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Housing market still set for a “big year” despite gloom

Lower interest rates will throw more fuel onto the fire that is Canada’s housing market and lead to a strong increase in resale home prices and residential investment this year, despite an economy that looks to be on the brink of a recession.

A report from The Conference Board of Canada warned that the Canadian economy – already on “precarious footing” in the fourth quarter of 2019 – could contract by a projected 2.7% in the second quarter of 2020, as challenges from rail blockades, a collapse in oil prices, and the ongoing COVID-19 pandemic take their toll. However, the report forecasted that the economy would rebound to 2.5% growth in 2021.

“Despite the fact that the global economy is currently shaken at its core, we expect to see growth resume in the third quarter, meaning that the economy will avoid a technical recession,” said Matthew Stewart, director economic forecasting at The Conference Board of Canada. “However, due to the unpredictability of the coronavirus, there are still huge downside risks to the outlook.”

And despite the gloom, The Conference Board said that housing markets are still set for a “big year.”

“While recent interest rate cuts by the Bank of Canada are meant to cushion Canada’s softening economy, they will only add fuel to Canada’s already hot housing market,” the report said. “Interest rates were already low and recent cuts will make it even cheaper to finance a new home purchase. The two other main underpinnings for housing – employment gains and population growth – have also been strong and have driven many resale markets, most notably in Ontario and Quebec, to the point of overheating.”

However, the report warned that the economic fallout from COVID-19 could still create a recession that derails housing demand. It also warned that homebuyers might flinch at the “eyewatering prices” in many cities and lose confidence that the value of their potential new homes will continue to rise in the future.”

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Canada’s largest banks slash prime lending rates

Following the Bank of Canada’s surprise announcement last week that it is lowering interest rates by 50 basis points to 0.75%, the country’s largest banks cut their prime lending rates to 2.95% from 3.45%.

RBC Royal Bank, BMO Bank of Montreal, Toronto-Dominion Bank (TD Bank), Scotiabank, and CIBC slashed their prime rates – which underpins variable-rate mortgages and lines of credit – effective Tuesday, March 17. Meanwhile, National Bank of Canada will reduce its prime rate effective Wednesday, March 18.

The Bank of Canada said that it cut interest rates, the second in two weeks, as a proactive measure “taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.” The move was welcomed by several in the mortgage industry as a strong response to the uncertainty caused by these economic challenges.

“The Bank [of Canada] is acting forcefully to reduce the impact of the coronavirus on the economy,” said James Laird, co-founder of Ratehub.ca and president of CanWise Financial. “It is in these uncertain times that Federal institutions acting quickly and intelligently can reduce the negative impact of unforeseen events.”

However, some experts have warned that the same uncertainty will cause banks to hold back on passing the 50-basis-point rate cut to consumers.

In an email to BNN Bloomberg, Rob McLister, founder of mortgage comparison website RateSpy.com, said a slew of macroeconomic headwinds facing the big banks make him skeptical the lenders will pass along the 50-basis-point prime rate cut to consumers.

“What banks giveth with one hand they will taketh with the other by way of variable-rate discount reductions,” Rob McLister, founder of RateSpy.com, told Bloomberg News. “The weather forecast for banks is hurricane, tornado, and tsunami all in the same month. They’re getting sucker-punched by surging credit spreads, shrinking interest margins, rising loan loss reserves, and increasing default risk (even though mortgage arrears are little changed yet.)”

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Bank of Canada cuts overnight rate again

Beginning today, the Bank of Canada is lowering its target for the overnight rate by 50 basis points to 0.75%. The Bank Rate is correspondingly 1 percent and the deposit rate is 0.50 percent.

The unscheduled rate decision is the second in as many weeks. In a statement, the central bank stated this was “a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.”

Last night, the US Federal Reserve made a surprise announcement in cutting its federal funds rate to a range of 0% to 0.25%. The US central bank also cited the negative economic impact from the coronavirus pandemic for its decision.

Separately, the Bank of Canada has teamed with five central banks to lower the pricing on the standing US dollar liquidity swap arrangements by 25 basis points.

Canada’s central bank announced on Sunday evening that it is working with the US Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to ensure the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 25 basis points. The central banks aim to increase the swap lines’ effectiveness in providing term liquidity by offering U.S. dollars weekly in each jurisdiction with an 84-day maturity, in addition to the one-week maturity operations currently offered.

These changes will take effect with the next scheduled operations during this week. The new pricing and maturity offerings will remain in place as long as appropriate to support the smooth functioning of U.S. dollar funding markets.

“The swap lines are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad,” said the Bank of Canada in a statement.

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Rent for 1-Bedroom in Toronto Dips Back Below $2300 in February

Torontonians struggling to make ends meet during the COVID-19 pandemic have gotten some respite for their housing concerns: last week, the province suspended evictions, and now, it looks like rental rates in the city are finally starting to drop.

According to the latest monthly rental report from Rentals.ca, the average 1-bedroom apartment in Toronto has dropped from its previous $2300+ threshold first hit in January and is now sitting at $2240, a -3.2% drop from the first month of the year.

In February, the average rent per square foot in certain areas of Toronto was the highest in Yorkville and the Annex at $5.11 per square foot. Year over year, the largest increase in average rent per square foot was 4.6% to $4.07 per square foot in the south core and central Harbourfront.

Despite rates dropping in Toronto last month, on a provincial level, Ontario still had the highest rental rates in February, with landlords seeking $2,212 per month on average for all property types. British Columbia had the second-highest rental rate at $1,885 per month, while Newfoundland and Labrador had the lowest at $927.

What’s more, the rental market softened considerably across the country in February, with the national rental rate dropping 3% month over month and 3.4% year over year, with the average monthly rent hitting $1,823 in Canada last month.

And while rentals.ca says it might be too early to attribute the February decline to COVID-19 worries, after a strong spring and summer for rent growth in 2019, rates have definitely trended downward nationally.

Furthermore, Matt Danison, CEO of rentals.ca, says he believes there’s going to also be a “drop-off” of walk-in showings for apartments across Canada during the Covid-19 pandemic.

