Higher Borrowing Costs See Buyers Remain on Hold

Lack of affordability and uncertainty remained issues for many would-be home buyers in the Greater Toronto Area (GTA) in October 2023. As a result, sales edged lower compared to last year. However, selling prices remained higher than last year’s levels.

“Record population growth and a relatively resilient GTA economy have kept the overall demand for housing strong. However, more of that demand has been pointed at the rental market, as high borrowing costs and uncertainty on the direction of interest rates has seen many would-be home buyers remain on the sidelines in the short term. When mortgage rates start trending lower, home sales will pick up quickly,” said TRREB President Paul Baron.

REALTORS® reported 4,646 GTA home sales through TRREB’s MLS® System in October 2023 – down 5.8 per cent compared to October 2022. On a month-over-month seasonally- adjusted basis, sales were also down in comparison to September.

New listings in October 2023 were up noticeably compared to the 12-year low reported in October 2022, but up more modestly compared to the 10-year average for October. New listings, on a seasonally-adjusted basis, edged slightly lower month-over-month compared to September 2023.

Risky Private Mortgages On The Rise

The reality for many prospective home purchasers is that it is getting more and more difficult to secure stable financing from conventional financial institutions, with the continual rise of interest rates, and the even-more-challenging ‘qualifying rates’. Many buyers with long closing dates are finding that while they may have previously been approved for a conventional mortgage, banks are rescinding approvals prior to closing, putting buyers in compromising positions. In order to avoid the legal costs and battle of simply failing-to-close on a purchase, many are turning to the unregulated private sector to get deals done.

The Toronto Star had a great article on this uprise of Private Mortgages, and the high costs, and risks, involved.

One issue is private lenders’ agreements are often just one-year contracts, and they could call in the loan at the end of it.

“Even though you’ve been a good borrower, they may be like ‘I need my money back,’” she said, adding she tends to think of private lenders as a last resort. Sialtsis said anyone using a private lender needs to ensure they have a “solid” exit strategy.

While a needed option for many, looking to unregulated funding should be an absolute last-resort option, when all conventional avenues fail.

Fraud in Toronto's Residential Rental Marketplace

The residential rental market in Toronto, a city renowned for its multiculturalism and vibrant lifestyle, has long been a hotspot for real estate investment and urban living. However, amidst the gleaming high-rises and charming neighborhoods, a darker underbelly of fraud has emerged within the rental marketplace. Fraudulent activities within Toronto's residential rental market are a cause for concern, impacting both landlords and tenants and creating a need for increased awareness and vigilance.

The Rising Menace of Rental Fraud

Rental fraud in Toronto encompasses a range of deceptive practices that exploit the high demand for housing, creating lucrative opportunities for scammers. One of the most common forms of rental fraud involves fake listings. Fraudsters lift property information and photos from legitimate listings and post them on various online platforms, offering properties at prices that seem too good to be true. Unsuspecting tenants are then lured into submitting deposits or payments for these non-existent rentals.

Additionally, there are cases where fraudsters pose as landlords or property managers, conducting viewings and collecting application fees before disappearing without a trace. This type of fraud exploits tenants' eagerness to secure a desirable property in a competitive market.

Red Flags and Warning Signs

Several red flags can help tenants and landlords identify potential rental fraud:

1. Unrealistically Low Prices: If a listing's rent is significantly lower than the market average for a similar property, it's essential to exercise caution.

2. Pressure to Act Quickly: Scammers often create a sense of urgency, pressuring applicants to submit payments or personal information hastily.

3. Lack of In-Person Viewing: Beware of landlords or agents who refuse to schedule an in-person viewing or offer excuses for their absence.

4. Requests for Payment Before Signing: Legitimate landlords typically request a deposit or payment after signing a lease agreement, not before.

5. Incomplete or Suspicious Contact Information: Be wary of listings with generic email addresses or phone numbers that don't match the property location.

6. Requests for Personal Information: Fraudsters might ask for sensitive personal and financial information upfront, which should be a major red flag.

Preventing Rental Fraud

Both tenants and landlords can take steps to protect themselves from falling victim to rental fraud:

For Tenants:

1. Research Extensively: Thoroughly research the property, its owner, and the local rental market to verify the legitimacy of the listing.

2. Visit in Person: Whenever possible, conduct an in-person viewing of the property before committing to anything.

3. Deal with Reputable Platforms: Use well-known and reputable online rental platforms, as they tend to have stricter verification processes.

4. Check Landlord References: Ask for references or previous tenant contact information to confirm the landlord's credibility.

For Landlords:

1. Screen Applicants: Implement a rigorous screening process for potential tenants, including background and credit checks.

