Report highlights next year’s real estate trends

Housing affordability continues to dominate the conversation in the Greater Toronto Area’s housing market. A new report released by the Urban Land Institute in conjunction with PwC, called Emerging Trends in Real Estate described governmental regulation as likely to exacerbate the affordability problem.

The laws of supply and demand lie at the heart of surging housing prices. Not only are single-family detached homes in high demand and low supply, but the condo market, too, is beginning to see signs of strain, as priced-out buyers realize they have no other choice to settle for skyward balconies over backyards.

The foreign buyer tax cooled the Vancouver and Toronto markets, where prices grew astronomically, but the report makes mention of suspicious players within the real estate industry, one of whom believes growth will continue with or without the tax because of natural growth. The report also noted that prices cooled temporally before rebounding and pushing condo prices upwards.

Those interviewed by the report parroted the need for government to stay out of the market, except to address the need for increased supply. It’s unanimously believed that the approvals process is one reason supply isn’t keeping up with demand.

Affordability will catalyze a growing trend: co-living. As the number of single people among the millennial cohort in expensive markets like, Toronto and Vancouver, continue rising, they’ll live with roommates out of necessity. While some may live alone, affordability will compel them forego ownership and rent. One in three young adults in Canada lives with at least one parent, and as others marry and look to start families during an inventory shortage, they’ll settle for living in condominiums. According to the most recent Census data, 6.3% of Canadians live in multigenerational households – a number that’s likely to rise.

The ’18-hour city’ is a burgeoning secondary market. Where NYC, London, Tokyo, and now Toronto, are 24-hour cities, the high cost has resulted in an exodus to smaller cities, like Austin, TX, Raleigh, N.C., Nashville, TN, which have grown in vibrancy. Montreal, Vancouver and Calgary are considered 18-hour cities and will continue staking their claim as emergent centres. Previous versions of Emerging Trends in Real Estate anointed Hamilton an emerging 18-hour city, and that’s likely to continue as affordability drives people further from the Toronto core.

Transit infrastructure is integral to attained 18-hour city status, and Hamilton is planning a downtown LRT.

The only condo growth associated with condos in recent years has been their popularity, but they have, in fact, been shrinking in square footage. The need for larger, family-sized condos will likely buck that trend.

Montreal’s rental market is as strong as ever, however, Ontario – already suffering from a shortage of rental units – has reintroduced rent control, much to the dismay of the report’s interviewees, who noted some planned purpose-built rentals rebranded as condos. Ontario’s rental vacancy rate is dangerously low, and it’s expected it could worsen.

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CREA releases latest stats

The Canadian Real Estate Association says the number of home sales edged higher in September compared with August, ending a streak of month-over-month decreases.

Sales through the association’s Multiple Listing Service were up 0.8 per cent nationally last month compared with August.

Sales were up in the Toronto region were up, while they continued to fall in and around British Columbia’s Lower Mainland region, which includes Vancouver.

“The Finance Minister’s recent changes to regulations affecting mortgage lending has added to housing market uncertainty among buyers and sellers,” said CREA President Cliff Iverson. “For first-time home buyers, the stress test for those who need mortgage default insurance will cause them to rethink how much home they can afford to buy.”

CREA has concerns that first-time buyers will be priced out of certain markets.

“First-time home buyers, particularly in housing markets with a lack of affordable inventory of single family homes, may be priced out of the market by the new regulations that take effect on October 17th,” said Gregory Klump, CREA’s Chief Economist. “First-time home buyers support a cascade of other homes changing hands, making them the linchpin of the housing market. The federal government will no doubt want to monitor the effect of new regulations on the many varied housing markets across Canada and on the economy, particularly given the uncertain outlook for other private sector engines of economic growth.”

Compared with a year ago, the number of home sales was up 4.2 per cent from September 2015.

The national average price for a home sold in September was up 9.5 per cent compared with a year ago at $474,590.

Excluding the expensive Greater Vancouver and Greater Toronto regions, the average price was $358,884 last month.

