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Tiny condos now the biggest losers in Toronto real estate market shakeup – TheChronicleHerald.ca

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For four months, Christopher Bibby anguished over how to sell a 435-square-foot condo in Toronto’s entertainment district. The unit, which was listed in March at $569,999, wasn’t visited once in its first two months on the market. There were no calls and no emails. “Those were dead months,” he said.

Bibby already thought he was giving buyers a bit of a break. He had sold a condo of the same size, with the same floor plan and in the same building for $580,000 in February. But that was before COVID-19 upended Toronto’s condo market.

After two months, Bibby trimmed the price even further to $529,999 and, coupled with loosening lockdown restrictions, that generated enough interest to do a showing every 10 days. Still, there were no offers.

It wasn’t until mid-June that Bibby and the unit’s owner were able to finally fill the unit — after putting it up for rent at a below-market rate.

Bibby’s experience is representative of a wider trend in Toronto, where it appears that these smaller units are weighing down the entire market.

According to research firm Urbanation Inc., sales of condos sized at 500 sq. ft. and under were down 20 per cent year over year in September, while sales for units of other size ranges were either flat or still positive. These micro units are also the only condos on the market to have experienced a price decline thus far. And, thanks to a tumbling sales-to-new-listings ratio, they’re the only form of housing that is firmly in buyer’s-market territory.

“It’s become clear that COVID-19 has caused two shifts in demand: A desire for more space and more value-oriented homes outside the core, both of which negatively impact the market for small condos,” said Shaun Hildebrand, president of Urbanation.

Pre-COVID-19, these condos were the hottest on the market. Investors flocked to them because they were the only form of housing under $500,000 available in Toronto and the high rents they could charge on these units meant that making profit was close to a sure thing. Most of them were snatched up on the pre-construction market and as investors became more emboldened by their returns, they bought more units, Hildebrand said.

Now they’re the ones flooding the market with listings. In September, new listings for micro units were up 165 per cent year over year. So many of these condos have hit the market, that active listings now represent 5.2 months of supply. Hildebrand said it is considered a buyer’s market when supply reaches four months.

COVID-19 turned the tide on the momentum surrounding these condos. The same people who were living in these units no longer need to be near their downtown office buildings because many of them are closed; they also can no longer enjoy the benefit of being steps away from theatres, sports arenas and restaurants that sit empty. As the

Financial Post recently reported

, many former Toronto condo owners and renters have left Toronto altogether for Hamilton.

The pandemic has all but erased the premium that tenants once had to pay for living in the downtown core, Hildebrand said. That premium usually meant paying an additional $400 in rent for an identical unit outside the core. Now, it stands at $50.

With rent coming down across the board for condos, tenants are trying to stretch every dollar, Bibby said. If $2,000 per month got them a 500 sq. ft. unit pre-pandemic, it might be enough to get them 550 sq. ft. now or perhaps 600 sq. ft. outside of the downtown core.

“With work-from-home becoming a norm, the idea of being locked in a 450-sq.-ft. condo, without access to the building’s gym, party room or rooftop patio just isn’t appealing,” Bibby said. “An extra 50 square feet makes a difference.”

Frank Polsinello, a broker of record at RE/MAX, has seen this sentiment play out in the digital ads he places on Facebook for micro condos. In the past, the comments would be lined with interested people tagging agents to see the property. Now, they’ve turned negative.

“What we’ve been seeing a lot is: ‘Why would I pay $600,000 for that 453-sq.-ft. closet?’” Polsinello said. He’s had no problem with selling larger units, but he recently had a micro condo on the market for two months without receiving a single phone call from an interested party.

Micro-condo owners are struggling to sell and rent their units because two of the main groups of people they once attracted — recent immigrants and students — are no longer clamouring for them. Immigration has slowed to a crawl during the pandemic, while the majority of university classes are being held online.

Why would I pay $600,000 for that 453-sq.-ft. closet?

There is still some interest in the units, particularly from first-time homebuyers who were previously renting and took advantage of a down market, multiple realtors told the Post. But that interest is scant. That the units are hard to distinguish from one another because the floor plans are rarely unique only compounds the problem.

“We’ve had a few that we have taken off the market recently because there’s a glut,” Polsinello said. “We’re constantly monitoring the inventory. If we see there are six, eight, 10, 12 of these things that are all identical, (buyers) have the pick of the litter and it’s going to keep driving the price down.”

And that means that for the first time in years, buyers are in control.

Vanessa Jeffrey, the broker of record at RE/MAX’s Property Shop, said she recently secured a 475-sq.-ft. condo in downtown Toronto for a client with a $450,000 bully offer when similar units had recently sold for $510,000.

“We knew they weren’t getting showings,” Jeffrey said.

Not only was their bid price accepted, but the owner agreed to her client’s conditions as well, including an inspection. In the past, asking for one would’ve automatically lost you a unit, Jeffrey said. Then, when the inspection turned up a few faucets that were leaking and a door that needed to be replaced, the owner agreed to take care of the repairs.