2. Document Everything: Keep records of all interactions, including emails, messages, and signed agreements.

3. Meet in Person: Whenever feasible, meet potential tenants in person during viewings or lease signings.

4. Use Secure Payment Methods: Encourage tenants to use secure payment methods for deposits and rent.

As Toronto's residential rental market continues to thrive, so does the menace of rental fraud. Tenants and landlords must remain vigilant and informed to protect themselves from falling victim to deceptive practices. By recognizing the red flags, conducting thorough research, and utilizing secure processes, both parties can contribute to a safer and more trustworthy rental marketplace.

Collaborative efforts from regulatory bodies, your favourite real estate professional, and technology platforms can help combat rental fraud, but you must be diligent in your research and tread carefully!

Are you a Landlord or prospective Tenant and need assistance with a rental property? Contact Us anytime!

Interest Rate Talk

In recent years, interest rates in Canada have remained historically low. However, it's important to note that interest rates are subject to fluctuations based on various factors, including the overall economic conditions and monetary policy decisions made by the central bank, the Bank of Canada.  We’ve seen the BOC continue to put upward pressure on interest rates, with continual 0.25 point increases, with most factors pointing to another raise in rates in July.

While interest rates have a profound impact on multiple sectors, they are particularly significant for the real estate market.

Mortgage Affordability:

When interest rates are low, homebuyers can benefit from lower borrowing costs. This can increase affordability and incentivize prospective buyers to enter the market or consider purchasing higher-priced properties. Lower interest rates translate into lower monthly mortgage payments, making homeownership more accessible to a broader range of individuals and potentially driving up demand in the GTA.

Demand and Property Values:

Low interest rates can fuel demand in the real estate market. As more buyers enter the market, the demand for properties increases, leading to rising property values. This can be positive for homeowners, as it can contribute to equity growth and increased net worth.

Housing Market Stability:

While low interest rates can stimulate the real estate market, a sudden and significant increase in interest rates could have the opposite effect. Higher borrowing costs may reduce affordability, which can lead to a decline in demand and a potential slowdown in the housing market. Homeowners looking to sell their properties might face challenges if the market experiences a shift in buyer sentiment due to increased interest rates.

Rental Market:

Interest rate trends can also impact the rental market significantly. Higher interest rates can increase borrowing costs for real estate investors, affecting their profitability and returns. If investors find it less lucrative to purchase properties for rental purposes, the rental market may experience reduced supply, potentially leading to increased rental prices – which is the trend we are seeing all around Toronto and the GTA, with record-high rental prices.

Interest rate trends have a significant influence on the real estate market in the Greater Toronto Area. Low interest rates have contributed to increased affordability, rising property values, and a robust housing market. However, it's important to remember that interest rates are subject to change based on economic conditions and policy decisions. As a result, prospective homebuyers, homeowners, and real estate investors should closely monitor interest rate trends to make informed decisions. Consulting with mortgage professionals and real estate agents can provide valuable insights into the potential impact of interest rate changes on the GTA real estate market.

Marketwatch for March 2023

March 2023 home sales accounted for an increased share of listings in comparison to March 2022, suggesting that competition between buyers is on the rise.

What’s interesting is that we do see a marked decrease in year-over-year average selling price (down 14.6%), however that may not last - since we are still not seeing the influx of 'spring' listings hitting the market, so expect the competition to only increase in the meantime., and bring prices up along with it.

How do we answer the most common question we hear in the industry?

“Whats happening with the home prices in my area?”

That question has been a tough one to succinctly answer for quite some time.  Everyone is well aware that we’ve been going through a rapid transition, being pushed by the Bank of Canada’s interest-rate changes over the last 6 or so months.

Opinions on the home-price trajectory were significantly different depending on your source - even the big-3 banks had wildly different projections (dips year-over-year anywhere from 10% to 40% or more) - however, what we see in a more thorough look at our market segments is often quite different.

One of the biggest factors that influence these statistics (aka clickbait) is the reality that in many cases, what we are seeing ‘on the market’ in a year-versus-lastyear comparison, are not necessarily “like for like” homes.  When the market is on the upward trend, we tend so see more highly-upgraded, highly-desirable properties on the market - which tend to dominate the upper end of the sales in each segment.  However, when we are progressing through a softer marketplace, where prices have been receding from recent highs, many of those top-tier homeowners may opt for the sit-and-wait approach.  

As we search with our Buyer-clients, we start to see this through the available inventory at any given time — the number of purely average homes starts to increase versus those higher-end gems.  These homes of course, tend to command lower prices, even in the best of times - becoming a bit of a self-fulfilling prophecy.  

