will be the case coast to coast.
Robert Hogue, a senior economist at Royal Bank of Canada, told CTV News that the red-hot housing market is no longer a big-city issue. This, he says, has now also become a small-town issue.
“Typically, housing markets are really kind of working in isolation relative to other parts of the country; this time it’s all synchronized, very hot everywhere,” Hogue said. “It puts a lot of pressure on affordability locally and that I think it is going to be quite a challenge going forward. This is no longer just a big-city kind of Toronto, Vancouver story; this is a small-town issue now.”
Whether you live in the city of Toronto or reside in the outskirts of The Six, the real estate market will continue to be on fire. Until interest rates begin to normalize or new supply is injected into the sector, this will be the case for at least the rest of 2021.
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Robert McLister: Tax shelters don’t make housing more affordable, but those with the cash would be foolish not to use them
Published Apr 19, 2024 • Last updated 55 minutes ago • 4 minute read
With housing unaffordability near its worst-ever level, our trusty leaders are on a quest to right their housing wrongs and get more young people into homes.
Part of Ottawa’s big strategy to “help” is promoting tax-sheltered savings accounts and pumping up their contribution limits. That, of course, stimulates real estate demand amidst Canada’s population and housing supply crises. But save that thought.
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First-time buyers now have three government piggy banks to stockpile cash for a down payment:
1. The 32-year-old RRSP Home Buyers’ Plan — which lets you deduct contributions from your income to defer taxes and then borrow from the account interest-free for your down payment (as long as you wait 90-plus days to withdraw any contributions);
2. The 15-year-old Tax-free Savings Account (TFSA) — which lets you save after-tax dollars, grow your money tax-free and withdraw it without the taxman taking a bite;
3. The one-year-old First Home Savings Account (FHSA) — which is a combination of an RRSP and TFSA. It lets you deduct contributions from income, compound it tax-free and never pay tax on withdrawals used to buy a home. You can even save the deduction for a year when you need it more — when you’re earning more money.
Assuming you have the funds and contribution room, these tax shelters can combine to help you amass a supersized down payment.
“Looking at the FHSA alone, with the max annual contribution room of $8,000 for 2023 and 2024, a potential first-time home buyer could have as much as $16,000 deposited in the account today for a down payment,” says Eric Larocque, chief mortgage operations officer at Questrade’s Community Trust Company.
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“If you also add in the cumulative contribution room of $95,000 for the TFSA, it amounts to $111,000 in potential funds available — and that’s before incorporating investment gains from either account.”
And it doesn’t stop there. RRSP, TFSA and FHSA savings limits keep increasing. If first-timers have enough contribution room, down payment savers in 2024 can sock away even more in these tax-sheltered troves.
“Factoring in the recent changes to the Home Buyers’ Plan, which now permits RRSP withdrawals of up to $60,000 — up from $35,000 — we land at a potential total of $171,000 in deposited funds that can be tapped for a first-time home buyer’s down payment,” Larocque adds.
That’s quite a wad — easily enough to cover the 20 per cent ($139,706) down payment required to avoid mandatory (and pricey) default insurance on the average home. Canada’s average abode is now worth $698,530 by the way, according to the Canadian Real Estate Association.
Here’s the rub: Canada’s living costs are sky-high, and real disposable income has trended downward. So, how’s an average first-time buyer household, raking in less than six figures, supposed to amass such a stash?
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Based on national averages, saving 10 per cent of one’s pre-tax income per year (who does that?) would take a young FTB couple over 15 years to sock away $140,000. History shows what would happen to home values if you waited 15 years — they’d jet off without you.
If you have no other resources and your bet is that historical appreciation rates continue — despite slower population growth, more building and potentially higher long-term rates — you’re better off saving less and buying sooner with a five per cent down insured mortgage.
So, does Big Brother really expect your typical first-time buyer to max out all these savings plans? Nope. But hey, throwing a buffet of options at you sure paints a pretty picture of government effort, doesn’t it?