“Landlords and property managers will need to embrace virtual leasing as much as possible to keep their staff and potential renters safe during this difficult time. Rentals.ca has committed to help by significantly lowering the cost of 3-D and virtual tours until July 1 to help with social distancing.”

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The Orbit aims to transform Innisfil into Ontario’s most futuristic town

A small town situated 60 kilometres north of Toronto along the shores of Lake Simcoe has aspirations of becoming the city of the future. Characterized by its rolling hills, farmland and cottages, Innisfil is a quiet municipality known to many Torontonians as a place they pass on their way to Muskoka. But with plans to build an ambitious mixed-use community called The Orbit underway, Innisfil hopes to reinvent itself and become a place that future generations will want to call home.

With a new GO Station on the Barrie Rail Corridor proposed for 6th Line, the town saw an opportunity to build something innovative and never-before-seen in the province. Its goal was to strike a balance between urban living to accommodate the anticipated population growth, brought upon by the new train station, while maintaining the area’s natural landscapes and agricultural uses.

“I think the people of Innisfil have been pretty happy to be a small town for its entire inception and the town council wants to maintain all of the things that are awesome about a small town,” said Jason Reynar, Chief Administrative Officer of Innisfil, on the UrbanizeThis podcast. “But we recognize that from a sustainability and fiscal responsibility perspective, we have to densify, and the idea of sprawling, single-family dwelling type subdivisions is not the way that Innisfil wants to grow.”

The town partnered with developer Cortel Group, which owns the majority of the Orbit lands, along with Toronto-based architecture firm Partisans, to develop a 40 million square-feet, transit-oriented, master-planned community.

“We released an RFP and asked to work with a team to create a vision that would leverage the new GO station and embrace the idea of a walkable community where you could live, work and play,” said Reynar. “We want to build a new kind of community centred around transit, where you can access grocery stores, community centres, 3D printer labs, digital media labs et cetera. Partisans was successful in the competition and they’ve worked with us and the land owners for almost a year now.”

Drafted by Partisans, the proposal is designed to accommodate up to 150,000 people with new residential, commercial, institutional and recreational components. Transit initiatives include pedestrian-first streets, new trails and pathways with access to the waterfront, enhanced cycling options and an Innisfil Transit system that incorporates autonomous vehicles and encourages shared trips.

“We know that our cities have been designed around cars, and that’s not conducive to a real community kind of fabric and obviously walkability,” said Reynar. “So we want to be very purposeful about how we design these streets, and our hope is that they’re designed for drop-offs and pickups from both a commercial and a pedestrian perspective.”

Initial renderings of the community show a mix of low- and high-rise buildings of varying shapes and sizes that ‘orbit’ around a central complex. At the core of the community is the Innisfil GO station, which itself boasts a unique, organic aesthetic that could’ve come out of a Zaha Hadid sketchbook. Aerial renderings are even more dramatic as they depict a series of concentric circles that radiate from the GO station. The roadways wrap around the transit hub and gradually expand in size until they hit the outer layers where they morph into a slightly rectilinear shape, which Partisans describes as ‘squircles.’

Another progressive element of The Orbit is the implementation of a dynamic zoning system that allows for greater density and building heights by automatically up-zoning the entire area when one parcel of land reaches 70 percent density.

“The concept is to have dynamic zoning where as the land gets used up, your as-of-right density automatically increases over a period of time for the next parcel,” explained Reynar to UrbanizeThis. “We really want to see land owners and developers who are going to try as best as they can to future proof the developments. So we want them to imagine what the second tower on the same parcel is going to look like now, so they can build in the greenspaces and amenities — that will always be there — for future residents.”

The Orbit isn’t the first example of Innisfil thinking outside the box. The town has undertaken several other progressive urban initiatives in the past, including a deal with Uber to provide local public transit services through publicly-subsidized fares, instead of using buses. In 2019, it teamed up with parking app, Rover, to help alleviate the parking problem at Innisfil Beach Park during the busy summer season. And in the same year, Innisfil was the first municipality in the country to accept cryptocurrency as a method of payment for property taxes. Of course, The Orbit is much larger in scope and more ambitious, but with open-minded municipal leaders and forward-thinking planners at the helm, Innisfil could very well rocket itself to becoming the city of the future.

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Toronto urges landlords to protect their tenants

Landlords should support tenants who become unemployed as a result from the coronavirus outbreak, the City of Toronto said Tuesday.

Mayor John Tory announced the City is taking action to help Toronto’s most vulnerable tenants impacted by the COVID-19 pandemic and, while it has no power to direct landlords, he said that all property owners should find ways to help tenants who need it to stay in their homes during these unprecedented times.

He also urged landlords to communicate with tenants to ensure they are aware of any policies that are in place to help them if they are financially impacted by the COVID-19 outbreak.

For its part, the City of Toronto has pledged help for Toronto Community Housing tenants:

  • For rent-geared-to-income households, which make up about 90 per cent of TCHC tenants, the housing corporation will recalculate their rent based on employment income changes owing to job loss or layoff incurred because of COVID-19. Rent will be adjusted or deferred in order to respond to the economic impact of COVID-19.
  • For market rent tenants whose income has been reduced as a result of a job loss or layoff because of the COVID-19 response, TCHC will consider various case-specific options to assist them, which may include arranging for payment deferment plans that suit their situation over the next few months.

“People across our City are facing challenges we could not have imagined even a month ago. That is why we are taking every step necessary to support them, including having the TCHC work with our tenants to ensure their rents are manageable and their homes secure. Our example will also be our request of all social housing providers and private landlords. Supporting each other we will get through this together,” said deputy mayor Ana Bailão

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8 REASONS THE CORONAVIRUS WON’T CRASH THE HOUSING MARKET

It’s all you hear on the news, it’s all you read in the papers, and it’s all you see on social media. The coronavirus is everywhere, and it’s safe to say that everyone is scared, both of the disease itself and the potential economic implications of the whole country going into a temporary quarantine.