If we don’t see the best-of-the-best up for sale, it’s obvious that we will see lower sale prices in current statistics.

The good news for Realtors, is that homeowners understanding and acceptance of this more modest market is starting to take hold.  We are seeing smaller gaps between asking and sale prices, as Vendors are adjusting to market realities, and list-prices are becoming more in-line with realistic expectations.   This is a win-win for everybody, as there is nothing more challenging than a Vendor that has the mental valuation of their home from the peak in late 2021!

In summary, in the majority of the communities around the GTA, we are seeing a rather balanced marketplace.  A welcome return to truly ‘negotiating’ a deal, and a much less stressful environment for many buyers.   Sure, there still are those gem’s out there commanding multiple-offers and offer-review dates, but they are much more of a minority than a year ago today.

Curious for more details on your homes valuation in today’s market? Feel free to connect with us - we are always happy to offer free, no-commitment home evaluations, just ask!

Stock Media provided by AndreyPopov / Pond5

Toronto's Vacant Home Tax

As of January 1st, 2023, Toronto has now implemented a “vacant home tax”, directed at properties that are not occupied for at least 6 months of the year.

What you need to know:

Residential properties in Toronto that are unoccupied for more than six months (cumulative) in a calendar year, may be subject to the new City of Toronto's Vacant Home Tax (VHT), unless they meet one of the exemptions. The VHT was created to improve the supply of housing in the city.

1. A declaration form will need to be completed by property owners by February 2, 2023.

2. A property is considered vacant if it is not the principal residence of the owner or any permitted occupants or was not occupied by tenants for at least six months during the previous calendar year or is otherwise deemed to be vacant under the bylaw.

3. The tax is 1 per cent of the current value assessment (CVA) of the home.

4. Exemptions include principal residence, death, repairs, units undergoing major renovation, owner is in care or hospital, court order, transfer of legal ownership and occupancy for full-time employment is in place.

When Buying or Selling:

The Vacant Home Tax has implications for property transactions, both for purchasers (buyers) and vendors (sellers):

• It is the responsibility of buyers and sellers to make the appropriate arrangements to ensure that the declaration has been filed.

• The Vacant Home Tax will form a lien on the property, and any unpaid taxes will become the buyer’s responsibility.

• If a closing occurs between January 1 and the closing of the declaration period on February 2, the seller must complete the declaration prior to the closing, as only the seller will know the property’s occupancy status for the prior year.

• If a closing occurs after the declaration period – February 3 to December 31 – the buyer must submit a declaration in the following year. The buyer qualifies for the “transfer of legal ownership” exemption.

• The seller should provide a copy of the completed and filed property status declaration to the buyer.

• The seller should provide a statutory declaration at closing confirming the filed property status declaration is true and correct.

The goal of the VHT is to increase the supply of housing by discouraging owners from leaving their residential properties unoccupied. Homeowners who choose to keep their properties vacant will be subject to this tax.

GTA REALTORS® Release October Stats

Despite the continued housing market transition to a higher borrowing cost environment, the average selling price in the Greater Toronto Area (GTA) found some support near $1.1 million since the late summer. GTA home sales continued to adjust to substantially higher interest rates in October 2022, both on an annual and monthly basis. However, new listings are also down year-over-year and month-over-month. The persistent lack of inventory helps explain why the downward trend in home prices experienced in the spring has flattened over the past three months.

GTA REALTORS® reported 4,961 sales through the Toronto Regional Real Estate Board’s (TRREB) MLS® System in October 2022 – a similar number to September 2022 but down by 49.1 per cent compared to October 2021. Yearover-year sales declines were similar across major market segments.

New listings were down by 11.6 per cent year-over-year and reached an October level not seen since 2010. New listings were down on an annual basis more so for mid-density and high-density home types, which helps to explain why prices have held up better in these categories compared to detached houses.

“With new listings at or near historic lows, a moderate uptick in demand from current levels would result in a noticeable tightening in the resale housing market in short order. Obviously, there is still a lot of short-term economic uncertainty. In the medium-to-long-term, however, the demand for housing will rebound. Public policy initiatives like the recently introduced provincial More Homes Built Faster Act and strong mayor provisions will help ensure we see more homes being built to affordably meet the needs of new households,” said TRREB President Kevin Crigger.

The MLS® Home Price Index (HPI) Composite Benchmark was down by 1.3 per cent year-over-year in October 2022. The average selling price for all home types combined, at $1,089,428, was down by 5.7 per cent compared to October 2021. The monthly trends for both the MLS® HPI Composite and the average selling price have flattened in recent months following steeper declines in the spring and early summer.

