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Is Toronto Real Estate Insulated from Recession? – RE/MAX Canada – RE/MAX News



After the American “Great Recession” a lot of people became worried about another financial crisis. They also fretted over what they can afford when purchasing a home, while banks were not as willing to give loans and mortgages to as many people as they once did. In other words, consumer (and lender) confidence became more cautious because they didn’t want to end up drowning in debt, or worse lose their homes.

However, north of the disaster, Canadians did not seem to be as affected by the recession. Instead, as we often do, we seemed to weather the storm, with less unemployment and a stable economy thanks to our natural resources. Although we tend to suffer when it comes to oil production compared to other oil-rich countries, other areas like lumber, fishing and minerals thrive. All of these things work together to help insulate us from recession.

Economic Considerations

In regards to Canadian housing, when looking at major cities like Toronto and Vancouver, there is a different focus when it comes to the economy. As well for the Canadian GDP, finance, insurance and real estate industry contribute 21% and construction contributes 6%. So, considering the majority of new construction homes are out in the suburbs the economy can fluctuate which in turn affects house prices, while in Toronto’s older neighbourhoods like Rosedale or Leaside homes tend to keep their value. They will at least stay within 10% of their value even as things are going up and down in the construction industry.

Green Construction

Another factor is Canadians are green obsessed. This is a good thing as it will affect demand on the construction of houses. Buyers will seek out eco-friendly houses that also tend to be available at lower home prices regardless of the housing market. Considering that most construction companies and developers rarely focus on eco-friendly options like geothermal heating or solar panels they are still making efforts to ensure the homes they build are energy efficient.

905 Neighbourhoods

You also have to consider Canada’s renovation industry. Because so many homeowners are striving to save money, many are targeting their gas and electricity bills. As a result, they are looking for ways to make their homes more energy-efficient. So, although we can pretend these people are green obsessed, the only green they are worried about are the $20 bills they can stash in their wallets. This is helping to generate business for the Geothermal industry as it offers a quick and affordable investment that will see some payback. It heats in the winter and cools in the winter, perfect for Canadian weather.

Energy-Efficient Renovations

So why does this affect the economy or even the real estate market in Toronto? Well, when looking at the longer term, homes should go up in value thanks to the money people are investing in these types of renovations. As a result, between green renovations and overall home upgrades, people can ask more when selling their newly revamped homes.

High demand areas like Lawrence Park or Davisville Village are prime examples of how renos are contributing to the local economy. Just drive down any street and you’ll see the telltale dump bins and service trucks that show the homeowner is undergoing renovations. They are making improvements that will make their homes more eco-friendly and cheaper to keep comfortable temperature-wise.

Spreading Metropolis

Meanwhile, there is a massive spreading of the GTA, with suburban regions getting further and further away from the core of the city. People seem to be putting their commute concerns aside in order to find affordable homeownership options. Not surprisingly, the local infrastructure is struggling to keep up with extensions to public transportation, but they are trying. As it becomes easier to commute, it has a duel effect by making these areas more appealing, which increases home values in these further out locations.

Despite the horrifying traffic jams people sit in every day, people still choose to buy in Toronto’s satellite regions. This means home sales in these areas bring opportunities for economic growth as more retailers can spread their wings to these faraway suburbs.

The Downtown Condo

So, we’ve got a willingness for people to head to the hills, mainly because there is a shortage of homes in downtown Toronto. They are also not affordable. However, there is also an endless column of construction cranes dotting the landscape of the downtown core. These condos are by no means family-friendly, which means builders will have to start looking at features that will appeal to this buyer. The trend for families to remain city-centric is forcing builders to look for new ideas to appeal to this group including the potential for onsite daycare services.

Pedestrian and Bike Friendly Toronto

As well, as the City of Toronto attempts to make it easier to get around with all kinds of things from bike lanes to bike-sharing, more people are attracted to the idea of staying in the city. As always, the young professionals and hip set will prefer this and will find it worthwhile to spend the extra dough on a condo when they can walk or bike to work in under 30 minutes. Therefore, the construction business will continue to thrive as old buildings are either renovated into lofts or torn down to make room for condos.

The Bubble Burst

If rumours of the imminent bursting of the proverbial housing bubble aren’t exaggerated, now could be a good time to buy. As sellers start to feel the fear, buyers can jump on opportunities and start low balling offers by as much as 10% to 20%. If the rumours prove to be true, sellers who take buyers up on their offers will sigh with relief when the bubble really does blow, and home prices drop by 20% to 30%.

