Good morning everyone;
As the summer winds down and back to school fast approaches it seems like the real estate market has almost skipped its lazy days of summer. The long drawn out winter seem to have pushed back the market. Early spring seemed slower than usual and summer seemed busier than usual.
In the GTA Market – Mid-August
TORONTO, August 18, 2014 – Toronto Real Estate Board President Paul Etherington announced midmonth
figures for August 2014 that point to continued strength in the GTA housing market. There were 3,504 sales reported through the TorontoMLS system during the first 14 days of August. This result was up by 7.6 per cent compared to the same period in August 2013. “Sales were up strongly for all major home types across the GTA through the first two weeks of August.
This means that many different types of buyers were active in the marketplace, including first-time buyers purchasing newly listed condominium apartments and existing homeowners changing their housing situation to meet their current needs,” said Mr. Etherington. Tight market conditions, especially for detached and semi-detached houses, drove strong price growth in
the first half of August. The overall average selling price was up by 9.4 per cent year-over-year to $538,530. The strongest price growth was experienced in the detached market segment, with the average detached price up by 12.3 per cent year-over-year. “During the first 14 days of August, the number of home sales grew at a faster pace year-over-year
compared to the number of homes listed for sale. This means that competition between buyers increased relative to the same period last year, which explains the continuation of very strong average price growth in the GTA,” said Jason Mercer, TREB’s Director of Market Analysis.
Do the math: Canadian real estate market will not crash by: Mark Weisleder
The doom and gloom stories have started again about the Canadian real estate market. Here are some signs:
Canadians debt to income ratio is at 160 per cent, which means $1.60 or debt for every $1 of income;
Canadian real estate is 20 per cent overvalued
In Toronto, too many condominium units are coming onto the market. If there are no buyers or renters, prices will fall.
If interest rates rise 1 percentage point, many of those with a mortgage will be in trouble.
Canada is not creating jobs as quickly as the U.S.
I see it another way. If you look at the market fundamentals, you can conclude the real estate market is extremely healthy.
I spoke to Brad Lamb, one of Canada’s leading real estate brokerages, who has developed projects in Toronto, Ottawa, Calgary and Edmonton. You would expect him to put a positive face on things, but here are his arguments why things aren’t what they seem.
- No place to build low rise homes anymore
In 2001, 30,000 new homes were built in the GTA, of which 22,000 were low rise homes and the rest were condominiums. Buyers were able to find new detached homes in the GTA in areas such as Mississauga, Oakville, Oshawa and Milton. However, as land became more expensive and more greenbelts established across Ontario, the result is not enough land available to build that many low rise homes. As such, for the last few years, we have seen the opposite; 22,000 new condominium units every year and 8,000 detached homes being built. But we still have the same number of buyers coming into the GTA, who need to find a home to work or raise a family.
- There are few apartment buildings being built anymore.
Due to the rent control laws, it has made more sense for years for developers to build condominiums instead of rental apartments. Yet young people entering the workforce still need a place to live. That is why the vacancy rate for new condominiums in Toronto is still close to 1%. If the units are filled with tenants or owners, prices cannot crash.
- Will interest rates go up at all?
For the past 4 years, banks have been saying that rates should begin to rise within 18 months. Same story today. Although it is true that governments cannot by themselves influence interest rate policy, the fact is that most of the countries in the world have so much debt that they would likely go broke if interest rates rose, so this is the number 1 reason why this will not happen. In addition, rising rates go along with an overheated economy. Canada is very far from being over-heated, with growth averaging about 2% the last few years and likely to remain the same.
- The debt to income ratio is a misleading statistic.
When analysts comment on the 160% ratio between debt and equity, they do not distinguish between credit card debt, which Brad likes to refer to as “stupid debt” and mortgage interest debt, which is the interest you pay on your home or on investment properties.
With interest rates at historic lows, most Canadians are able to carry the cost of their own mortgage debt and the rental income from their investment properties in most cases pays for all of the property expenses. If these analysts would do the right thing and separate out the good debt of Canadians from the bad debt, we would be nowhere near any dangerous debt levels in Canada. Do the math. Canadian real estate remains one of the best investments out there.
Mark Weisleder is a lawyer, author and speaker to the real estate industry.
Canadian Housing Market To Cool Down In 2015 If Interest Rates Rise: RBC
TORONTO – RBC Economics says higher interest rates will put a strain on the Canadian housing market in 2015 and “substantially” moderate prices increases.
In its latest Canadian housing forecast, the bank (TSX:RY) says Canada’s current historically low interest rates are not “sustainable” and it forecasts longer-term interest rates will rise by the end of the year in anticipation of a return to tightening mode by the Bank of Canada in 2015.
RBC says if current rates rise, it anticipates home resales to fall by 0.9 per cent to 463,100 units next year following an increase of 2.1 per cent to 467,200 units in 2014, while it sees home prices increasing just 1.1 per cent in 2015, compared with a jump of 4.3 per cent this year.
RBC describes those developments as a cooling not a crash in the housing market, which is supported by a variety of other factors, including steady immigration rates and good employment outlook.
The report said condo construction, particularly in the major cities, will be one of the main reasons the housing market will slow in 2015 as more units become available.
It cautioned that although there will be slowdown in 2015, the big impact on the Canadian housing market will be likely not be seen until 2016 once higher interest rates are “normalized.”
My 2 cents
My personal thought that even if the condo market slows the resale market will remain quite robust. Many condo owners are searching for that freehold property to upsize to.
Freehold inventory levels are still over all low and it’s for this main reason that we have been experiencing bidding wars for the last several years.
If and when interest rates increase it most likely will be at slow pace allowing the market to pace itself. Rates will not hike up by major amounts overnight. An increase in interest rates may take some buyers out of the market but bidding wars will still most likely be present if even with fewer competing bids.
Have a great work week! Anthony