“Home prices in the GTA have found support in recent months because price declines in the spring and summer mitigated the impact of higher borrowing costs on average monthly mortgage payments. The Bank of Canada’s most recent messaging suggests that they are reaching the end of their tightening cycle. Bond yields dipped as a result, suggesting that fixed mortgage rates may trend lower moving forward, which would help affordability,” said TRREB Chief Market Analyst Jason Mercer.

Important Update For Condo Owners

If you currently own a condominium property - especially those who have Tenanted investment properties, these new changes will be of interest. Long overdue, we are finally seeing an up date to the Condominium Act giving Landlords more tools leverage when issues arise.

The Government of Ontario has introduced new changes to the Condominium Act, 1998 related to an expansion of the jurisdiction of the Condominium Authority Tribunal (CAT) – the Province’s virtual tribunal that helps resolve condo-related disputes.

As of January 1st, 2022, the CAT will be granted the authority to handle disputes involving nuisances, annoyances, and disruptions.Specifically, prescribed nuisances under the Condominium Act 1998 will now include “unreasonable” instances of:

• Odour

• Smoke

• Vapour

• Light

• Vibration

Previously, these issues were dealt with through mediation, arbitration, or the courts, leading to costly and time-consuming proceedings. Under the current rules, landlords and condo owners often have to foot the bill for these types of disputes.

The new rules will provide a faster and more cost-effective dispute resolution mechanism for condo owners and their tenants. It is important to note that the expanded jurisdiction of the CAT will not have a direct impact on eviction proceedings, as those issues are still governed by the Landlord and Tenant Board.

Applications for condominium-related disputes can be found on CAT’s online portal and dispute resolution services are offered at a total cost of $200.

OREA will be releasing more information on updates to the CAT’s jurisdiction as they become available. For more information about the CAT, please visit the Condominium Authority of Ontario’s website at: www.condoauthorityontario.ca.

We will post more details as further information is released.

A busy Summer season!

As we move from Spring into Summer, historical trends tell us that the Real Estate market tends to slow, as people begin to focus a little on family activities as school ends for the year. Well 2021 has continued to surprise! Despite various models suggesting that our ‘bubble’ was due to burst, or that we would start to see some rapid corrections in the market, we’ve seen virtually none of that at all. While volume is down slightly, the sales that are occuring are still very strong - this is clearly continuing to be a ‘sellers’ market.

We’ve been heads-down working with our Buyer and Seller clients, navigating this incredibly fast-paced environment, and are thrilled with our success! With pandemic restrictions slowly fading away, as our communities as a whole become vaccinated, we expect that as things slowly return to normal, we will once again get to enjoy a bit more face-to-face work with our prospects and Clients — heck, we actually kind of miss our famous VIP Open Houses!

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This month has been a busy one, and are thrilled to announce some fantastic sales and purchases with our Clients!

118 Gilson Street - Just Purchased!

2 Eldad Drive - Record Price!

645 Atwood Cres - Record Price!

24 Peter Street - Sold!

Updated for 2021: First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive helps people across Canada purchase their first home. The program offers 5 or 10% of the home’s purchase price to put toward a down payment. This addition to your down payment lowers your mortgage carrying costs, making homeownership more affordable.

New Program Update available Spring 2021!

First time home buyers purchasing a home in the Toronto, Vancouver, or Victoria Census Metropolitan Areas will be eligible for an increased Qualifying Annual Income of $150,000 instead of $120,000, and an increased total borrowing amount of 4.5 instead of 4.0 times your qualifying income.

What Is It?

The First-Time Home Buyer Incentive makes it easier for you to buy a home and lower your monthly mortgage payments. This program is a shared equity mortgage. This means that the government shares in the upside and downside of the property value. It allows you to borrow 5 or 10% of the purchase price of a home. You pay back the same percentage of the value of your home when you sell it or within a 25-year window.

Some Basic Qualification Guidelines

These are a few criteria to determine your eligibility for the First-Time Home Buyer Incentive:

• your total annual qualifying income doesn’t exceed $120,000 ($150,000 if the home you are purchasing is in Toronto, Vancouver, or Victoria)

• your total borrowing is no more than 4 times your qualifying income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria )

• you or your partner are a first-time homebuyer

• you are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada

• you meet the minimum down payment requirements with traditional funds (savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member)

Full Program Details

Follow the link below for details on this excellent program for first-time Home Buyers!

GTA REALTORS® Release January 2021 Stats

With the January sales numbers rolling in, our thoughts on the recent activity in the market are proving correct all around the GTA. Differing opinions if this is truly a ‘bubble’, but regardless, the market is certainly on fire.

