The Canadian housing market outlook for 2020 started strong. Ontario, the country’s most highly populated province, continues to attract homebuyers. While the coronavirus pandemic may shift this expectation in the short-term, the market will rebound quickly.
For buyers who want to purchase a home in Ontario, it can be challenging to decide where to settle down. Home prices vary across the province, and external factors can affect how much these prices increase. In 2019, among cities in Ontario, Oakville was the housing market with the most expensive sale price while Cornwall was the housing market with the least expensive sale price.
Here are some factors that determine Ontario real estate prices:
The Bank of Canada has reduced interest rates to 0.25%, from 1.25%. This new rate will stimulate more demand in the market to help lift the economy. However, low inventory will cause price increases, since sellers will want to get the best possible price.
The positive is that homebuyers are able to borrow more money at a reduced rate. This could lead to huge cost savings over time for buyers.
Some first-time buyers were challenged in entering the market previously due to the mortgage stress test. However, the lower interest rate can help buyers qualify for a mortgage and buy a larger or better home in areas outside of the Greater Toronto Area (GTA), which are more affordable.
Differences between Ontario’s housing markets
In Ontario, various housing markets outside the GTA are generally less volatile. Many people start their home search outside of the city, where greater affordability can be found.
In February, the average residential selling price in Toronto was up by 16.7%, to $910,290. A year-over-year double-digit price increase was seen in detached houses and condominiums. Great news for homeowners and sellers, but challenging for buyers on a budget.
Price-conscious buyers are thus choosing to live in the suburbs or rural areas of the province and commute to Toronto for work. The closer you get to the city, the more expensive housing becomes.
In other parts of Ontario, house prices are lower, since they don’t experience the level of demand seen in Toronto. This means homebuyers can take advantage of lower mortgage rates and less expensive property prices to purchase homes in these areas.
Yet, there are other cities in Ontario that are now showing similar trends to Toronto. For example, Ottawa and Windsor were experiencing seller’s market conditions, showing substantial year-over-year increases in average residential sale price at 11.7% and 11% between 2018 and 2019. Both cities continue to attract young professionals, especially with improved transportation features such as the Ottawa LRT.
The Niagara region also saw strong growth between 2018 and 2019, with average residential sale price increasing almost 13%.
Supply and demand
Especially in large cities like Toronto and Vancouver, it is challenging to purchase an affordable home because of high demand and low supply. In Toronto due to land shortages and the influx of immigrants, more people need homes to live in. At the start of 2020, the Toronto Regional Real Estate Board (TRREB) shared that shrinking inventory had led to a double-digit jump in housing prices.
Whether homebuyers move to Toronto for job opportunities, better amenities or to be closer to transit, as this city continues to develop, it is expected that demand will grow alongside it.
According to a recent report by the Ontario Ministry of Finance, the population in this province is expected to increase by 38% by 2046. This is a jump from an estimated 14.3 million in 2018 to almost 19.8 million.
Yet, the number of listings continues to dwindle in the Toronto market. These market conditions result in bidding wars and more competition for desired homes. A seller’s market continues to prevail, making it difficult to enter this market as a buyer.
Seasonal real estate trends
Seasonality trends in the Ontario market can also play a role in real estate price increases.
During the winter, many people pause home searching to avoid poor weather conditions. If sellers are intent to sell during the winter season, the decrease in demand may require sellers to lower their asking price.
Spring and summer are when Canadians come out of “hibernation” to purchase homes. For sellers, the good weather can boost curb appeal to make their homes look better to homebuyers. Therefore, sellers can increase prices because of demand.
When the fall season rolls around, it can bring less inventory on the market because of the busy home purchasing activity which happened during the spring and summer seasons. Yet, demand remains stable, so homebuyers can expect competition when trying to secure the house they desire.
Ontario’s real estate prices haven’t shown signs of decreasing. Trends from earlier this year show that market activity continues despite social distancing measures from the coronavirus pandemic. Many housing markets in Ontario are considered seller’s markets. Yet, homebuyers can leverage low-interest rates to qualify for mortgages, purchase homes in areas with less demand, and use seasonal real estate trends to try to get a leg up on the competition.
Canada real estate: TD Economics sees high home prices holding up in fourth quarter before dropping in 2021 – The Georgia Straight
Home buyers looking for a bit of a discount may want to wait a little.
A housing report by TD Economics predicts that high home prices will persist for the rest of 2021.
“Regarding prices, we think they’ll hold up at these record levels in the fourth quarter…,” economist Rishi Sondhi wrote.
Then things will start to ease in 2021.
Sondhi explained that tight supply is driving high home prices.