In the U.S. when the bubble burst house prices dropped by 40 to 50% of their average prices in value. The truth is pricing won’t drop that far in Canada or Toronto as we enjoy a more stable economy. Despite this, we aren’t immune to a Canadian real estate collapse, just better poised to weather it if it happens. So, in answer to the question, if Toronto real estate is insulated from recession, the answer is really it depends as always on location. However, despite the threat of recession over the next couple of years, supply and demand in Toronto should help keep home values relatively stable.


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Former B.C. Realtor has licence cancelled, $130K in penalties for role in mortgage fraud



The provincial regulator responsible for policing B.C.’s real estate industry has ordered a former Realtor to pay $130,000 and cancelled her licence after determining that she committed a variety of professional misconduct.

Rashin Rohani surrendered her licence in December 2023, but the BC Financial Services Authority’s chief hearing officer Andrew Pendray determined that it should nevertheless be cancelled as a signal to other licensees that “repetitive participation in deceptive schemes” will result in “significant” punishment.

He also ordered her to pay a $40,000 administrative penalty and $90,000 in enforcement expenses. Pendray explained his rationale for the penalties in a sanctions decision issued on May 17. The decision was published on the BCFSA website Wednesday.

Rohani’s misconduct occurred over a period of several years, and came in two distinct flavours, according to the decision.

Pendray found she had submitted mortgage applications for five different properties that she either owned or was purchasing, providing falsified income information on each one.

Each of these applications was submitted using a person referred to in the decision as “Individual 1” as a mortgage broker. Individual 1 was not a registered mortgage broker and – by the later applications – Rohani either knew or ought to have known this was the case, according to the decision.

All of that constituted “conduct unbecoming” under B.C.’s Real Estate Services Act, Pendray concluded.

Separately, Rohani also referred six clients to Individual 1 when she knew or ought to have known he wasn’t a registered mortgage broker, and she received or anticipated receiving a referral fee from Individual 1 for doing so, according to the decision. Rohani did not disclose this financial interest in the referrals to her clients.

Pendray found all of that to constitute professional misconduct under the act.

‘Deceptive’ scheme

The penalties the chief hearing officer chose to impose for this behaviour were less severe than those sought by the BCFSA in the case, but more significant than those Rohani argued she should face.

Rohani submitted that the appropriate penalty for her conduct would be a six-month licence suspension or a $15,000 discipline penalty, plus $20,000 in enforcement expenses.

For its part, the BCFSA asked Pendray to cancel Rohani’s licence and impose a $100,000 discipline penalty plus more than $116,000 in enforcement expenses.

Pendray’s ultimate decision to cancel the licence and impose penalties and expenses totalling $130,000 reflected his assessment of the severity of Rohani’s misconduct.

Unlike other cases referenced by the parties in their submissions, Rohani’s misconduct was not limited to a single transaction involving falsified documents or a series of such transactions during a brief period of time, according to the decision.

“Rather, in this case Ms. Rohani repetitively, over the course of a number of years, elected to personally participate in a deceptive mortgage application scheme for her own benefit, and subsequently, arranged for her clients to participate in the same deceptive mortgage application scheme,” the decision reads.

Pendray further noted that, although Rohani had been licensed for “a significant period of time,” she had only completed a small handful of transactions, according to records from her brokerage.

There were just six transactions on which her brokerage recorded earnings for her between December 2015 and February 2020, according to the decision. Of those six, four were transactions that were found to have involved misconduct or conduct unbecoming.

“In sum, Ms. Rohani’s minimal participation in the real estate industry as a licensee has, for the majority of that minimal participation, involved her engaging in conduct unbecoming involving deceptive practices and professional misconduct,” the decision reads.

According to the decision, Rohani must pay the $40,000 discipline penalty within 90 days of the date it was issued.



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Should you wait to buy or sell your home?



The Bank of Canada is expected to announce its key interest rate decision in less than two weeks. Last month, the bank lowered its key interest rate to 4.7 per cent, marking its first rate cut since March 2020.

CTV Morning Live asked Jason Pilon, broker of Record Pilon Group, whether now is the right time to buy or sell your home.

When it comes to the next interest rate announcement, Pilon says the bank might either lower it further, or just keep it as is.

