Connect with us

Real eState

Toronto Real Estate Bubble? Try Affordability Crisis: RE/MAX Executive – RE/MAX News

Published

 on


Greater Toronto real estate experienced record activity in 2020 and based on the data and market conditions in these first few months of 2021, we’ll likely see the trend continue. While some are saying Toronto is in a “housing bubble,” a RE/MAX executive is calling it a “housing affordability crisis” attributed to a perfect storm of factors including low inventory, high demand, and recently increased purchasing power thanks to rock-bottom interest rates and Canadians’ higher rate of household savings over the last year. All this has resulted in the current market conditions: “hot,” and that’s putting it mildly. With more people being vaccinated and immigration expected to pick up over the next three years, there’s no relief in sight without adding more housing supply to the Canadian housing market.

“Housing bubble? I prefer the term ‘affordability crisis,’” says Christopher Alexander, Chief Strategy Officer and Executive Vice President, RE/MAX of Ontario-Atlantic Canada. “The demand level is at an all-time high and inventory is very low. I don’t see how we’re going to be able to keep up with the demand with population levels expected to rise to new heights.”

Greater Toronto Real Estate Data (February 2021)

Greater Toronto real estate saw double-digit price and sales growth in February. Sales were up 52.5% year-over-year, with the Toronto Regional Real Estate Board (TRREB) logging 10,970 transactions. Average price rose 14.9% to $1,045,488. Overall, new listings were up 42.6% compared to February 2020, but sales are still outpacing any new supply coming on market.

Toronto has long been the hottest Canadian housing market, so while the continued growth in the 416 is certainly notable, it’s not entirely surprising. Then there’s the suburbs. Markets outside of Toronto really heated up in the wake of the pandemic, as homebuyers’ newfound flexibility due to remote work arrangements allowed them to look outside of the city core for homes offering more indoor and outdoor space with a lower price tag. Thus, real estate markets such as Halton, Peel and Durham experienced marked increases in sales and prices between 2020 and 2021, and the trend continues.

Here’s a quick look at the trends across these regions, according to TRREB’s February 2021 data (compared to their February 2020 stats):

The “Perfect Storm”

While some were forecasting a decline in housing prices last year due to Covid-19 and its impacts on employment, the economy and people’s ability to buy homes, industry insiders knew a downturn was highly unlikely. It never did materialize, and as we now know, Canadian real estate weathered that initial pandemic storm. What we’re facing now is unprecedented price growth and an affordability crisis prompted by the following factors.

  • Supply & Demand
    Tight markets and rising prices are expected to continue, with severely limited housing inventory and growing competition. With borders expected to open later this year, and the federal government’s plan to increase immigration to 1.2 million people over the next three years, housing supply will become an even more pronounced issue unless more supply materializes.
  • Interest Rates
    Rock-bottom borrowing rates have prompted many people to get into the market. In March of 2020, the Bank of Canada lowered its benchmark interest rate to a record-low 0.25% in an effort to boost the economy. Big banks followed suit by lowering their mortgage rates. That meant people who were still in the market to buy a home could now buy even more home for the same price, thanks to the lower cost of borrowing.
  • Covid-19
    Canadians saved record sums of money during the course of the pandemic, which they can stretch even further given these low interest rates. With few other diversions to spend their money during lockdowns, real estate became a place to sink those savings both as an investment and for lifestyle reasons.

“We’ve experienced some unexpected market shifts in the wake of Covid-19,” says Alexander. “Many Canadians suffered serious financial setbacks due to widespread job loss and lockdowns, largely across the service sector. Meanwhile, those who were able to transition to remote work environments saved an unprecedented amount of money last year. Urban condos lost some of their lustre last fall, while larger suburban and rural homes gained traction. These savings, coupled with record-low interest rates, have prompted many Canadians to invest in real estate – or at least try. The problem is that new listings are falling short of demand, and these tight market conditions across Canada are causing serious buyer fatigue. Demand is driving up prices, and as I’ve always maintained, a national housing strategy is sorely needed to boost supply and ease the housing crunch.”

What’s Next for Toronto Real Estate?

The Toronto housing market is experiencing a shortage of single-family detached listing inventory, while the condominium segment is flooded with supply. We expect balance to be restored, to a degree, when homeowners (potential sellers) feel more confident listing their homes for sale and feel safe in the current pandemic environment. Widespread vaccinations and eventual immunity will help.

Once this does happen and we reach that immunization target, how will this impact the economy? Preliminary reports have a positive outlook. Will the large Millennial cohort affect housing demand more so than what the Baby Boom cohort did back in the 60s and 70s? Do all three levels of government have a plan to address supply issues? Or might they continue to try to control buying activity with taxes and policies? Time will tell.

