Blog

24 Nov 2017
Toronto Real Estate

Toronto Real Estate: What We Can Expect in 2018

Posted by Andrew Dybenko

When Buying or Selling Toronto Real Estate, it’s important to look past the headlines to better understand what’s actually taking place. Real Estate performance can often be quite localized. Drilling down to see what is happening in your neighbourhood is essential, but so is having a broader understanding of the market. Knowing how the market is behaving overall can give you insight as to how your neighbourhood might perform. We discovered some significant variances in how the GTA’s market is performing in different price segments. The chart below highlights this by showing supply (Active Listings in mid November), demand (Sales in October) and who has the upper hand in each price segment.

Price Segment Active Listings
November 2017
(21,800)
GTA Sales
October 2017
(7,120)
MOI Market Conditions
Below $800,000 52% (11,400) 67.0% 2.4 Sellers
$800,000 – $999,999 15% (3300) 14.4% 3.1 Sellers
$1M – $1.5M 17% (3700) 12.1% 5.3 Balanced
$1.5 – $2M 7.5% (1500) 3.4% 6.1 Buyers
$2M+ 8.5% (1900) 2.9% 9.1 Buyers

 

While it’s common to have a higher number of listings and months of inventory (MOI) in higher price points, the difference we are seeing this fall is worth noting. Currently, properties priced under $800,000 make up 52% of the listings, but account for a 67% share of the sales taking place. For those of you searching for a property under $800,000, overall supply in the GTA is tight. Although, not as tight as this time last year when the MOI for most Toronto neighbourhoods was below 2.

The price point between $800,000 – $1M currently makes up 15% of the listings while accounting for a similar number of sales. This price point remains competitive and in the Seller’s favour. For most neighbouhoods, the closer you are to downtown the more it seems to be tilting in the Seller’s favour.   

As you enter the price points above $1M, things start to change. The percent of sales no longer corresponds to the number of active listings, and the MOI shoots above 4. Buyers looking in the $1-1.5M range can expect fairly balanced conditions. A breath of fresh air for Buyers in comparison to the drum tight supply constraints we saw early in 2017. Those looking above $1.5 Million are seeing very favourable conditions for Buyers. The fact is that the GTA seems to be oversupplied with high priced properties, and continues to be short supplied when it comes to more affordable options.

The Squeeze is on…

With the new stress test regulations becoming a reality in January, we should see these trends among price segments continue into the New Year. As Buyers purchasing power is reduced, more Buyers will have to consider lower priced options. We expect to see even more Buyers forced to crowd into the lower price segment. If supply doesn’t match the increase in demand in this segment, Buyers will head to the sidelines and either rent or look outside the GTA.

Higher price segments need to see a large uptick in demand to deplete current inventory levels. Otherwise price drops in these segments should be expected as Sellers compete for the available shoppers. This could create more attractive purchasing conditions for Buyers looking to move up the property ladder, but not so great for those retiring Baby Boomers with large homes to sell.

Where do you think the Toronto Real Estate market is going? Any questions or comments, shoot me an email at andrew@relativerealty.com!


19 Oct 2017
Toronto Real Estate crashing

Toronto Real Estate: Crashing, Rebounding or Flattening?

Posted by Andrew Dybenko

Toronto’s Real Estate Market remains in a state of flux since its spring shake-up following an incredible first quarter of the year. This has left many on edge, contemplating a purchase or sale and questioning whether Toronto Real Estate is crashing or rebounding. Here’s what the bulls and bears are saying on Toronto’s market.

What the Bulls are saying:

  • Prices are up 6% from August to September, the first month/month price increase since April.
  • The rental market remains incredibly hot. With low vacancy and prices on the rise, finding a rental in Toronto is no easy feat.
  • Toronto is likely to follow Vancouver’s foot steps, that is, to rebound shortly after the introduction of the Foreign Buyer Tax and to continue to see the condo market surge.
  • New stress tests and mortgage regulations introduced in November 2016 failed to cool the market. Why would the most recent announcement be different?
  • Toronto’s employment is high and economy is strong.
  • Interest rates remain low and have simply returned to 2014 levels.

What the Bears are saying:

  • Further stress measures were just introduced and will take effect on January 1, 2018. This new stress test will reduce uninsured Buyers (those purchasing with more than 20%) purchasing power.
  • Interest Rates have increased 0.5% and most are predicting another 0.5% in 2018. Further reducing Buyers affordability.
  • New listings are up 9.4% as of September. Active listings are up 69% from the same time in 2016, meaning there is more supply which makes for a less competitive market.
  • September sales were down 35% from 2016, and so far in October, we are trending toward similar numbers.
  • Days on Market are up 50% from last year.