According to the TD Bank economist, the real-estate market is currently in seller’s territory.
The economist noted that the national sales-to-new listings ratio in September “registered a drum-tight reading” of 77.2 percent.
He noted that “markets were the tightest they’ve been in nearly 20 years in September”.
Sales-to-new listings ratio is the number of sales divided by listings.
A seller’s market means that the sales-to-listing ratio is 60 percent or more, or six sales out of 10 listings.
A balanced market features a ratio between 40 percent and 60 percent.
A buyer’s market happens when the ratio is less than 40 percent, which means fewer than four sales for 10 listings.
In a report on October 15, the Canadian Real Estate Association noted that the national average price of a home set a new record in September.
The average price topped the $600,000 mark for the first time at more than $604,000.
In his report on October 15, Sondhi predicted “some easing is anticipated” for prices after the fourth quarter of 2020.
This is consistent with Sondhi’s previous report on October 8.
The bank economist noted in that earlier report that “unlike sales, an immediate fourth quarter pullback is unlikely” for prices.
“In fact, another (modest) gain could be in the cards,” Sondhi wrote.
“After the fourth quarter,” Sondhi predicted on October 8, “Canadian prices will likely drop through the first half of 2021 by around 7%, before regaining some traction later next year.”
Brookfield weighs US$3B life-sciences real estate portfolio sale – BNN
Brookfield Asset Management Inc. is exploring a sale of its life-sciences real estate portfolio, and seeking about US$3 billion, according to people with knowledge of the matter.
The Toronto-based alternative asset manager is working with advisers to sell roughly 2.3 million square feet of life-sciences real estate it acquired as part of its 2018 purchase of Forest City Realty Trust Inc., said the people, who requested anonymity because the information isn’t public.
A Brookfield representative declined to comment.
Blackstone Group Inc. agreed last week to recapitalize a portfolio of BioMed Realty life-sciences buildings for US$14.6 billion, a deal that will generate US$6.5 billion of cumulative profits four years after investing in the properties.
Life sciences, which includes pharmaceutical, biotech and other medical research fields, is a sector where most staff can’t work remotely. That has stabilized the value of such properties.
Alexandria Real Estate Equities Inc., one of the largest real estate investment trusts that owns on life sciences properties, has fallen 2 per cent this year compared to a 14.6 per cent decline of the Bloomberg U.S. REITs Index.
ULI & PwC to Release ‘Emerging Trends in Real Estate’ Report
An upcoming report on Canada’s real estate market will highlight our nation’s resiliency through the COVID-19 pandemic. Nationwide impacts to retail, office spaces, and suburbanization have been felt hard in the development industry, as landowners, sellers, and buyers are all affected by the trials of 2020. Many in the industry are viewing this as a prime opportunity to reposition their portfolios, so this is among the topics to be covered in PwC and ULI’s new Emerging Trends in Real Estate report.
“The coming year will be all about embracing opportunities to be resilient in the face of uncertainty, while shifting strategies in anticipation of market headwinds,” reads a statement issued by Frank Magliocco, National Real Estate Leader, PwC Canada. “For the first time in a few years, we’re hearing divergent views from industry players about issues like the future of office spaces and the urbanization and suburbanization trends.”
Downtown Toronto, image by Forum contributor Michael62
Set to be released on October 30th, the report’s 2021 edition touches on trends and outlooks in the Canadian and US real estate markets. Among these are specific changes to the market, including breakdowns of specific submarkets. Within the commercial real estate submarket, this includes details on retail troubles, office space uncertainty, and warehousing gains. Within the residential real estate submarket, the report discusses the concept of “creating 18-hour cities across Canada,” environments that combine live, work and play elements, as more Canadians are drawn towards more spread out suburban communities.
“The tension between longer term trends and fundamentals and short-term realities manifests in this year’s must-read report,” reads a statement from Richard Joy, Executive Director of Urban Land Institute Toronto. Prudence, “in the face of uncertainty, while dampening some sectors and trends, is accelerating and expanding others.”
The report is to be launched at the end of the month with an online webinar event led with a keynote delivered by Andrew Warren, Director of Real Estate Research at PwC, which is set to be followed by a panel of local experts panel to be moderated by PwC. The program has been expanded, with this year’s event offering attendees the opportunity to participate in various sessions, including a closing Fireside Chat with Jon Love and Aliyah Mohamed to further explore the economic landscape of the real estate development sector.
Those wishing to attend the ULI/PwC Annual Trends in Real Estate webinar on Friday October 30th, from 8 AM to 12 PM, can register at this link.
Source: – Urban Toronto
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