“The best case scenario we’re seeing is obviously a quarter point. I think more just because of the job numbers that just came out, I think more people are just leading on the fact that they probably just gonna do it in September,” he said. “Either way, what we saw in June, didn’t make a big difference.”

Here are the pros of buying/ selling now:

Pilon suggests locking in the rate right now, if you don’t want to take a risk with interest rates going up in the future.

He says the environment is more predictable right now, noting that the home values are transparent, which is one of the benefits for home sellers.

“Do you want to risk looking at what that looks like down the road? Or do you want to have the comfort in knowing what your house is worth right now?” Pilon said.

And when it comes to buyers, he notes, the competition is not so fierce right now, noting that there are options to choose from.

“You’re in the driver seat right now,” he said while noting the benefits for buyers.

Here are the cons of buying/ selling now:

He says one of the cons would be locking in the rate right now, then seeing a rate cut in the future.

The competition could potentially become fierce, if the bank decides to cut the rate further more, he explained.

He notes that if that happens, the housing crisis will become even worse, as Canada is still dealing with low housing inventory.

An increase in competition would increase the prices of houses, he adds.

Selling or buying too quickly isn’t the best practice, he notes, suggesting that you should take your time and put some thought into it.

Despite all the pros and cons, Pilon says, real estate remains a good investment.

According to the latest Royal LePage House Price Survey for the second quarter of this year, the average home price in Canada is $824,300. That’s up 1.9 per cent from the same time last year, and up 1.5 per cent from the first quarter of 2024.

In the Ottawa Housing Market Report for June 2024, the average price of a home was up 2.4 per cent from this time last year to $686,535, but down 0.6 per cent from May 2024.

Experts believe many potential buyers are still hesitant of jumping into the housing market and waiting for another interest rate cut of 50 to 100 basis points.

“I don’t think it’s going to be the rush that we see in the past, because people are used to more of a conservative approach right now,” said Curtis Fillier, president of the Ottawa Real Estate Board. “I think there’s still a bit of a hold back, but I definitely do think with another rate cut, we’ll probably see a very positive fall market.”

With files from CTV News Ottawa’s Kimberly Fowler



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Real estate stocks soar to best day of year on rate cut bets



(Bloomberg) — The stock market’s worst group notched its best day of the year as a cooler-than-expected inflation report stoked bets that the Federal Reserve will start cutting interest rates in September.

Shares of real estate companies jumped 2.7% Thursday for their biggest gain of 2024, climbing to their highest level since March as investors snapped up homebuilder, digital and commercial real estate stocks alike. Real estate also was the best-performing group in the S&P 500 Index Thursday, with volume that was around 30% higher than the 30-day average, according to data compiled by Bloomberg.

Arguably the most significant news to come from the latest consumer price index reading was a pullback in housing-related inflation. Shelter costs rose just 0.2% for the slowest monthly increase in three years. Homebuilders, which have risen 7.1% this year, were up 7.3% for the session, the most since 2022. Shares of D.R. Horton Inc., which is scheduled to report earnings next Thursday, gained 7.3%.

“Housing has really been the last shoe to drop in terms of winning the battle against high inflation,” Preston Caldwell, chief U.S. economist at Morningstar wrote in a note to clients Thursday. “Leading-edge data has strongly indicated for some time now that a fall in housing inflation was in the works.”

A rally in real estate stocks is bad news for short sellers who have been piling into the group, which is the worst performer in the S&P 500 this year. To start the week, short interest as a percentage of float hovered near 49% in the SPDR Homebuilders ETF, the highest level since February for the exchange-traded fund, according to data from S3 Partners.

Property owners are rallying as well. Real estate investment trusts, which were brutally penalized during the two-year run up in borrowing costs, advanced by as much as 3%. And the outlook for the group appears to have turned a corner, according Rich Hill, senior vice president and head of real estate strategy and research at Cohen & Steers Capital Management.

“We think this is a compelling backdrop for listed REITs especially as fundamental growth remains on solid footing,” he said, referencing the latest inflation data and rate outlook. “The rally that started in October of 2023 pushing returns more than 20% above their trough looks set to continue if inflation cools and interest rates continue to decline.”

Shares of industrial REIT Prologis Inc., which reports second-quarter results on Wednesday, rose 3.3% to hit their highest level since April. U.S. Treasury yields tumbled, with the 10-year bond falling to 4.2% and the policy-sensitive two-year note slipping to 4.5%.

(Updates indexes and stock prices for market close.)



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