What to conclude:

It’s true that we have seen a rebound in prices in September and so far in October. Even though much of this increase can be attributed to a typical seasonal adjustment, the fact that Buyers are willing to pay more in the fall then the summer was an important signal. While the decline experienced since March has flattened significantly, overall the Greater Toronto Area still seems to be in a declining trend. This is because of how much prices rose in the first quarter of 2017. Prices in the GTA were up a whopping 33% on a year/year basis in March while that year/year appreciation has since flattened to a “measly” 2.8%.

We have yet to see prices fall on year/year basis. However that is likely still to come, given the new headwinds on demand and the continuous supply that has been coming to market. Prices need to increase by 12.8% from now to February to avoid year over year depreciation. This increase would be a few percentage points above what is typical and seems unlikely given current levels of supply and demand. In fact, there is a chance that prices in November could show negative year/year results – a headline that will certainly impact Buyers and Sellers psyche.

Some things to consider going forward:

  • While year over year appreciation is flattening, TREBs Home Price index (HPI) is still coming in at 12.2% for September. Indicating you can still expect to spend 12% more for the same home today than you were a year ago.
  • Considering Selling in 2018? Don’t simply wait until the spring to list your home! Get your home sale ready now. Try to put your home on the market when you are “comparatively attractive” with minimal competition.
  • The new stress test could actually increase demand for the next couple of months.  But it’s anticipated to have a significant impact on Buyers purchasing power once it takes effect.
  • Condos will continue to outperform freehold properties in 2018, as Buyers are forced to more affordable housing options.
  • After some recent years of the reverse, it’s likely the 416 will outperform the 905 in 2018. More supply and less competition will allow Buyers to reconsider what location works best for them (For Globe Subscribers).
  • Media coverage could get ugly in 2018. Negative year/year price reporting isn’t something that’s happened for some time. If we don’t see a surge in demand or drop in supply, it could be the story dominating Toronto’s headlines heading into the 2018 spring market. Negative media often discourages Sellers from coming to market, leading to an overall reduction in the number of sales. It also greatly impacts Buyers psyche. Adjusting your pricing and negotiating tactics accordingly will prove important.
  • Demand for homes within a median income budget will be the most competitive segment especially given how tight the rental market is.

28 Jun 2017

GTA Real Estate: Rent Vs. Buy

Posted by Andrew Dybenko

Summer is here, and the second quarter of 2017 is just about complete! Many are wondering what’s next for the GTA Real Estate market. To bring some perspective back to where things currently stand, I thought it might be a great time to do a new rent vs buy analysis. Before digging into this, let’s do a quick recap of what’s happened to Toronto Real Estate over the last few months to bring us here.

Prices increased substantially in January, February, and again in March, when we were seeing close 30% year/year appreciation. In April, the Ontario Government announced new measures to cool the market causing a rise in new and active listings. This was the most significant shift in market conditions we have seen since 2008.  Providing a more balanced market and one that favours Buyers in some GTA neighbourhoods. Prices have retreated from the highs reached in Q1. The most recent stats for mid June indicate prices are up 6% on year/year basis, but down about 13.5% from March. Keep in mind this is based on the average price for the GTA and may or may not be representative of your specific situation.  

Many Home Buyers who aren’t used to having this much clout are now sitting back and waiting to see what happens next. This article indicates that first-time buyers planning to buy a home in the next year comprise only 40 per cent of anticipated purchases, down from 53 per cent in a November survey. First Time Buyers often drive the market and can have a domino effect on other Buyers/Sellers ability to make a move. While Buyers are taking a pause, in comes moneybags Warren Buffet. Buffet’s most recent investment in Home Capital shows he is confident that a Canadian housing crash is not imminent.  

Investor purchases aside, I thought it would be a good time to step back and take a look at things with a rent vs buy approach. This analysis should help those renting decide if they should be taking advantage of current conditions.

What we found is that whether to rent or buy might not be the right question. Where to rent and where to buy is more telling. The results provide some insight in what areas and housing type are likely to see further price drops, and what segments are more likely to see a more rapid rebound.  

Appealing…

High Park North – 3 Bed 2 Bath Home | Rent – $3,500 | Purchase – $1,000,000

Many Buyers in areas across the city like High Park North are seeing significant discounts from the early spring. Finding a Freehold for $150,000 less than you were paying a few months back has been a reality this June. However, Buyers should be cautious not to overplay their hand. If all things remain the same, waiting too long for a further price drop could backfire, as inventory may begin to tighten again. As Sellers adjust to the new pricing realities less homes are likely to come to market in Toronto’s popular neighbourhoods.

Check out our analysis below to see how renting that Million dollar house in High Park North might end up costing you more in the long run as you factor in equity gained through ownership. Now if you are certain prices are going to drop further or anticipate a large interest rate increase, not Buying is an easy decision. But if you think the market is likely to level off with potential for small gains going forward, a purchase can make sense.  Unless of course you know of a more stable investment that you feel is certain to outperform your 200k downpayment.  