Echos of the 2008 housing market crash have many agents imagining doomsday scenarios and assuming the worst.

But in a recent article published by USA Today, Gus Faucher, chief economist of PNC Financial Services Group, said, “A recession is not inevitable. If we do get a recession, it is likely to be brief and much less severe than the Great Recession.”

Faucher notes that the 2008 financial crisis and recession resulted from years of deeply rooted economic insecurities, which isn’t the case now.

“What we’re seeing is caused by something external to the economy,” Faucher said.

There are key differences in this market that spell good things for the housing market despite recent events. Let’s examine some of the key indicators that we will avoid a housing market crash.

1. Inventory is low.
A December 2019 Forbes article predicted a historically low level of housing inventory in 2020. According to NAR statistics, there is a chronic shortfall of 300,000 to 400,000 housing units every year.

Bryan Souza, a real estate agent from Fresno, Calif., who worked through the 2008 recession, says there is a key difference between that market and today’s.

“Back then, we had 18 months of supply…it was a buyer’s market,” Souza said. Today, in our local metro and actually nationwide, we’re looking at two to three months of inventory. And so, it’s more of a seller’s market.”

Even when markets turn, buyer demand remains. Even if some buyers initially delay their purchases out of fear, when that fear subsides, most buyers will still want to buy — and that pent-up demand will turn into sales.

2. Mortgage rates are low.
Mortgage rates have been below 4% for some time and are expected to remain low. These low rates will encourage more people to buy, even if they are dissuaded by initial fears caused by the virus.

3. Subprime loans are down.
The 2008 crash was set off when banks and other lenders approved an overabundance of mortgages to unqualified buyers, driving up home prices to too-high levels. When home prices began spiraling down, millions of Americans stopped making mortgage payments and lost their homes, and banks were pushed to the edge of bankruptcy.

At that time, household debt climbed to a record 134% of gross domestic product. Today, household debt is at a historically low 96% of GDP. Households today are saving about 8% of their income, compared to just 3% in 2008.

According to data from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel, from the third quarter of 2001 through the end of 2008, an average of 20% of all mortgages originated went to people with subprime credit scores (lower than 660). In the third quarter of 2018, subprime borrowers received just 9% of all mortgages.

All of this means more Americans are better equipped to handle a temporary economic disruption that won’t significantly impact their ability to buy homes or hold onto their current ones.

4. Today’s homeowners have more equity in their homes.
According to a Federal Reserve report called the Flow of Funds, Americans owned $18.7 trillion of their homes, giving them a 64% equity stake. By comparison, this number was just 52.7% in the first quarter of 2007. This means that the vast majority of homeowners will have no problem keeping their homes during these uncertain times.

5. The government is offering a moratorium on foreclosures for 60 days — which is likely to be extended for up to 12 months.
In light of the current situation, the Department of Housing and Urban Development announced that all single-family homeowners with Federal Housing Administration-backed mortgages would be shielded from foreclosure or eviction until mid-May.

The Federal Housing Finance Agency has suspend all foreclosures for “at least 60 days.” The FHFA also offered payment forbearance to homeowners affected by COVID-19, allowing them to suspend mortgage payments for up to 12 months.

These moves should instill confidence in home sellers and give them an opportunity to sell their homes during the extension.

6. Home prices appreciated during previous recessions.
Not every recession signals a housing market crash. In fact, home prices went up in three out of the last five recessions (1980, 1981, 2001) and remained mostly flat in one (they dropped 1.9% in the 1991 recession). They only dropped significantly in 2008.

According to Zillow, annual home value appreciation across all states since 1997 has averaged 4.6% during times of economic growth and 4% during recessions.

The current market conditions are much more similar to how they were in 2001, after 9/11.

7. People will always need a place to live.
More than ever, people understand the value of having a roof over their heads. In times of uncertainty, homeownership is a security people take pride in and work toward. Real estate is above all a human industry, and humans crave the stability of homeownership.

8. No one knows how long this will last.
Fear is at an all-time high right now. There is so much uncertainty about how this virus will impact people in the United States that people are assuming the worst.

If a viable cure is found in the next few weeks and rolled out, this pandemic could be a much shorter-term issue than initially anticipated. Now is not the time to start panicking and stop doing what works and makes sense.

If you have a solid marketing strategy, like a marketing system you follow or marketing materials, like books, that are consistently helping you get listings, now isn’t the time to abandon tried and true resources.

Stick to what’s working, adapt with the change, and you will come out on top.

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33 Avenue Road Condo Tower Proposal Changes in New Design

A proposal to redevelop the northeast corner of Avenue Road and Yorkville Avenue first appeared on UrbanToronto’s front page in 2012, and after another change to the project’s team, a new version of the proposal has appeared in a new rezoning application. Before we dive into what’s being proposed by developers First Capital and Greybrook Realty Partners, let’s take a look back at the various designs and teams that preceded the current plan.

2012’s proposal from Empire Communities called for a 38-storey condominium tower, designed by Zeidler Partnership Architects with Richmond Architects. This plan would subsequently be resubmitted to the City at 35 storeys with an almost identical design, before eventually reappearing in 2014 with new plans.

The 2014 plan saw First Capital partner with Empire Communities, expanding the site area in hopes of securing zoning for a 40-storey condominium tower. Once again designed by the team of Zeidler and Richmond, the project incorporated a sweeping curve in its massing and a playful incorporation of the existing York Square, a group of seven Victorian homes which were been integrated into Yorkville’s first commercial redevelopment way back in 1968 by renowned architects Jack Diamond and Barton Myers.

The team of Empire and Greybrook Realty Partners returned with a new 30-storey plan for the site in early 2016, submitting a proposed “vertical forest” with terraces lined in greenery and a more respectful integration of York Square, still by the design team of Zeidler and Richmond.

With the same team on board, this “vertical forest” plan was refined in May, 2016, reduced to 29 storeys, and featuring facades of copper-hued panels to complement the greenery.