On the pre-construction market, Sergio Menezes, a sales representative at Condo Connect, said developers are making similar concessions to draw investors back into buying their micro units. Many have introduced what he referred to as a drawn out deposit structure. Normally, investors have to put down 15 per cent in one year to secure these units, he said, but now, they’re being given the choice of paying five per cent each year over a period of three years. Cheaper lockers and parking spaces have also been placed on the negotiating table.

Moving forward, Hildebrand expects further weakness in the market for micro condos. Although sales prices have dropped, they’ve only done so by one per cent so far. The current supply on the market suggests that further drops could be coming, he said, especially as developers wrap their work on pre-construction units and bring more of them to market.

How quickly the market recovers is directly tied to COVID-19, he said.

“How long demand will be impacted depends on how the downtown market recovers, which is an evolution of the current health crisis,” Hildebrand said. “When does immigration bounce back? When do students return? When do office workers go back into their offices? It’s hard to say, but in the near term it looks likely that prices are going to trend lower.”


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Will Canada's Real Estate Market Stay Hot This Winter? RE/MAX Thinks So – Toronto Storeys

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After COVID-19 reared its ugly head on Canadian soil, life as we knew it changed forever… or at least for the foreseeable future.


Businesses closed and jobs were lost across every industry as the government tried to gain control of the deadly virus. However, despite a minor hiccup in the spring, the Canadian real estate market has managed to (so far) come out unscathed — for the most part, anyways.

In the months to follow the initial outbreak of the virus, Canada’s housing market experienced a record-setting recovery from coast to coast, thanks to high demand, Canadians taking advantage of low-interest rates, and real estate agents utilizing digital sales tools.

Since the start of the pandemic, Canadian homebuying behaviours have shifted immensely, with many urbanites relocating to the ‘burbs in search of more space as the work-from-home trend continues.

As such, both sales and prices are up, which raises the question: will the Canadian housing market maintain this upward trend as we head into winter?

READ:  Home Renovations in Canada Up Nearly 40% Since Start of Pandemic

The Federal Reserve Bank of Dallas recently published a report that analyzed the real estate markets in the Group of Seven countries during the second quarter. According to the report, Canadian residential real estate prices reported the biggest jump in the G7, rising 2.42% from Q1-2020. The next biggest jump by a G7 country was France, rising 1.71%. This occurred in Canada despite soaring vacancy rates and very little immigration during the April-to-June period.

To get a better understanding of the Canadian housing market, RE/MAX shared the average sales prices and the year-over-year growth from August.

  • Greater Toronto Area: $890,400 (+11.1%)
  • Greater Vancouver Area: $1,038,700 (+5.3%)
  • Ottawa: $517,800 (+19.9%)
  • Greater Montreal Area: $408,200 (+16.4%)
  • Halifax: $372,982 (+18.1%)

“The unforeseen developments of 2020 may have stumped market watchers, but the upward trends make sense since a key factor helping in the recovery of the national real estate market has been an inventory shortage that surfaced long before COVID-19 reared its head in Canada,” wrote RE/MAX in a recent report.

According to the Canadian Real Estate Association (CREA), inventory levels fell to an all-time low of 2.6 months in August.

Looking ahead, some economists said that the pent-up demand has been exhausted, which could mean the Canadian real estate market would lose some of its current momentum in the months to come. Despite the possibility of a slowdown, RE/MAX suggests that prices will continue to climb.

“With pent-up demand now largely exhausted, we see activity cooling later this fall,” said RBC economist Robert Hogue.“The pent-up demand created this spring proved a powerful driver of activity. Question is: how much longer can it be such a dominant factor? We think there’s probably little pent-up demand left to satisfy in most markets.”

RBC’s forecast for higher prices coincides with RE/MAX Fall Market Outlook Report, which predicted a “continuation of growth in valuations and activity in most housing markets.”

Regardless of where you’re looking to move, RE/MAX says the Canadian real estate market is “ripe with a wide range of opportunities for both new homebuyers and homeowners looking to upgrade.” Particularly since more people are working remotely and fewer workers need to be in close proximity to their workplace, which is leading to growth outside of downtown cores — namely within small suburban or rural municipalities.

The Bank of Canada (BoC), which is anticipated to maintain an accommodative monetary policy for a few more years, forecasts that it’ll still be some until Canada’s economy recovers. However, despite the remaining roadblocks within the economy — including business closures and widespread job loss — the real estate sector is booming.

RE/MAX suggests that “any significant price cooling activity is unlikely to correlate with Canada’s cooling temperatures” and when it comes to the national real estate market, “all signs point to a hot winter market ahead.”

Of course, it must be noted that RE/MAX has a vested interest in the market performing, and they have been one of the most critical voices of the CMHC’s dire forecasts since COVID-19 began. That said, RE/MAX’s predictions about the housing market have so far been more aligned with real life occurrences than those of the CMHC. But, as the saying goes, winter is coming — and if buyers start to get cold feet it’s going to be a long one.