High Park North 3 Bedroom 2 Bath with parking
Rental 3,500 Purchase 1,000,000
First/Last Deposit 7,000 Down Payment 200,000
Closing Costs less rebate 26,175
Total 7,000 Total 226,175
Rent 3,500 Mortgage 3,600
Property Taxes Property Taxes 500
Maintenance Fees Maintenance Fees
Utilities and upkeep 300 Utilities and upkeep 800
Monthly Cost 3,800 Monthly Cost 4,900
Monthly Equity Gained zero Monthly Equity Gained 2,033
Monthly Expenses 3,800 Monthly Expenses 2,867

Debatable?

King East-Rivertowne Condo | Rent – $1,675 | Purchase – $430,000

Like most downtown condos King East saw prices surge in the first quarter of 2017. Condos in the core didn’t experience the same decrease in prices that most freeholds saw in May, we are seeing more of a pull back in June. The supply has been so low for most of 2017 that we could see a further injection in listings at some point this year similar to what the freehold market experienced in May. However, rental rates have also risen and the rental market remains tight and always seems to get tighter in the fall.  When you factor in the equity gained, Buying can still make sense, but the lines start to get more blurred with a lower downpayment.  If Buying with less than 20% down you need to recoup the premium you paid for mortgage insurance.

King East Rivertowne Condo 1 Bedroom 550 Square Feet
Rental 1,675 Purchase 430,000 430,000
First/Last Deposit 3,350 Down Payment 5% / 20% 21,500 86,000
Cash Required for Closing Costs
Less FTB Rebate
28,190 3,375
Total 3,350  Total 49,690 89,375
Rent 1,675 Mortgage 1,924 1,558
Property Taxes Property Taxes 250 250
Maintenance Fees Maintenance Fees 325 325
Utilities and upkeep 100 Utilities and upkeep 200 200
Monthly Cost 1,775 Monthly Cost 2,699 2,333
Monthly Equity Gained Monthly Equity Gained 1,075 871
Monthly Expenses 1,775 Monthly Expenses 1,624 1,462

Yikes

Richmond Hill Crosby – 3 Bed Bungalow | Rent – $1,900 | Purchase – $1,250,000

Is there more pain to come? As you can see from our rent vs buy analysis in Richmond Hill Crosby neighbourhood, speculation is rampant. Three Bedroom Bungalows that tend to rent for as little as $1800-1900 are selling for $1.25M. These speculative purchases are more susceptible to price decreases as the numbers don’t add up. Buyers here are paying $4,000 more a month for the privilege to own, when you subtract the equity they will gain they are still $2,000/month worse off. People are Buying here with the intention to build or simply because they think prices will increase which could prove to be a risky proposition.

Richmond Hill – Crosby 3 Bedroom Bungalow
Rental 1,900 Purchase 1,250,000
First/Last Deposit 3,800 Down Payment 20% 250,000
Closing Costs less rebate 19,175
Total 3,800 Total 269,175
Rent 1,900 Mortgage 4,530
Property Taxes Property Taxes 750
Maintenance Fees Maintenance Fees
Utilities and upkeep 300 Utilities and upkeep 800
Insurance 60 Insurance 130
Monthly Cost 2,260 Monthly Cost 6,210
Monthly Equity Gained Monthly Equity Gained 2,033
Monthly Expenses 2,260 Monthly Expenses 4,176

05 Jun 2017

Toronto Home Prices Down?! What’s Happened

Posted by Andrew Dybenko

Toronto’s Real Estate Market could be in for some negative headlines this week as May’s statistics are released. After a wild start to the year where Buyers were willing to trade their first born and a pile of money for a home in the GTA, we are finally seeing a change in what’s been a pretty mental market. May is typically a month that attracts the highest average price for the year, but this year is a bit different.

What has changed?

A lot more listings and a little less demand. The number of active listings has changed fairly substantially, up over 50% in many areas across the GTA from May 2016, and up about 50% from March and April of this year. The number of sales has actually dropped about 5% from April, 7% from March and about 15% from May 2016.

How big is this change?

This feels like the biggest shift in market conditions experienced since the Fall of 2008 when the market experienced a downturn caused by the economic crisis at that time. However, that change was prompted by a reduction in demand due to consumer confidence, where this change is being fuelled by an increase in supply. It’s not unusual to see these types of conditions occur in individual neighbourhoods as we head to the end of spring, but the scale and impact seems to be larger this year. The increase in supply could also be short lived as many Sellers unable to achieve their anticipated price are likely to pull their homes off the market heading into summer.

What caused the change?