Now, in 2020, the project has been resubmitted with a new team led by developers First Capital and Greybrook, and now being designed by Giannone Petricone Associates and BBB Architects. This new design would rise 29 storeys to a height of 125.1 metres—a slight increase from the previous plan—with a total gross floor area of 29,332 m². The existing York Square Victorians on site are absent from the latest plan. The majority of this GFA is planned as residential space, at 24,879 m², or 84% of the total GFA. The remaining 4,454 m² is proposed as retail space housed within the first three floors of the building.

The retail component would include a prominent corner space, referred to in planning documents as the ‘jewel box.’ Set to act as a gateway to the complex, this retail unit would be separated from a new community space by a pedestrian mews that connects to York Square, where a privately-owned public space will be positioned in the middle of the site’s frontage along Yorkville Avenue. East of York Square, retail spaces would line a second pedestrian mews leading to a new entrance of the Yorkville Village Mall.

A limited selection of just 100 condominium units—increased from 74 in the previous proposal—would be spread across the tower. In an unusual unit breakdown, no studio or single-bedroom units are planned, with the building planning larger suites only; 88 two-bedroom units and 12 three-bedroom units.

A four-level underground garage would contain a total of 220 vehicular parking spaces, divided between 210 long-term resident spaces and 10 short-term visitor spaces. 126 bicycle spaces are also planned for residents with local commutes, with the majority to be provided on the P1 underground level.

 

 

 

 

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Canada’s home market expected to overcome slowing market

A WEEK into a pandemic that has forced a swath of Canada’s economy to shut down and wiped hundreds of billions of dollars off the nation’s stock market, a Vancouver mansion sold for C$150,000 (S$150,000) over the asking price.

As the coronavirus upends the real estate business, along with everything else, the country’s indefatigable buyers are taking some pause – but, so far, not much.

John Pasalis’ firm was getting ready to list a C$1.1 million home in Toronto’s trendy Leslieville district next week but was preempted by two “bully” offers – those made ahead of the official selling date. A deal was struck before the property ever hit the market.

“Some of those buyers are seeing the slowdown as a way to compete without too many people,” said Mr Pasalis, the president of Realosophy Realty.

Before the virus landed in Canada, its three biggest housing markets – Toronto, Montreal and Vancouver – were gearing up for a sizzling house-hunting season this spring. That outlook has now dimmed.

Home resales are expected to fall in the coming weeks as the economy contracts. Agencies are cancelling open houses, and a traditionally face-to-face industry is using virtual tours to get some deals done.

An extended drop in Canada’s housing market would be a major blow to an economy already reeling from the meltdown in oil prices.

Prime Minister Justin Trudeau, the Bank of Canada and the country’s biggest commercial banks are pulling out all the stops to try and head off a serious recession.

The central bank has now cut interest rates a full percentage point to 0.75 per cent in the past two weeks, spurring mortgage rates lower, and it may cut again. The banking regulator is loosening bank capital requirements to free up C$300 billion of lending capacity.

Meanwhile, Canada’s six biggest lenders, including Royal Bank of Canada, Bank of Montreal and Toronto-Dominion Bank, said they would consider six-month mortgage-payment deferrals for small businesses and individual borrowers impacted by the pandemic.

In the longer run, relentless demand means any pullback will likely be short-lived and prices should hold up, said Robert Hogue, senior economist at RBC.

“In all likelihood, this will be a temporary hit with a rebound taking place later this year once the Covid-19 situation settles down – though the timing and magnitude of the rebound are highly uncertain at this point,” Mr Hogue said in a research note this week.

Re/Max, one of the nation’s biggest brokerages, on Tuesday urged its 18,000 brokers across the country to cancel all open houses.

In Vancouver, developers are closing sales centres and construction sites will be impacted as building activity is interrupted, according to Anne McMullin, president of the Urban Development Institute, an industry group.

But underpinning the market is the fastest pace population growth in 30 years, driven in large part by immigration, and the appeal of Canadian real estate to those with cash to deploy at uncertain times, including foreign buyers. In Montreal, a New-York based buyer just made an offer on a property listed at more than C$2 million after a virtual visit, said Debby Doktorczyk, owner of Engel & Volkers Montreal, which counts 175 brokers.

Momentum helps. The housing market entered the spring selling season on a high, with sales across the country up 25 per cent from February 2019. Toronto and Vancouver home resales surged about 44 per cent from the same month a year ago, while Montreal’s were up about 23 per cent.

The market was extremely strong – if not a bit “crazy” – before the pandemic, says Ms Doktorczyck.

Now, “instead of getting 15 offers for a property, we’re getting five”, she said, adding virtual visits are likely to become more common.

Even in Vancouver, which was only just emerging from its worst year in decades before the coronavirus, Royal LePage broker Adil Dinani says his shop is still doing 90 per cent of the deals expected.

Mr Dinani was up past midnight negotiating the sale of a C$2.3 million, six-bedroom home in an affluent suburb just outside Vancouver. The open house on Sunday had drawn 40 groups – some 85 eager buyers undeterred by the virus – who waited to enter one group at a time. The property drew seven offers, including the winner – an all-cash bid, almost C$150,000 above asking.

While open houses may be suspended, home buyers can still see homes by appointment, say agents. Meanwhile falling mortgage rates will act as a spur.

Borrowers can now get a five-year variable mortgage at 2.1 per cent and a three-year fixed at 1.99 per cent, according to RateSpy

“You know the saying – oxygen for any real estate market is low interest rates,” said Mr Dinani. “Interest rates just got lower. There’s a lot more room to move in Canada. That prime rate can come down more, unlike the US and other nations that are pretty much operating near zero.” BLOOMBERG

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Toronto Residents Granted 60-Day Grace Period to Pay Utility Bills

To alleviate some of the hardships Torontonians are facing due to the spread of COVID-19, Mayor John Tory has announced a 60-day grace period for several City utility bills.

Mayor Tory announced the 60-day grace period Friday morning, which will cover City of Toronto property tax, water and solid waste utility bill payments for all residents and businesses, for bills dated as of March 16.