• January 2021 home sales amounted to 6,928 – up by more than 50 per cent compared to January 2020. This strong start to 2021 included sales growth across all major segments including condominium apartments, both in the City of Toronto and surrounding GTA regions.
  

• New listings were also up on a year-over-year basis in January, but not by the same annual rate as sales. This means market conditions tightened compared to January 2020, resulting in the continuation of double-digit growth in the MLS® Home Price Index and the average selling price.

• The average selling price for January 2021 was up by 15.5 per cent to $967,885 year-over-year. The MLS® HPI Composite Benchmark was up by 11.9 per cent over the same period.

• Price growth was driven by the low-rise market segments, while the average condo apartment price was down in Toronto. However, if we continue to see condo sales growth outstrip condo listings growth, we could start to see renewed growth in condo prices later this year.

You can review the full details of the most recent statistics by downloading this months MarketWatch (PDF).

Toronto & GTA: Market Perspective

It is almost like you need to do a double-take and check the calendar to see if it is indeed 2021, and not 2017. Toronto and most of the GTA has been experiencing all the hallmarks of a continually strong ‘Sellers’ market, with many of the same hallmarks of the 2017 peak.

Mostly attributed to the detached market, we are back to seeing multiple-offer situations on nearly every property on the lower side of the price range. If you are looking for a detach or semi-detached home and have less than $1.7MM to spend, you should prepare yourself for some solid competition.

Condos are a bit of a different scenario - in December we had sales of 2,193 units, and there are currently available for sale 2,934 units on MLS, which equals about 1.33 months' supply. While it has been difficult to move some of the smaller bachelor and studio condos, with a bit of time the larger units are still moving well. Compare that to a total availability of just 1,045 freehold (detach, semi, town) available in all of Toronto.

For comparison purposes, a typical ‘balanced market’ usually has about 4-6 months of ‘supply’ available, versus the sales volume. Interesting to consider - with a total of just under 4,000 total properties for sale, and over 58,000+ registered Agents in the Toronto Board… you can see how there can be immense pressure on what is available.

Unfortunately, that competition for properties - and between Agents - often comes along with a lack of proper advice, borderline unethical behaviour, and some Agents putting their own needs ahead of their Clients. We are seeing all sorts of crazy ‘offers’, especially for new Buyers, going into situations they are simply not prepared for — no protection for arranging financing, or home inspections in many cases. The lesson here is that despite the bit of bedlam the current market is bringing us, it does not reduce the liability of an Agent, nor mean that you should ignore all the risks just to try to win a deal.

There are many other ways to protect yourself as both a Buyer or a Seller, do things the right way, and still come out ahead.

If you are thinking of buying or selling, before you make a move - call us! We are always available to talk about strategy, the marketplace, and of course here to offer the best possible advice and guidance we can, no strings attached.

Investment Property "Flips" - It Takes a Team

The discussions about ‘flipping’ an investment property come all the time - with so many people watching the endless number of TV programs showcasing investment properties, it can often seem much easier than it really is.

The reality, is that many of these projects - despite the best intentions and target - get caught up in all those small details, most people don’t even consider beforehand. We see well intentioned Clients who are attempting to be their own ‘project manager’, get hampered by decision-fatigue. The seemingly endless stream of small decisions to be made along the way, and having to constantly battle that balance between what they personally may like, versus what the market may demand.

In all honesty, most people should rely heavily on an experienced project manager / general contractor for the bigger jobs - they remove the personal connection, provide a buffer to trades and suppliers, and can advise and guide based on numerous other projects they’ve completed in the past. It’s hard to provide better resources yourself, than an experienced contractor.

The Team: Architect, Client and Contractor

We were thrilled to be a part of our Clients most recent project - updating and renovating a small bungalow in Markham Village, for the express purpose of maximizing their financial return. Our contribution started with a deep analysis of the market conditions and trends, to then guide the scope and direction of the overall project, to best position the home for later sale.

David Johnston was the key architect on the project, and was able to capture our suggestions and design them into an attainable project. Old Village Construction was the general contractor, and really the driving force behind the project - with Graham Dewar leading the charge to turn our paper wish-list and design, into the gorgeous home we all see today - 12 Gleason Avenue in Markham - a tiny 1 bedroom bungalow, that evolved into a rustic-yet-modern 4 bedroom, 2-storey showcase home.

The take-away from this is simple: If you want to truly maximize the potential of a real estate project, ensure you have fully engaged a proper team. Everyone from your Realtor, to your designer, architect, project manager and contractor all have important contributions to the team!

Want to learn more about the behind-the-scenes of this exciting build? Or just want to talk about a potential project you had in mind? We’re always happy to discuss our thoughts - contact us anytime!