With files from Canadian Press

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Toronto area housing prices, sales volume soar in September: real estate board

By David Paddon

TORONTO _ Housing sales in the Toronto area continued to soar last month, with the average price rising 20.4 per cent from September last year to $755,755, the Toronto Real Estate Board reported Wednesday.

The price increases came as the number of transactions in the Greater Toronto Area rose 21.5 per cent, a stark contrast to a big drop in the number of transactions last month in Vancouver’s residential real estate market.

The real estate board said Wednesday there was strong growth in sales transactions for all major home types in the area but a lack of supply limited growth in the City of Toronto itself.

By comparison, figures released Tuesday by Vancouver’s real estate board showed a 32.6 per cent drop in sales transactions compared with September 2015 _ prior to a new 15 per cent provincial tax on foreign buyers that came into effect in August.

Vancouver prices continued to rise but some analysts expect a prolonged decline in demand will lower the sky-high cost of housing in Canada’s most expensive real estate market.

There’s also been anecdotal evidence that some foreign buyers have shifted their focus from Vancouver to other cities, including Toronto. On Monday, the federal government unveiled measures to tighten rules for prospective buyers and lenders.

“The Toronto Real Estate Board will be closely monitoring how the recent changes to federal mortgage lending guidelines and capital gains tax exemption rules impact the housing market in the Greater Toronto Area,” Jason Mercer, the board’s director of market analysis, said in a statement Wednesday.

“While these changes are pointed at the demand for ownership housing, it is important to note that much of the upward pressure on home prices in the GTA has been based on the declining inventory of homes available for sale.”

The real estate board’s benchmark price index was up 18 per cent from September 2015, after adjusting to various types of housing..

The average sale price for detached houses in Toronto proper rose to $1.29 million, up 23 per cent from a year earlier. The comparable price for detached houses in surrounding areas was $928,414, up 26.6 per cent.

By contrast, prices for condos in Toronto proper grew only 6.5 per cent to $446,729. Condo prices in other parts of the Greater Toronto Area were up 19.4 per cent to $367,260.

THE CANADIAN PRESS

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Home sales fall further in August: CREA

National home sales have declined for the fourth straight month, according to the Canadian Real Estate Association.

On a national level, sales fell 3.1% month-over-month in August. However, they were up 10.2% year-over-year.

Sales were down in 60% of the country’s markets, with the Greater Vancouver Area showing the most precipitous decline.

“The sudden introduction of the new property transfer tax on homes purchased by foreign buyers in Metro Vancouver has created a cloud of uncertainty among home buyers and sellers,” CREA President Cliff Iverson said. “That the tax applies to sales that had not yet closed shows how the details for a new tax policy can unnecessarily destabilize housing markets. More broadly, it speaks to the importance of evidence-based decision making to ensure that unintended consequences and collateral damage are minimized when new policies or tighter regulations affecting housing markets are being actively considered.”

Last month was the sixth month in a row sales declined in the Lower Mainland in B.C.

Again, CREA blames the newly-enacted foreign sales tax.

“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” Gregory Klump, CREA’s chief economist, said. “The surprise announcement of the new tax caused sales to brake hard.”

On the price side, August marked the seventh consecutive month of year-over-year price growth.

“Two-storey single family home prices posted a 16.3 percent year-over-year increase in August 2016, as did townhouse/row units,” CREA said in the release. “One-storey single family homes followed close behind with a y-o-y increase of 14.4 percent, while apartment unit prices rose 11.7 percent y-o-y.”

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CREA releases latest sales figures

Canadian home sales have fallen for a third consecutive month.

“Home sales continued to trend lower while price gains further accelerated in the Lower Mainland of British Columbia,” said Gregory Klump, CREA’s Chief Economist. “This suggests that sales are being reined in by a lack of inventory and a further deterioration in affordability. The new 15 per cent property transfer tax on Metro Vancouver home purchases by foreign buyers took effect on August 2nd, so it will take some time before the effect of the new tax on sales and prices can be observed. That said, the new tax will do little in the short term to increase the supply of homes.”