The fall of Home Capital and the Government of Ontario’s introduction of a Speculator/Foreign Buyer Tax has certainly suppressed demand and stopped the unsustainable appreciation levels that we were seeing earlier this year; however, these changes wouldn’t be a reason for Sellers to list their homes. Sellers would have been smart to rush to list their property prior to the announcement. It’s the number of active listings that is driving the change in market conditions.

The increase in the number of listings could be seen as a natural occurrence caused by the fact that new listings were down and sales were up for 4 straight months from December to March. The bump in listings was likely to occur at some point, given that we were short changed early in the year. As word got out about what your neighbour down the street was able to sell their home for, even more Sellers came to market that may not have been planning on selling this spring.

I can’t tell you the number of people I talk to who say they will just list in the spring because that is the best time to sell your house, and articles like these don’t help this line of thinking. Getting caught up in the timing of the market can sometimes be misguided, but understanding supply levels and demand triggers is proving to be more and more important.

What to consider going forward.

Price appreciation on a year/year basis is still likely to finish the year quite strong. It’s the benchmark set in March that we are seeing some retraction from.

Total Sales on a year to date basis are strong and remain above 2016 levels. If the number of sales remains similar to 2016 and the number of new listings coming to market go back to normal levels conditions will start tightening again and head back in Sellers favour.

The number of Buyers not able to close on their purchase has increased as some Buyers who chose to buy first and sell second are not able to sell for what they expected/needed.

The impact on the downtown core and some of the condo market has been more muted. Perhaps because of Buyers limited affordability they are being pushed from Freehold to Condos. This was discussed in this previous post. However, the Ontario Government’s April announcement expanding rent controls to all private rental units is going to have an impact on condo investors’ bottom line. Rent increases will be limited to 2.5%. Given this new provision, the price you get when finding a new tenant could prove very important and may increase the amount of downtime between tenants.

While some properties are still fetching top dollar, Buyers who have been waiting for a change to market conditions should start looking for opportunities. First Time Buyers, Move up Buyers and some investors may see new opportunities emerge.

Sellers should pay close attention to inventory levels in their area and have their home market ready, but wait to list at a time when inventory levels are lower. Have a backup plan in place in case their original selling strategy is unsuccessful.

Be cautious of things that could further impact demand, like an increase in interest rates or unemployment, and take a long term approach to your Real Estate decisions.


20 Apr 2017
Toronto Real Estate

To Stay or To Sell? Toronto Real Estate’s Big Question

Posted by Andrew Dybenko

Have you ever sat back and thought if I could get $2 Million Dollars [or insert your crazy number here] for my house, I would sell it tomorrow? This wishful thinking has become a reality for some Toronto Real Estate owners. Price appreciation across the GTA set new records for the first quarter of 2017 with year/year appreciation coming in at the 20-30% range. The Real Estate frenzy has spread from Toronto, to the GTA, and across Southern Ontario prompting the Ontario Government to finally step in to attempt to cool things off. Last week’s headlines of alternative lender Home Capital’s shenanigans are sure to add an extra layer of uncertainty in terms of how the market will respond. We will touch on the Ontario government’s changes in a future posts, but for now, we spent a bit of time talking to GTA homeowners about whether they plan to stay in the city or take the money and run.

Many Toronto residents are very much in the middle of their lives here. They work in the city, their kids go to school down the street, their friends and community are all close by. Toronto is home. So while crazy jumps in appreciation are exciting for these homeowners, it’s not going to prompt them to sell. They’re in it for the long haul, and fluctuations in the market today are unlikely to negatively affect them in the future. But for those who are no longer tied to the city, and/or have a move on their radar in the next 5 years or so, I was curious about a couple things: 1/ Is there any fear of a market correction and possibly losing money if they don’t cash out now?, and 2/ Do they have a magic number that would persuade them sell without hesitation?  Here is what people are saying…

Toronto homeowners remain fairly bullish on the market; would-be Sellers I spoke with are not expecting prices to pull back, though about half do expect appreciation to cool. As for that magic number, it seems that recent appreciation is more of an afterthought when deciding whether or not to sell their home (maybe this would change in a different market). On average, it seems about 30% above current market value would be enough to tempt most people to sell ahead of expectation.  

Money isn’t everything: Community, family and lifestyle are bigger drivers than money which is why many choose not to sell as they ease into retirement. Take Ann for instance: Ann is a single women in Leslieville who lives in 2 story Detached home with her dog, Freddie. She’s been retired for 5 years now, but selling isn’t on her radar. She expects this to be at least 10 years down the road, and really depends on whether she finds the maintenance of her home manageable. People like Ann have seen the community grow and improve, and have ties that keep her in the area. Ann isn’t the only person I spoke with who indicated that their community plays a large role in their decision. Sports groups, neighbours, and proximity to family are often bigger influences than sale price when deciding whether or not to sell their current home.  