The COVID-19 pandemic has turned people’s lives upside down overnight. We know families are struggling to figure out how to make ends meet while also worrying about their health and the health of their loved ones,” Tory said in a statement.

“Toronto businesses and residents need to know that we understand these are extraordinary circumstances and we are here to support them.”

The City said late payment penalties for residents and businesses on tax and utility bill payments will be waived for 60 days, starting March 16 to give residents some “relief” as the City works to rebuild the economy, said, Tory.

“We will continue to find ways to offer extraordinary help in these extraordinary circumstances.”

 

Earlier this week, the city announced a 30-day grace period for businesses amidst the ongoing measures posed by local and provincial health officials, which include the closure of non-essential business and for residents to work from home and practice social distancing to help prevent the spread of the virus. This 30-day grace period will now be extended to 60 days.

Mayor Tory also announced that he will continue to advocate for renters in the wake of the pandemic and said that he’s been continuously calling on landlords to provide accommodation and leniency for renters at this time.

“Just as I know many households and businesses are reviewing their finances in the wake of COVID-19, we are continuing to review the City’s finances to fully understand its impact on our operations and revenues,” budget chief Gary Crawford said.

“While we know there will be a financial impact to the City, we are moving now and in the coming weeks to do what we can to help our residents.”

This comes as both the federal and provincial governments have announced financial compensation plans for those who have lost wages during this time.

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Is Toronto real estate the new gold? Home sales soar as global financial markets tank

Every financial market you can think of is in an uproar right now, but not Toronto real estate.

Sales of houses and condos for the first week of March were up 47 per cent over the same period last year and average prices rose 18 per cent, said John Pasalis, president of Realosophy Realty, a real estate brokerage that specializes in data analysis.

“Sales are still strong, there are still lots of bidding wars, open houses are still packed,” Mr. Pasalis said. “There’s no slowing down right now, from what we’re seeing at least.”

Stocks have fallen hard since the last week of February in Canada and globally because of fears that the coronavirus will hurt corporate profits, and interest rates are plunging because of fears that the economy will fall into recession. Gold used to be the financial asset people turned to provide a storehouse of value in uncertain times, but gold prices have been up and down since the stock and bond markets turned volatile.

Might home buyers be thinking along the lines that Toronto housing is the new gold? “Kind of – it feels like that,” Mr. Pasalis said. “There’s a mood now where people want to buy investment properties. It’s like this real need to stock up on as much real estate as possible.”

Toronto real estate could well be a lagging indicator, which means that the effects of what’s happening in global financial markets won’t be noticeable until weeks from now. But Mr. Pasalis said there’s a sense among buyers, fed by commentary from economists and the housing industry, that the only thing to worry about in the Toronto market is a lack of properties on sale.

“The problem with this is that it makes people think prices can only go up,” he said. “Of course, that’s not the case.”

Mr. Pasalis sees vulnerability in the fact that condo prices are soaring as a result of buying by investors who plan to rent their units, but growth in monthly rents has faded. This could make it harder to generate the monthly income needed to carry the mortgage on an investment property.

The market for single-family homes has its own problems. “It’s not healthy,” Mr. Pasalis said. “It’s so competitive and we’re seeing a lot of irrational prices being paid. People are offering prices that make zero sense.”

Concern about the economy falling into recession has led to a sharp decline in interest rates for all kinds of borrowing – government bonds as well consumer loans, lines of credit and mortgages. But home buyers and people in the real estate business don’t see these rate cuts as a warning sign about a lack of security for jobs and incomes, Mr. Pasalis said. “These cuts actually get people excited about the market.”

The last time stocks plunged on a sustained global basis was 2008-09, which turned out to be a great time to get into the housing market. Owing to rapidly falling interest rates, houses became much more affordable. Prices then soared in many cities – enough so that early buyers have seen the value of their home double or triple over the years.

If the coronavirus burns out soon and the global economy rebounds, Toronto house and condo prices could rise enough to justify the aggressive buying going on right now. But if there is an economic slowdown or recession, housing could very well be hammered even if rates fall to zero.

In 2008-09, there was a deep well of consumer borrowing power for the housing market to draw from. Since then, people have borrowed nearly to the point of saturation. The credit monitoring firm TransUnion Canada says average non-mortgage debt balances fell 0.5 per cent on a year-over-year basis in the final three months of 2019. Mortgage debt soared 17 per cent, but can this be sustained in a weakening economy?

Mr. Pasalis says he believes the big risk to the Toronto market is neither what’s happening in financial markets nor the coronavirus, unless it gets bad enough to cause a lockdown in the city. To him, the bigger problems are in the market itself.

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Will COVID-19 affect the spring real estate market?

Unlike the stock market, COVID-19 hasn’t affected the Lower Mainland real estate market — at least, not in a negative way.

A friend of mine just closed on an apartment for $500,000 where she had to deal with a bidding war and ended up paying over asking. Open houses are still well-attended and quality properties are being snapped up quickly. Even detached homes at higher price points are starting to move.

Low supply and high demand have pushed up prices — particularly in the case of condos which are selling at all-time highs.

To cushion the economic blow caused by COVID-19, central banks around the world have cut interest rates. Anyone with an existing variable mortgage, or someone looking to get one, can expect their borrowing costs to decrease. The Bank of Canada cut rates by a full percentage point since the beginning of March.

We are also seeing investors flee the stock market and park their money in investment grade bonds. A result of this flight to safety is that fixed-term mortgage rates are dropping. Lower mortgage rates increase the amount a home buyer can borrow, which pushes up prices as borrowers are able to make higher offers.

We also cannot forget about the mortgage stress test. On Feb. 18, the federal government announced that the hurdle rate of the stress test would be lowered effective April 6. In anticipation of this change, many buyers re-entered the housing market, increasing demand on a real estate market with limited inventory. However, as of last Friday, the Department of Finance announced that changes to the stress test have been put on hold.

Buyers beware
All these factors are fuelling the housing market and not even COVID-19 appears to be able to slow it down — yet.

It was just a month ago when stock markets were at an all-time high, largely due to the fear of missing out, whereas today it’s the opposite: many people are panic selling.