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Vancouver posts Canada’s lowest commercial property tax rate – Business in Vancouver

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Altus Group 2020 Canadian Property Tax Rate Benchmark Report.

The City of Vancouver now has the lowest tax rate for commercial property among major Canadian cities, but Vancouver has shifted the burden to residential real estate, creating the most heavily-taxed homeowners in the country.

With a decrease of 27.9% from 2010, Vancouver posted the largest drop in commercial rates out of 11 cities surveyed by the Altus Group for its 2020 Canadian Property Tax Rate Benchmark Report, released October 26. The 17th annual survey was done in conjunction with the Real Property Association of Canada.

The tax shift is measured by a commercial-to-residential ratio that compares the commercial tax rate to the residential tax rate. For example, if the ratio is 2.50, a commercial property valued at $1 million dollars would incur property taxes 2.5 times higher than an equally-valued residential property.

Because of the pandemic, many cities have shifted the tax burden away from businesses, which resulted in a decrease of the commercial-to-residential tax ratios in 2020.

But Vancouver was particularly aggressive.

Vancouver’s commercial-to-residential tax ratio dropped 36.84% in 2020 from a year earlier to a historic low of 2.3. This was the largest decline of all cities surveyed, Altus found. This decrease took Vancouver from the third highest ratio in 2019 to the fourth lowest in 2020.

In comparison, the average national commercial-to-residential tax ratio in Canada is now 2.65, down 6.6% from 2019.

“[This] marks the fifteenth year in a row that Vancouver’s commercial rates have gone down. Over the last five years, Vancouver’s commercial tax per $1,000 of assessment has dropped 55.3%, going from $15.05 in 2015 to $6.73 in 2020,” Altus reported.

The city cannot take full credit for the dramatic cut in commercial taxes. The drop was driven in large part by a B.C. government decision in April to reduce the school tax portion of the commercial tax mill rate (tax per $1,000 of value)  by 70% this year as part of its COVID-19 Action Plan.

The tax shift has dinged owners of homes, which remain the highest priced in the country.

Vancouver posted the largest increase in residential tax rates in Canada this year, with a 14.2% increase from 2019, the Altus report reveals. This moved the city’s mill rate on a median residential unit to approximately 2.92 this year, from approximately 2.56 in 2019. This increase adds $131 more in property taxes for a median priced home of $1.2 million, according to the City of Vancouver.

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Real estate sales set new mark in Powell River – Powell River Peak

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Residential real estate sales in the Powell River region for September 2020 were significantly higher than the value of sales from September 2019, setting a new record in the process.

In September 2020, there were 50 single-family homes sold, for a value of $23,051,740, compared to 15 in September 2019, valued at $6,946,300.

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According to statistics, a new sales record for the month of September was reached in Powell River and it was the third highest sales figures for any month on record in the region.

“Home sales in the region continued to rebound in September, hitting the third highest level for any month on record,” said Neil Frost, president, Powell River Sunshine Coast Real Estate Board. “New supply also hit a new record level for the month of September but is not keeping pace with the strong demand we are experiencing. As a result, the market continues to tighten significantly and the imbalance between supply and demand is putting upward pressure on prices in the region.”

For single-family mobiles and manufactured homes, in September 2020, there were three units sold, valued at $765,369, compared to three units valued at $594,000 in September 2019.

In the single-family condos, apartment and duplexes category, there were three units sold in September 2020, valued at $823,500, compared to four units sold in September 2019, valued at $935,500.

Total residential sales for September 2020 were valued at $24,640,609 for 56 units, compared to $8,475,800 for 22 units in September 2019.

On the non-residential side, there were five parcels of vacant land valued at $797,000 sold in September 2020, compared to one, valued at $84,000, in September 2019. There was also one industrial, commercial and institutional property sold in September 2019, valued at $300,000, compared to none in September 2020.

Grand totals show 61 total sales in September 2020, valued at $25,437,609, compared to 24 sales, valued at $8,859,800 in September 2019.

The average price of a single-family home in September 2020 was $461,035, compared to $463,087 in September 2019. The median price of a home in September 2020 was $470,000, compared to $344,000 in September 2019.

While the average price of homes sold in September 2020 was $461.035, Frost said the more comprehensive year-to-date average price was $414,794; rising 16.5 per cent from the first nine months of 2019.

There were 75 new residential listings in September 2020. This was the largest number of new listings added in the month of September in history.

Active residential listings numbered 101 units at the end of September.

While month-end figures are not yet available, Frost said Powell River sales figures for October are strong. As of October 26, 2020, there had been 50 sales in the Powell River area, compared to 26 in 2019.

In terms of year-to-date figures, as of October 26, Frost said the 2020 figure sits at 375 sales, compared to 311 over the same period in 2019.

“When we started out, we didn’t think we were going to touch 2019 because we had a couple of dead months, then we started to catch up, were on par, and now we are ahead,” said Frost. “We definitely had our strongest September and it was our strongest month in a long time. It was a banner month.”

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