Ottawa’s dirty little secret is that these nifty programs crank up demand, turning renters into buyers. So don’t bet on them making the home-owning dream any cheaper, for first-timers or anyone else.
Take advantage of them anyway.
The government sets limits on these tax shelters with well-off home buyers in mind. One lucky bunch who can make use of all three down payment savings plans is the first-timer with prosperous parents.
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Such buyers can make a withdrawal from their parental ATM (a living inheritance, some call it), deposit that cash in all three savings vehicles above and reap: hefty income tax savings or deferrals (thanks to the FHSA and RRSP deductions); tax-free/tax-deferred growth on the investments; and tax-free withdrawals if the money is used to buy a qualifying home (albeit, you’ll have to pay the RRSP HBP back over 15 years, starting five years after your withdrawal).
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The more opportunities it gives people to save for a down payment, the more Ottawa worsens the imbalance between purchase demand and supply. And that, of course, boosts real estate values skyward — which is dandy for existing owners but contradictory to the government’s affordability messaging.
But hey, these tax treats are ripe for the picking. Home shoppers with the means — especially those with deep-pocketed parents — might as well take advantage of all three accounts.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
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Successful real estate investors have long followed the adage: When there is blood in the street, buy property.
Historically, this approach has yielded dividends, and it explains the mindset behind a new venture from Hines, a real estate giant with over $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that seeks to capitalize on the recent troubles in the real estate industry.
The management at Hines has been carefully watching the real estate industry for decades, and they believe that today’s market presents the perfect opportunity for investors to buy distressed assets and sell them at a profit in the future. When you consider that nearly $4 trillion in commercial real estate loans are set to mature between now and 2027, it’s easy to see the logic behind Hines Private Wealth Solutions.
The developers behind many of those projects took out loans assuming they would be able to refinance at pre-COVID interest rates. Considering that current interest rates are about double what they were before COVID-19, that assumption looks more like a losing bet every day. It also means there will be a lot of foreclosures that a well-positioned fund can snap up for pennies on the dollar.
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That’s where Hines Private Wealth Solutions seeks to step into the picture. It’s already contracted with investing heavyweight Paul Ferraro, former head of Carlyle Private Wealth Group, and raised $10 billion in funds for the new project. It will offer its clients a range of investment options, including:
In addition to these offerings, Hines will also give personal guidance to its investors on how to best manage their real estate assets. It is targeting investors who want to turn away from the traditional 60/40 investment model by channeling more money into real estate and away from other alternative investments. Hines is banking on the idea that high interest rates and high inflation will be around for a while.
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When that happens, it becomes more important for investors to hold inflation-resistant assets. That’s a big part of why Hines is betting that real estate is near the bottom after years of declining profits resulting from high interest rates and major losses in the commercial sector. Hines’s conclusion that now is the time to buy real estate is based on long-term company research showing that real estate typically declines after a 15- to 17-year-long growth period.
Its research shows that the decline normally lasts around two years, which is about the same length of time the real estate market has been suffering from high prices and high interest rates. Theoretically, that makes this the perfect time to make aggressive moves in the real estate market, and the Hines Private Wealth Fund was conceived to allow investors to take advantage of current market conditions.
Despite the deep troubles facing today’s real estate industry, it’s not hard to see the logic in Hines’s approach.
“This is a great vintage, it’s a great moment. This real estate correction began really over two years ago, right when the Fed started raising interest rates,” Hines global Chief Investment Officer David Steinbach told Fortune magazine. “So, we’re two years into a cycle, which means we’re near the end.”
If Hines is correct, real estate investors will have a lot of good bargains with high upside to choose from in the next 12 to 24 months. The good news is that even if you’re not wealthy enough to buy into the Hines Private Wealth Solution, there may still be plenty of opportunity for you to adopt their investment philosophy and start scouting for an undervalued, distressed asset to scoop up. Keep your eyes open and be ready.
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