Where the heck do we go: Yes, Toronto’s house prices have been raging, but so have the GTA’s as well as most Southern Ontario communities, which has would-be Sellers asking: where do we go? The thought of moving can be daunting, and the thought of moving in today’s market can be downright overwhelming. Bidding wars, less home for your buck, foregoing proper due diligence just to secure a property make staying where they are far more appealing for some.

Millennials cramping your style: While most retirees welcome the home equity gained from recent home appreciation, this is a double edge sword: these gains are making the housing and rental market unaffordable for millennials which means parents may not be empty nesters for a while yet. John and Lynn have already purchased their home in Honduras where they plan on spending part of their retirement, but will hang on to their GTA home until their children – all in their early 20’s – have launched their careers.

Condo’s aren’t for everyone: Many potential downsizers would be open to a smaller house, but are not keen on a condo. Chalene and her husband are both retired and own a 2200 sqft 2 story home in Pickering, and like most of her friends, would love to downsize to a bungalow. But if they plan to stay in the same community, the numbers just don’t add up.  

The market is crazy, without a doubt, but residents I spoke to love their city and have faith the market will continue to grow, even if the appreciation rates fall to a more reasonable pace. Many homeowners that could cash out (ka-ching!) are finding that the reasons to stay far outweigh any amount of money to go. It will be interesting to see how the market is performing in a year from now and if this sentiment remains true.

Comments or questions? Shoot me an email at andrew@relativerealty.com.


20 Apr 2017
Ups & Downs of Toronto Real Estate this Spring

Navigating the Toronto Real Estate Market this Spring

Posted by Andrew Dybenko

If there’s one thing we can say for certain about this year’s spring market, it’s that it’s going to be an interesting one. The warmer weather, longer days, and backyards in bloom make spring an ideal time for buying and selling a new property. The timing is perfect for families looking to settle into a new home before the start of the next school year, and so the market tends to be busier in the spring months. Of course, nothing about the Toronto Real Estate market as of late has been predictable. Yes, we expect price appreciation, but I don’t think anyone would have guessed the recent 30% jumps in a market that some have anticipated to ‘crash’ for the last 5 years. This year, it’s looking like the spring market is shaping up to be a stressful time for both buyers and sellers. Government regulations announced today include foreign buyer taxes, vacancy tax, rent controls, and supply inducing measures, among others. Will rent controls and foreign buyer tax make investment properties less appealing leaving more supply for would-be residents? Will increased interest rates make a GTA property just beyond a buyer’s reach? It’s intent is to slow crazy appreciation rates, but will that really make Toronto more affordable? Time will tell, but for now, we have a few tips for buyers and sellers as we head into an uncertain spring.

Don’t get caught up in the hype and instead focus on inventory levels:  While new government interventions or just the announcement of intervention may influence Buyers and Sellers, its impact on inventory levels is what you should be looking at. You want to buy when supply is high and sell when supply is low to get the most value from your property transaction. Consider how these interventions will impact the market. For instance, in the fall, I highlighted how a government announcement would likely have a positive impact on condo appreciation as would-be home buyers will be forced to consider other products, read more here 

Consider “Solds’ beyond the last 3 comparables: Realtors will often show you the 3 most recent comparables when determining value for a purchase or sale. While this is probably the best way to determine value in a more reasonable market, Toronto buyers and sellers should be considering a longer history to determine how sustainable the recent price growth is. Buyers purchasing prior to selling should be particular cautious and consider how a pull pack in prices could impact their sale. 

Have your home ready to go to market, but don’t sacrifice timing to do it: The best time to list your home is when you have less competition, so if the time it takes to complete finishing touches means listing when supply is high, then those last minute details could be costing you money. We often see more favourable Buying conditions in June than in early spring as natural procrastinators end up listing at the end of the spring market versus the beginning. So don’t sweat the small stuff and get to market before your neighbours!

Be active: In order to understand what is happening in the market, you either need to be active or to fully trust your Realtor’s take on the market. Either way, you have to show that you are ready and willing to make a move when ideal market conditions are present . 

Don’t be shocked when you finally get what you want: I can’t count the number of times Buyers get rattled when they finally have the opportunity to offer on a property that fails to attract the level of interest they are used to seeing. We’ve conditioned ourselves to think that a home without multiple offers must have something wrong with it, but that’s not necessarily the case. If it’s a great option for you, then make sure you have done the necessary due diligence to give you the confidence to offer. But don’t let the fact that no one else showed up to the party sway you, if it works for you, it works for you. 