The same could happen, but to a lesser degree, with real estate, as buying psychology is fickle.

It’s important to also keep in mind that, since all financial markets are interconnected, a stock market drop should affect the housing market. For example, many new buyers turn to the bank of mom and dad to help with their down payment. However, after experiencing a drop in their investment portfolio many parents will be less inclined, or no longer able, to help their children fund a down payment.

Another important factor to consider is the potential loss of income that COVID-19 may cause. Some lenders might be hesitant to lend to applicants working in areas affected by the pandemic such as the travel or oil and gas industries.

Selling? List properties right away
All these variables can affect demand.

If I were a buyer, I would be cautious. Don’t underestimate COVID-19’s negative impacts on the economy, jobs and buyers’ sentiment and avoid overstretching your budget — something that tends to happen when buying in a seller’s market.

My advice to sellers who are looking to cash out or downsize is to list their properties right away. Momentum is on your side and there is limited inventory, so sellers of quality homes are getting top dollar. The demand is currently high, but I wouldn’t be complacent and assume that it will last. If offered a reasonable price, I would take it.

If you don’t need to sell, I wouldn’t and I’m not. I still think housing in B.C. is a great long-term investment.

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CORONAVIRUS (Covid-19) and THE TORONTO REAL ESTATE MARKET

What is the real story of Covid-19?

If you are a “News Junkie”, like me, and have been following the story of the virus Covid-19, including, cancellations of school, work, events and travel options. It is very hard to get pragmatic advice but today, I received an email with an interview with Dr Peter Nord, Chief Medical Officer of Medcan, a health and well-being organization. Have a listen to the most recent podcast which really gives a cogent opinion on what is transpiring globally without the dramatic presentations that you may be viewed in the Media. There is a lot of confusion so do yourselves a favour and take the time to listen to this interview about Covid-19. It is well worth the time to get a common-sense take on Covid-19, the future and best ways to protect yourselves.

How will Covid-19 Affect the Real Estate Market in Toronto?
Remember that Toronto was a very strong recipient of SARS in 2003 and it was similar in effect. What we could expect from a repeat performance on is unknown but if we go back to those earlier days, the market did slow as buyers hunkered down. However, today’s market has shown to have numerous buyers for each property that becomes available. The numbers of offers may reduce but that may be an excellent opportunity for those buyers that persist in searching for their dream home.

Sellers may have to be somewhat more flexible and be open to seriously considering good offers if their intention is to sell. It’s always best to sell and buy in a similar market and the reaction from the Bank of Canada has been to lower the prime rate which may also act as a stimulus to this market.

My suggestion would be to keep looking at homes, use your computer and apps like Real Estate Dot Love, which you could download by clicking here. You may want to avoid Open Houses or be vigilant about handwashing and physical expressions like hugging or handshaking just as you would in a strong flu season.

 

Technology has advanced greatly and you can sign and submit offers without anyone coming face-to-face if you are high risk and/or greatly concerned about the Virus.

If the timing is right for you and your Home Dreams then move ahead and take advantage of the marketplace. Toronto has never been a quiet easy market. So much affects our real estate microcosm, that it has proven to be constantly in flux. There are only good and bad times in hindsight.

“No one ever overpaid for the right home”.
Those who years ago predicted the “Toronto Real Estate Bubble” and the crash of it have only found themselves priced out-of-the-market in Toronto. They now are moving farther away and commuting more in a region where traffic and roads are not keeping up with the population shift. They find themselves “driving till their mortgages are approved”.

Don’t let yourself be forced out of the market, even if it means an expectation adjustment. Can three bedrooms and a den allow more options than 4 bedrooms?

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How the coronavirus might impact Canada’s housing market

Businesses all over the world are becoming increasingly concerned about the coronavirus’s impact on various markets as the death count and number of affected individuals mounts.

Could the coronavirus adversely impact property markets in China and beyond? The answer mostly depends on how quickly the virus is prevented from spreading within China and elsewhere. In the meantime, the uncertainty about the potential for contagion is keeping chief risk officers awake at night.

The current outbreak is caused by a new strain in the family of viruses characterized as coronavirus, but a similar epidemic in 2003 caused by Severe Acute Respiratory Syndrome (SARS) impacted Hong Kong and many other countries, including Canada.

Toronto was one of the first places in Canada to experience SARS-related emergencies. Health officials implemented strict protocols to prevent the virus from spreading. Even handshakes were discouraged. During the 2003 convocation ceremonies at the University of Toronto, the traditional handshake with the school’s president was replaced with a gentle head bow.

Earlier precautionary measures to contain the virus discouraged discretionary travel and face-to-face interactions. Generally, a slowdown in market activity is likely when consumers avoid grocery stores, hair salons and/or restaurants, but is it significant enough to cause a decline in economic output, including property markets?

Despite the challenges resulting from SARS, the Canadian economy did not necessarily experience a slowdown in 2003. Canadian GDP grew to $892 billion in 2003 from $758 billion in 2002, and it ultimately crossed the trillion-dollar threshold in 2004.

Hong Kong, the epicentre of the 2003 SARS epidemic, experienced a slight slowdown, with GDP declining to US$161 billion in 2003 from US$166 billion a year earlier. The Hong Kong economy, though, had not been growing since 1997 when GDP reached US$177 billion. Hence, the slowdown in 2003, even if meaningful, could not be entirely attributed to SARS.

Even neighbouring China’s economy grew, to US$1.6 trillion in 2003 from US$1.3 trillion in 2002. Chinese economic growth, however, took off in 2006, with record year-over-year GDP growth that has lasted for more than a decade.

As for property markets, recall that Toronto bore the brunt of SARS in Canada. If anyone was expecting a slowdown in housing sales or moderation in housing prices, they might look at a city where handshakes were almost forbidden.

Interestingly, housing sales data from 2003 in Toronto show no apparent signs of suffering. Sales increased to 78,898 units in 2003 from 74,759 units in 2002. Similarly, the average sale price increased by around $18,000 during the same time period. Essentially, the growth in sales and prices in 2003 was in-line with long-term trends.