Some Final Words

Regardless of market conditions, always buy and borrow within your means. Do not use a “speculator philosophy” when buying a principal residence.

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Canadian home prices on fire and policymakers using ‘squirt gun’

Published

 on

By Julie Gordon

OTTAWA (Reuters) -Buyers are turning up the heat on Canada‘s searing hot housing market, their frenzy leading to record sales, prices and starts, but in a budget unveiled on Monday the federal government did little to tamp down the fire.

The Teranet-National Bank Composite House Price Index showed home price gains accelerated 1.5% in March from February, data released on Tuesday showed.

The index was up 10.8% on the year, with a record 81% of the broader 32 markets surveyed posting annual gains above 10%. That far exceeds the last peak in 2017.

On Monday, Finance Minister Chrystia Freeland, presenting Canada‘s first budget in over two years, fleshed out a previously announced tax on foreigners parking money in Canadian homes, along with limited investments in affordable housing.

“The idea here is that homes are for Canadians to live in. They are not assets for parking offshore money,” Freeland told reporters.

For those watching, it was nowhere near enough.

“It’s like a squirt gun next to a towering inferno,” said Doug Porter, chief economist at BMO Capital Markets.

“We need to break the psychology that real estate is this can’t lose investment that only goes up,” he added. “Before this turns into a full-on bubble.”

March was a record month for new housing starts and home resale prices surged 31.6% year-over-year.

New Zealand, facing a similarly red hot market, introduced a raft of cooling measures including new taxes on investors and stricter lending rules.

While the Bank of Canada has become increasingly vocal on the issue, it has also pledged to keep interest rates at record lows into 2023. It will update its forecasts Wednesday.

And most measures that would cool the frenzy are up to the provinces and federal government who remain cautious as a third wave of COVID-19 rages.

Real estate agents say more listing are now coming to market, but they still see a massive long-term shortage. They expected more than the 35,000 units pledged in the budget.

“It’s not going to do much to intervene in the activity level we’re seeing now across the country,” said Christopher Alexander of RE/MAX Ontario-Atlantic.

(Reporting by Julie Gordon in OttawaEditing by David Gregorio and Alistair Bell)

Continue Reading

Real eState

Canada housing starts up 21.6% in March to new record – CMHC

Published

 on

Real Estate Sales In September

By Julie Gordon

OTTAWA (Reuters) – Canadian housing starts rose 21.6% in March compared with the previous month, easily beating expectations and hitting a new record, data from the Canadian Mortgage and Housing Corporation showed on Monday.

The seasonally adjusted annualized rate of housing starts rose to 335,200 units in March, well ahead of analyst expectations for 250,000 units, and a new high for all months on record.

Much of the gain was on multiple urban starts, which jumped 33.8% to 222,358 units. Single-detached urban starts rose 3.6% to 78,615 units.

“The big acceleration came as weather was unseasonably warm in many parts of the country,” Royce Mendes, senior economist at CIBC Economics, said in a note.

Mendes added that new home construction will likely be a major contributor to overall GDP growth again in 2021, even as building activity cools off from the “torrid pace” of recent months.

Canada‘s average home selling price soared an eye-watering 31.6% year-over-year in March, hitting a new high as sales also climbed to a new all-time record, the Canadian Real Estate Association (CREA) said earlier this month.

A supply imbalance has been blamed for skyrocketing home prices through the pandemic, though new listings surged in March, which, coupled with strong starts, suggests a more balanced market could be coming.

“Red-hot demand for real estate propelled a record month for housing starts in March. While the market will need a long stretch of supply growth to have a meaningful effect on prices, the March numbers are a solid start,” said Shelly Kaushik, an economist with BMO Capital Markets in a note.

Canada‘s ruling Liberals are set to unveil their first full budget in two years on Monday, with billions in pandemic supports as COVID-19 infections skyrocket, a national daycare plan and new taxes on luxury goods.

 

(Reporting by Julie Gordon in Ottawa; Editing by Toby Chopra and Jonathan Oatis)

Continue Reading

Real eState

Canadian home sales, prices surge to new record in March

Published

 on

OTTAWA (Reuters) – Canadian home sales rose 5.2% in March from February, setting a new all-time record amid strong demand in markets across the country, the Canadian Real Estate Association said on Thursday.

The industry group said actual sales, not seasonally adjusted, rose 76.2% from a year earlier, while the group’s Home Price Index was up 20.1% from last March and up 3.1% from February.

The actual national average selling price hit a new record at C$716,828 ($572,821) in March, up 31.6% from a year earlier and rising 5.7% from February.

($1 = 1.2514 Canadian dollars)

 

(Reporting by Julie Gordon in Ottawa)

Continue Reading

Trending