So, how to you prepare for a uncertain spring market? Be ready, be informed, and know what you want. Have any questions or comments? Feel free to reach out at andrew@relativerealty.com


16 Feb 2017

5 Reasons to Sell Your Toronto Area Home in 2017

Posted by Andrew Dybenko

Time to cash out? 5 reasons to sell your Toronto Area home in 2017

Toronto’s Real Estate market has been on what seems to be a never-ending joyride. Many who predicted a crash have repeatedly been proven wrong, and in fact, the opposite has taken place as recent year/year appreciation is in the 20%+ range. Even condos are starting to see accelerated appreciation up 14.5% across the GTA in January. Price appreciation for condos seems to be even stronger in February, a property segment that until recently was a sanctuary for Buyer’s looking to avoid multiple offer situations. Supply seems to be down by about 40% in the 416 area while demand remains relentless, despite this lack of inventory. These tight market conditions are likely to favour Sellers through 2017, so is it time to take advantage? Well, if you are just getting settled into a career and life in GTA, you obviously wouldn’t, but depending on your situation, I can see why people are starting to consider selling.

While I think there are a number of reasons why Toronto continues to be a very appealing Real Estate investment, here are 5 reasons you might want to sell:

  1. Lifestyle Changes. For some, it’s not necessary to live in, or close to, the city anymore – kids have gone away to school, you only have to be in the office once a week,  you’re retiring…whatever the reason might be, if you could live somewhere else and can maintain or improve your quality of life, maybe it’s the right time to cash out. Did you know that for the same price as an average GTA area home ($709,000) you could own a home in the Greater Montreal Area($365,000) and Guelph ($311,000) and still have money $33,000 left over for that new car? 
  2. Further Government Intervention could impact future price appreciation. Despite prolonged low interest rates, Toronto’s affordability is going to get worse this year, and if we continue to see appreciation at Vancouveresque rates, our Ontario and/or municipal government might decide to step in. Selling before this happens could be beneficial to your bottom line. In Vancouver, for instance, January 2017 sales are down 40% from 2016, and prices are starting to be impacted – values were down 3.7% from 6 months ago, but still up 15% compared to January 2016. 
  3. If Toronto prices keep going up, surrounding communities will also benefit. Canadians want to own their home, and as both purchasing and rental affordability becomes a bigger issue, people will start looking at alternative communities to live and work. So if your sole reason for not selling your Toronto home is because you don’t want to miss out on Real Estate appreciation, you can expect GTA appreciation rates to spill over to smaller more affordable communities. 
  4. You own multiple properties. While Canadians are quick to blame foreign investors for the rise in home prices (and yes, there may be some truth there), we should also look at how many of us own multiple properties and if each is being used to its full potential. If you’re an empty nester with a 2500 sqft home, you might be finding that it’s too big for your needs, and not cheap to maintain. If this is the case, and you have the option of moving to your smaller investment property, or re-locating to your cottage property, now might be the time.
  5. Because everyone who is anyone expects prices to continue to rise in 2017. When compared to other world class cities like New York ($1,450/square foot according to Trulia), Toronto still looks reasonable. Based on the economics of supply and demand, prices seem certain to increase. However, current appreciation levels are well above the norm; so is the demand sustainable, or are Buyers purchasing simply because the expectation is for prices to increase?  Whatever the reason, 2017 is shaping up to be a good year for Sellers.

Thinking of Selling? Have any comments or questions? Shoot me an email at andrew@relativerealty.com.


20 Dec 2016

Toronto Neighbourhood Guide 2016

Posted by Andrew Dybenko

rr_bloggraphic

Last month marked Toronto’s 10th straight month of price increases! Needless to say, there’s been some change since this time last year, so we’ve gone ahead and updated our Toronto neighbourhood guide to wrap up 2016. Our guide compares your budget with property types in Toronto’s various neighbourhoods. To see what this guide looked like in 2015, click here.

The Big Smoke: a city rich in culture, entertainment, underdog sport teams (TFC *almost* did it in 2016!) and a seemingly unstoppable housing market (still!). It’s a great place to live, but navigating the Real Estate market can be tricky. With hundreds of different neighbourhoods to choose from, bidding wars galore, and differing opinions on the market; finding a property and neighbourhood that best suit your needs and budget is overwhelming. Looking at average prices for neighbourhoods can help, but may not be reflective of the realities of the market. When every dollar counts, you need more information.

Identifying how much you can afford is a good first step; however, how much you are willing/able to spend should also depend on the condition of the home. After all, this will have a large impact on your housing budget. And shouldn’t it also depend on the neighbourhood you choose? So where do you start? How about right here…

We have simplified Toronto Freehold Real Estate into 3 tables for East, Central and West neighbourhoods. Each table indicates what type of home you can get in each neighbourhood and for your budget. We have categorized houses into 5 different categories and identified what price point you can expect to pay for each home type across the city.