The numbers above raise two related questions: Did SARS, despite the enormous death toll and the cost of the resources mobilized to contain the threat, have a limited economic impact elsewhere as well? And can one draw any inferences from SARS for what property markets may experience from coronavirus?

The housing market dynamics in 2003 in Hong Kong offer some context. The SARS epidemic claimed the lives of 300 Hong Kong residents, representing a third of all SARS-related deaths worldwide. Grace Wong Bucchianeri, a former professor at Wharton, reported in the Journal of Urban Economics in 2008 that housing prices in Hong Kong fell by eight per cent, equivalent to a total value of US$28 billion.

This raises the question of whether the decline in Hong Kong housing prices in 2003 resulted entirely from SARS or was it an acceleration of the lingering “pre-SARS downward trend.” Controlling for the “already frail Hong Kong housing market,” Bucchianeri observed a moderate average price decline of 2.6 per cent that could be attributed to SARS.

Coronavirus to date has already claimed more lives than SARS did in 2003. The uncertainty about how long the threat will last and how quickly it can be contained will weigh heavily on the markets. Since the epicentre of the breakout is far from Canada, it is probable that the adverse impacts on Canadian markets will be moderate at worst.

Evidence from Toronto in 2003 suggests that the housing markets in Canada did not experience a noticeable adverse impact from SARS. The effect of coronavirus, if any, is likely to be moderate in the short run. If the challenge persists over a more extended period, Canadian housing markets are likely to become even more attractive to investors who would like to move their capital from markets with ominous health risks to the relatively safe environs in Canada.

Financial Post

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Virus-driven rate cut could add kerosene to housing market

Canada’s housing market is poised for a hot spring — with lower mortgage rates likely to offset any major drag from the coronavirus.

While a reduced travel from China may crimp sales in Vancouver, and the potential for a recession could set the market back, the possibility of interest rate cuts from the Bank of Canada is likely to fuel further declines in mortgage rates and draw buyers into the market.

“People are not concerned about coronavirus, people are not concerned about recession,” John Pasalis, president of Toronto property brokerage Realosophy Realty, said Monday by phone. “The only things they’re worried about is buying a home — and if they don’t buy now they might spend more in the future.”

A confluence of factors is priming the pump for a brisk buying season. Lower bond yields amid the virus have allowed Canadian banks to unveil mortgage specials and the government has tweaked its mortgage qualification rules. Meanwhile, markets have begun to price in an interest rate cut from the Bank of Canada to cushion the economic of virus as soon as Wednesday — maybe even 50 basis points.

“All of this is great news for housing and the mortgage market — until and unless we see a huge spike in coronavirus cases in Canada and/or a big jump in unemployment,” Robert McLister, founder of mortgage comparison RateSpy, said in an interview. “Lower rates are stimulative to housing.”

Home prices in some of Canada’s largest cities have already been rebounding after the market slumped through 2018 and 2019. Shrinking supply in Toronto drove prices to their strongest gains in more than two years in January. Pasalis estimates that sales were more than 40 per cent higher in February from a year ago.

Yield Freefall

“We’re back to near all-time highs in some markets, and we’re seeing prices ramp up and bidding wars in hot markets,” McLister said. “Everyone knows exactly what happens in the near term if mortgage rates plunge — that’s just more kerosene on the fire.”

Royal Bank of Canada cut some mortgage rates at the end of January and HSBC Holdings Plc’s Canadian division began offering a three-year fixed-rate mortgage special of 1.99 per cent on Monday while lowering its five-year fixed rate for uninsured mortgages by 30 basis points to 2.49 per cent.

“This freefall in yields has been stunning — you don’t see this often — and it’s now just starting to translate into meaningful discounting in mortgage rates,” McLister said.

Jonathan Bundle, head of mortgages and secured lending at HSBC Bank Canada, anticipates more competition on mortgages ahead.

“There’s indication that it’ll be a strong property market this year and because of that you are going to see that a lot of lenders will end up being competitive,” he said.

Vancouver Affected

Still, some realtors have reported some early impacts on activity in cities like Vancouver as the coronavirus outbreak in China cut travel demand in the first two months of the year.

“Since they’re not coming here for vacation for Chinese New Year, it’s pretty hard for them to make a decision on any property,” Vancouver realtor Jerry Huang said in an interview. “People were planning to do open houses early February and obviously the turnout wasn’t as good because there’s just a lot less traffic.”

He estimated a drop of “50 per cent plus” of overseas buyers, especially from Asia, who were going to visit Vancouver for real-estate projects and deals that just didn’t come.

Kevin Wang, real estate adviser and property manager at W Brothers Real Estate Group in Vancouver, said longer term, buyers from China may have more of an incentive to buy in Canada to avoid future virus outbreaks.

Neither Ratespy’s McLister nor Realosophy’s Pasalis see the coronavirus as playing a big role in the coming months for housing demand, noting that Toronto’s SARS outbreak 17 years ago failed to dampen sales.

“The market is so far out of balance that you could lose half the sales and it’d still be really, really busy,” Pasalis said.

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Bank of Canada cuts overnight rate again

Beginning today, the Bank of Canada is lowering its target for the overnight rate by 50 basis points to 0.75%. The Bank Rate is correspondingly 1 percent and the deposit rate is 0.50 percent.

The unscheduled rate decision is the second in as many weeks. In a statement, the central bank stated this was “a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.”

Last night, the US Federal Reserve made a surprise announcement in cutting its federal funds rate to a range of 0% to 0.25%. The US central bank also cited the negative economic impact from the coronavirus pandemic for its decision.

Separately, the Bank of Canada has teamed with five central banks to lower the pricing on the standing US dollar liquidity swap arrangements by 25 basis points.

Canada’s central bank announced on Sunday evening that it is working with the US Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to ensure the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 25 basis points. The central banks aim to increase the swap lines’ effectiveness in providing term liquidity by offering U.S. dollars weekly in each jurisdiction with an 84-day maturity, in addition to the one-week maturity operations currently offered.