National home sales fell 1.3% month-over-month in July and 2.9% year-over-year.

The average price jumped 14.3% year-over-year last month. Newly listed homes, meanwhile, increased 1.2% month-over-month.

“National sales and price trends continue to be heavily influenced by a handful of places in Ontario and British Columbia and mask significant variations in local housing market trends and conditions across Canada,” said CREA President Cliff Iverson.

Many cities in those two provinces continue to be considered “seller’s markets.

“With sales down and new listings up, the national sales-to-new listings ratio eased to 61.6 percent in July 2016 – its second monthly decline following its peak of 65.3 percent in May. A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively,” CREA said in a release. “The ratio was above 60 percent in about half of all local housing markets in July, virtually all of which continue to be located in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario.”

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Canada markets are facing a turbulent 2016

With oil dropping to less than $30 per barrel and the Canadian dollar reaching its lowest levels in 15 years, the beleaguered Canadian economy is struggling to achieve stability this year despite the continued dynamism in the country’s real estate markets.

Housing prices will rise by nearly 10 per cent this year, TREB predicted. Surging demand in high-volume locales like the Greater Toronto Area will play a crucial part in this significant increase, the same projections noted.

Analysts point at the continued downturn of Canada’s energy sector as a main driver for real estate trends this year.

“Certain oil producing countries and companies have flooded the market with a surplus of supply, driving down the cost of crude. As a result it’s been a downhill slide for the Canadian energy sector that plays a huge role in the national economy,” the Rent Seeker Team wrote in their analysis piece published by The Huffington Post.

“When Canadians lose jobs, the real estate market suffers,” the authors added.

Complicating matters is the increasing presence of foreign capital, especially since a weak loonie fosters exchange rates that make domestic markets attractive to international investors.

“For those who own property, increased foreign investment has been welcomed as they have seen their own property value increase. However, for the majority of Canadians who rent, foreign investment means increased real estate prices that were already unaffordable,” the analysts warned.

All of these developments amid a backdrop of historically low mortgage rates, which are stimulating greater transaction volume.

“As long as borrowing money is cheap, real estate prices won’t be. For those who are priced out of the housing market, while rents have also risen across the country, it is the only option for many,” Rent Seeker said.

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The market investors should be focusing on may surprise you

Phil Soper, chief executive officer of Royal LePage, is bullish on this one surprising market. This is why investors should take note.

Toronto and Vancouver will continue to provide impressive returns for investors in 2016, but it’s another market that may be home to the best prospects.

“The surprise #3 from my perspective is Montreal; I use a hockey metaphor: Montreal in real estate terms hasn’t made the playoffs in years, it’s had a tough time and, as a result, the average home price in Montreal is much lower than other major or minor cities in the country,” Soper told Canadian Real Estate Wealth. “For example, average home prices in St. John’s Newfoundland are higher than in Montrael and that makes no sense based on the economic potential. There is much more opportunity (in Montreal).”

The average price for a property in the Greater Montreal area rose 2.3% in 2015 to $340,207, according to Royal LePage. It’s expected to see further gains in 2016 as well.

According to Soper, the City of Saints has dealt with it share of economic challenges. However, many of those – including its oversupply issues – have worked themselves out.

“As I look to 2016-2017, some of the broad-based macro-economic factors that benefitted B.C. and Ontario, such as the low Canadian dollar and those will all start to work in Montreal’s favour in 2016,” Soper said. “Quebec is both for manufacturing and for services exports – education and financial – it is an exporting province in a big way yet it didn’t see the kind of uptake in export volume that BC and Ontario have seen and I think we are starting to see the front edge of that improvement in the Quebec economy. And the lower Canadian dollar will (help that along).

“I would call it the most improved market in Canada … for 2016.”

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TREB calls for repeal of the MLTT

Amid a backdrop of rising costs in home ownership and waning purchasing power due to a weak petro-currency, the Toronto Real Estate Board (TREB) recommended the abolition of the Municipal Land Transfer Tax (MLTT) last week (January 12).