So if you are curious if you can afford a fixer upper in The Beach, how much a detached home with parking goes for in Roncesvalles, what you have to pay to start a conversation in Lawrence Park or where prices are topping out in Riverdale, follow the steps below and check out our handy dandy charts.

1. NAME YOUR PRICE

What budget category do you fall into? This would be determined by your mortgage pre-approval and how much you can afford to spend on housing each month.

Getting into the Game: < $650,000

The Masses: $650,000 – $850,000

Stepping Up: $850,000 – $1M

So-called Luxury: $1M – $1.5M

Luxury: $1.5M +

2. WHAT’S YOUR TYPE?

What are you looking for in a home? Read the categories below to determine your best fit.

High Point: This category identifies the highest priced homes selling in any given neighbourhood (in the past year). If a neighbourhood has had around 5 or fewer sales it will be labeled as a High Point. If you are considering purchasing in a High Point for an area you should proceed cautiously and confirm whether a home deserves such a high price tag.

Done + Done:  Looking for a detached home in good condition, parking, 3 bedrooms, all on a quiet street? Join the club! If these are must-haves, then stick to neighbourhoods that offer D+D homes in your desired price range.

The Compromise:  Willing to make some compromises to get into your preferred neighbourhood? We have identified the price ranges where you can expect to make some compromises for all of Toronto’s neighbourhoods.  A compromise could mean one or a combination of the following:  no parking, semi detached or townhome, small lot or busy street, renovation needed, small and/or only 2 bedrooms.

Fixer Upper: Willing to break out your tool belt (or pocketbook) for the right home? The Fixer Upper label is referring to homes which need significant work, or could be representative of a price point for some townhomes in various neighbourhoods.

Entry Point: Just looking for a way in? Our entry point identifies the lowest price a home sold for in a Toronto neighbourhood within the past year.  This will typically only represent a few homes that are likely to be small and unique properties that need substantial work, and for many areas could be indicative of a starting point for land value.

3. PICKING SIDES

Once you’ve determined your price point and property type, the next step is to pick which side of the city you’re looking to call home. Our EAST, WEST + CENTRAL tables (links below!) will show you the neighbourhoods that best suit your budget and style. Note: these tables are for freehold properties only.

East

Central

West

Looking for more detail? Contact us for a a full neighbourhood analysis and find out where you should be looking to buy. Want to see what these charts looked like last year? Click here for our 2015 neighbourhood guide.


04 Nov 2016

Ch-ch-ch-changes: How the GTA’s Real Estate market will perform after recent interventions

Posted by Andrew Dybenko

It’s rare to check the news these days without hearing about a new effort to cool Canada’s red hot housing market. From Foreign Buyer Taxes, to new mortgage stress tests, to closing off tax loop holes; Federal and Provincial governments are looking at ways to keep Real Estate appreciation sustainable and reduce volatility in an industry that can have a drastic impact on the Canadian economy.

B.C. 15% Foreign Buyer Tax (August 2016):

B.C.’s recent implementation of a foreign buyer tax  resulted in decreased sales activity across the province particularly with regards to single family homes. The Greater Vancouver Area HPI index indicates home prices increased 24% y/y, but that sales decreased by 38% from October 2015.  As inventory builds from the 38% reduction in sales, prices are certain to experience downward pressure which should translate to decreased appreciation rates in 2017.

After B.C.’s foreign tax implementation, all eyes turned to the Ontario Government who continues to show reluctance to implement any such tax. Kathleen Wynne’s most recent comments reinforce her belief that the markets are very independent and that her focus will be on helping first time buyers. I think they would be remiss not to expect some of this foreign investment from B.C. to shift to Ontario and cause upward pressure on the GTA and Ontario’s housing prices. While the Ontario government is taking time to decide on their approach, enter Bill Morneau and the Federal Government with the following changes:

  • Expanding mortgage rate stress test to all insured mortgages.
  • The government is launching consultations on lender risk sharing.
  • As of November 30th, the government will impose new restrictions on when it will provide insurance for low-ratio mortgages. For more on these read here.
  • Tax Loop Hole Closed (Not really). For more read here.

Stressed out

The federal government has implemented new changes that are designed to reduce the risk associated with an overheated Canadian housing market. While I applaud the government’s continued efforts to help reduce volatility in the housing market, I think it’s unlikely to have the desired impact on the GTA where the supply just can’t keep up with the demand. Reducing the purchasing power of those with limited down payments certainly won’t improve affordability. The new rule has buyers with less than 20% down being stress-tested at the Bank of Canada’s posted mortgage rate which is currently about 4.64%, about 2-2.5% higher than what mortgage lenders are offering. The idea being that borrowers will qualify for what they can handle should interest rates increase, and while this isn’t a bad move, it does mean a reduced purchasing budget for those who do not have 20% down. My estimation is that the new regulation change will impact 15% of Buyers, and while this should help reduce unsustainable year/year 20% appreciation rates, it alone is not enough to completely shift the market, at least not in the GTA.