These changes will take effect with the next scheduled operations during this week. The new pricing and maturity offerings will remain in place as long as appropriate to support the smooth functioning of U.S. dollar funding markets.

“The swap lines are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad,” said the Bank of Canada in a statement.

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Home Sales in Canada up 26.9% Year-Over-Year in February: Report

Despite a rocky couple of weeks, Canada’s real estate market continues to experience notable growth, with home sales up in February compared to the same time the year prior, according to a new report from the Canadian Real Estate Association (CREA).

According to the report, which was released Monday, home sales recorded over the Canadian MLS Systems rose by 5.9% last month, marking one of the larger m-o-m gains of the past decade.

The association also reported that sales for February, which included an extra day due to the leap year, were up 26.9% compared with the same month last year.

CREA reported that transactions last month were up in about 60% of all local markets, largely as a result of a 15% jump in activity in the Greater Toronto Area (GTA).

“Following a quieter than normal December/January period, February saw a burst of new listings in some of Canada’s most supply-starved markets, so it was not a surprise that sales were up alongside that increase in new supply,” said Shaun Cathcart, CREA’s Senior Economist.

“There is some question about how much pent-up demand remains in parts of the country where listings have been low for some time now. That said, it will take more than one month of increased new listings to even start to turn some of these markets towards some semblance of balance. In the meantime, expect competition among buyers for available listings to continue to drive prices higher.”

According to the report, the number of newly listed homes in the country rose 7.3% in February compared with January.

Additionally, the increase in the number of sales came as the national average price for homes sold last month rose 15.2% compared with a year ago to $540,000.

The association said the increase in the national average price was heavily influenced by sales in the Greater Vancouver Area and in the Greater Toronto Area, two of Canada’s most active and expensive housing markets.

Excluding those two markets from calculations cuts close to $130,000 from the national average price, trimming it to around $410,000.

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COVID-19: Government announces new mortgage buying program

The Canadian government has announced a further measure to mitigate the impact of the COVID-19 crisis and to help maintain stability in the financial system.

It will launch a revised Insured Mortgage Purchase Program (IMPP) which will see up to $50 billion of insured mortgage pools purchased through the Canada Mortgage and Housing Corporation (CMHC).

It means that banks and mortgage lenders will have stable funding to continue to lend to consumers and businesses.

The government highlights that this does not pose additional risk to taxpayers as the insured mortgages being purchased are already backed by the government.

“These events remind us all how crucial it is to have a safe and affordable place to live. CMHC exists in part to buffer the effects of events such as the COVID-19 virus pandemic, which affect the health and stability of Canada’s financial system. This is what we do. We are part of a federal team that is working hard together to ease the impacts on Canadians,” said Evan Siddall, president and CEO of CMHC.

Earlier this week, the Office of the Superintendent of Financial Institutions (OSFI) announced measures to shore up finances of the institutions it regulates and the suspension of the planned changes to the mortgage stress test.’

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Property Taxes in Toronto are Increasing 4.24% this Year

Toronto city council has voted in favour to increase residential property taxes 4.24% this year.

Council voted 21-3 in favour of the tax hike Wednesday morning, as part of the city’s $13.53-billion operating budget.

Under the 2020 budget, property taxes are set to increase with the rate of inflation, and when combined with the increase to the City Building Fund, which addresses transit and housing, 2020 property taxes for residents will go up 4.24% to $3,141.

 

 

According to the budget, for the average residential home assessed at $703,232, residents will now be paying an additional $128 on their $3,141 property taxes in 2020. This amount includes a $61 increase for city operations, a $22 increase for reassessment and rebalancing, and a $45 increase for the City Building Fund.

What’s interesting to note is that of the $3,141 taxes, just $62 goes toward children’s services, which explains why childcare is often so hard to come by and the most expensive in the country.

Included in the 2020 operating budget are $67 million in new expenditures, which are said to go toward addressing key city commitments, including poverty reduction ($15.3 million) and addressing climate change ($5.9 million).

Another big focus in the Budget is partnerships, with staff expecting the federal government to continue to support the city’s refugee program, $77 million is already factored into the Budget.

Other partnerships include the provincial upload of subway expansion, which allows the city to redirect funding to transit state-of-good-repair, and the federal government’s co-investment of $1.3 billion for building repair for Toronto Community Housing Corporation.

 

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Home buyers in the GTA will largely focus on detached housing

A significant proportion of those planning to buy homes in the Greater Toronto Area this year are going for detached housing, according to a new report by the Toronto Residential Real Estate Board.

The share of those seeking this type of property stood at 42% as of fall 2019. This was markedly lower than the 54% reading in fall 2015, mainly due to the impact of the OSFI-mandated mortgage stress testing.

“In order to adjust to the more stringent qualification standards, intending buyers followed a number of different paths. The most common responses involved changing home price, type or location,” TRREB said. “Some intending buyers also looked to alternate lenders, such as credit unions or the secondary lending market.”

Overall, however, sustained demand will continue driving activity in the detached segment this year. The trend is expected to further amplify the market’s already severe inventory issues, which were already quite apparent in 2019.

“After more than three years of slower market activity brought on largely by changes in housing-related policies at the provincial and federal levels, home sales will move closer to demographic potential in 2020. The key issue, however, will be the persistent shortage of listings. Without relief on the housing supply front, the pace of price growth will continue to ramp up,” TRREB Chief Market Analyst and Director of Service Channels Jason Mercer explained.

“Policy makers need to understand that demand side initiatives on their own will only have a temporary impact on the market.”

The TRREB predicted that the region’s home sales numbers will likely reach 97,000 this year, which will be 10.5% larger on an annual basis. Price growth will also see similar gains, with a near-10% increase to reach an overall average sales price of around $900,000.

“This forecast rate of growth presupposes that price growth will continue to be driven by the less expensive mid-density low-rise home types and condominium apartments,” TRREB stated. “If the pace of detached home price growth starts to catch up to that of other major home types, the average selling price for all home types combined could push well past the $900,000 mark over the next year.”

 

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