In a statement posted on its website, the TREB said that the proposed adjustments to the MLTT administration fee are unjust and injurious to buyers, who already have to contend with thousands of dollars in other MLTT payments.

“Between annual property taxes and the MLTT, City Hall has a huge impact on the cost of home ownership,” TREB president Mark McLean said, adding that the tax does nothing to stem the rising tide of greater house prices.

During its first implementation a few years back, the average cost of a home sat at $400,000. Back then, the MLTT’s highest tax rate wasn’t applied to homes with purchase values beneath the average price. However, the government’s neglect to adjust the relief measure has essentially rendered it useless, as the current average is now at $659,000.

The statement noted that the organization abides by Mayor Tory’s platform of working towards better tax equity. According to the TREB, this is in keeping with their goal of ensuring the reduction of City costs on homeowners.

“The proposed budget demonstrates Mayor Tory’s determined leadership by ensuring equity for taxpayers, specifically through bold, yet fair, property tax increases,” McLean said.

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December home data comes in

National home sales fell 0.6% in December from November to December, but increased 10% year-over-year.

Buyers trying to get ahead of changing mortgage rules faced obstacles last month.

“An increasingly short supply of listings in Vancouver and Toronto blunted the impact of changes to mortgage regulations announced in December that were aimed at cooling these housing markets,” CREA President Pauline Aunger said in a release. “Buyers there had been expected to bring forward their purchase decisions before new regulations take effect in February 2016, but they faced a growing shortage of supply. Meanwhile, supply is ample in many other major urban markets, particularly those where buyers have become cautious amid economic uncertainty.”

Sales were down from the previous month in over half of markets.

“December mirrored the main themes of 2015, with strong sales activity and price growth across much of British Columbia and Ontario offsetting declines in activity among oil producing regions,” said Gregory Klump, CREA’s Chief Economist. “The recent decline and uncertain outlook for oil prices means that housing market prospects are unlikely to improve in the near term in regions where job market prospects are tied to oil production.”

Still, actual sales were up 10% year-over-year overall in December, with B.C.’s Lower Mainland, the GTA, and Montreal leading the way.

The national average price rose 12% year-over-year; excluding Greater Vancouver and the GTA, where prices increased by 5.4%. The average Canadian home cost $405,538 in December.

New listings, meanwhile, rose 2.2% from November to December and, according to CREA, the housing market overall remains balanced.

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Investor forecast for 2016

The Canadian Real Estate Association has updated its forecast for 2016, with two provinces expected to lead the way.

“Since CREA’s last forecast published in September, housing markets in British Columbia and Ontario have strengthened further,” CREA said in its updated housing forecast. “As a result, CREA has raised sales and average price forecasts for these provinces.”

National sales for the rest of the year have also been revised higher.

Home sales in Ontario are expected to rise by 9.3%, which would be higher if prices in the GTA were more affordable, CREA said.

“British Columbia is projected to post the largest annual increase in sales activity in 2015 (+21.4 per cent), while Alberta (-21.4 per cent), Saskatchewan (-10.8 per cent), and Nova Scotia (-5.1 per cent) will record annual sales declines,” CREA said. “Activity in Manitoba is forecast to rise by 2.3 per cent this year.”

One bit of bad news, however, is that the recently announced mortgage rule changes – which will impact homes costing more than $500,000 – will have a larger reach than intended.

“Recently announced changes to mortgage regulations that take effect early next year risk cooling housing markets beyond Greater Vancouver and the GTA, their intended targets,” CREA said. “In particular, the regulatory changes are also likely to reduce sales activity in Calgary once they take effect in early 2016.”

Despite this, home sales are expected to reach 498,600 next year.

“The national average price is forecast to edge higher by 1.4 per cent to $448,700 in 2016,” CREA said. “Price gains in 2016 are forecast to be strongest in Ontario (+2.9 per cent) due to an ongoing shortage of listings for single family homes coupled with strong demand for them in and around the GTA.”

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