So how can we expect these changes to impact Toronto and the GTA’s residential real estate market?

Buying Opportunity between $850,000 – $1M: The most recent rule change is likely, at least in the short term, to have the biggest impact on the $850,000-$1M price range, and should lead to more favourable purchasing conditions in this category. With an estimated 15% of these buyers purchasing power being reduced, they will now be forced to look in a lower price point. However, unlike other price segments, there won’t be any buyers from higher ranges to fill the void. Buyers purchasing over $1M are already required to have a minimum of 20% down and are not subject to mortgage insurance and won’t be impacted by the new stress test regulations. The number of Buyers in this price segment should be reduced in the $850,000-$1M range, so we should see reduced competition in this segment.

The Condo Alternative:  Reducing Buyers purchasing power will force them to look at a more affordable product, and in Toronto, that will mean condos, for some, smaller condos. Those buyers whose purchasing power has been reduced, but would rather get in the market than hand over their pay cheque to a landlord will be forced to look at alternative products. For many this will mean switching from Freehold to Condo. This is likely to stimulate some additional price growth in Toronto’s condo market.

Rental Markets to Benefit: Reducing the purchasing power of first time buyers is going to turn some of the would-be purchasers to renters, creating greater demand for rental units in and around the city. This will reduce turnover and vacancy rates for landlords, and put upward pressure on rental prices. However, we are seeing more purpose built rental units going up in the city which could help to balance out this impact.

Price growth in the more affordable neighbourhoods: October’s Detached home prices in the 905 region are up 30% on a year over year basis, so those intent on purchasing will be forced to look in lower priced areas they may have been originally hoping to avoid, Hello South Oshawa! Under valued market segments are likely to continue to see strong appreciation as Buyers seeking single family homes will be forced to look at low priced neighbourhoods across the GTA.

 


13 Jul 2016

What You Need to Know About Your MPAC Assessement

Posted by Andrew Dybenko

By now, many Toronto home owners will have received their 2016 Municipal Property Assessment Corporation (MPAC) assessment notice revealing their property value as of January 1, 2016. This MPAC assessment is used to calculate your property taxes over the next four years and will be a basis for future assessments. I have already written about how we saved $2,500 in property taxes by disputing MPAC’s assessment back in 2014, and how Toronto’s property taxes stack up against other municipalities, so I will try to keep this short and to the point.

Here’s what you need to know:

  • Your property taxes are calculated by multiplying the Total Tax Rate (City+Education+Transit) by your MPAC assessment value. Since property values have increased significantly over the past 5 years, Toronto’s tax rate has decreased, going from 0.79% in 2011 to 0.69% in 2016. This is not just the Rob Ford effect, but a case of higher property values needing a lower tax rate to meet budget requirements!
  • Your property taxes are not going to go up just because your MPAC assessment has increased; in fact, they could actually go down. Essentially, the city needs to collect a set amount from property taxes. MPAC assessments have Toronto’s housing values going up by 30% from 2o12 to 2016. With these increased property values, the city can lower it’s tax rate to get to the set amount it needs. So if your home value goes up, but doesn’t exceed the average increase in value, the lowered tax rate will off-set your increased property value. Homes that didn’t see such strong appreciation can expect a break on their property tax bill. Still confused/want more detail? Check out this article from the Torontoist.
  • Your assessed value is based on the value as of January 1, 2016.  When considering if your assessment was fair, focus on what your house should have sold for at the start of this year. The most accurate comparables would be solds from fall/winter 2015.
  • You should only submit a Request For Reconsideration (RFR) if you can show that MPAC has assessed you too high. By submitting an RFR, you are essentially asking them to reconsider their valuation which means they could, although unlikely, re-assess your home with a higher valuation.
  • If submitting an RFR for the 2017 Tax Year, it is due by September 29, 2016. The easiest way is to visit to www.aboutmyproperty.ca and create a login (note, you will need your property assessment notice to do this). You will be able to see comparable sales in your neighbourhood and submit a RFR if you feel it’s appropriate. You can also access RFR forms directly here.
  • MPAC assessments are phased in over 4 years from the 2017 to 2020 Tax Years, so you won’t be paying taxes on that assessed value until the last year of this cycle, 2020.
  • This property tax calculator can be helpful in looking at how much property tax you can expect to pay for 2016 when buying a house in Toronto. It’s important to note that in future years, tax rates and property values will change, so this calculator is really just to give you an idea of current property taxes.

Want to talk MPAC assessments? Drop me a line here.


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