Is a housing market crash on the way in 2021?

With the real estate market experiencing surging prices, scant inventories, and a backlog of new home construction, many consumers are wondering if what’s gone up must come back down — in other words, are we headed for another housing market crash? Let’s take a closer look.

Memories of the Great Recession Are Still Fresh
Few people foresaw the housing market crash 15 years ago that ignited a worldwide recession. Fueled by low interest rates, loose mortgage lending standards, and the nation’s unshakeable faith in homeownership, home values rose at record rates year after year. When the housing bubble burst, some nine million families lost their homes to foreclosure or short sale between 2006 and 2014. Housing values plunged 30% or more, homeowners lost a collective $7 trillion, and it took nearly a decade for most markets to recover. Even today, several local real estate markets have not fully recovered.

With the robust market activity we’ve seen lately, are we in for a repeat housing market crash? The short answer is “not likely.” Today’s mini-boom cannot be sustained, but a crash as serious as the last one is highly unlikely because of a few determining factors:

Factor #1: Higher Lending Standards
Loose mortgage lending practices ultimately brought down some of the nation’s largest banks and mortgage companies. The fallout forced Congress and federal regulators to make significant adjustments that have since fundamentally changed how mortgage lending is regulated.

Since then, standards have been raised and the process of obtaining a mortgage is now more transparent. “Anyone can get one” types of loans are illegal, while borrowers must undergo rigorous income and asset checks. An entirely new regulatory agency, the Consumer Financial Protection Bureau, was created to enforce this new regulatory framework. Lenders who do not comply with these standards risk severe penalties.

As a result, the housing finance marketplace is now more robust and safe than it was 15 years ago. Any dip in the housing market will be cushioned by these stricter regulations.

Factor #2: Pandemic Mortgage Forbearance
When the housing market crashed in 2007, the influx of foreclosures pumped housing supply into areas with falling prices and weak labor markets, while also preventing recently-foreclosed borrowers from re-entering the market as buyers. According to the Federal Reserve, foreclosures during a time of high unemployment could depress prices, plunging homeowners across the country deeper into negative equity.

However, in the pandemic era, the effects of mass unemployment bear little resemblance to the Great Recession, thanks in large part to forbearance programs that have allowed homeowners to postpone their monthly mortgage payments without suffering penalties.

As of early March 2021, 2.6 million homeowners’ mortgages were in such forbearance plans. As the pandemic economy has slowly recovered, many homeowners have since resumed their employment, and thus their home payments. According to CoreLogic, by the end of 2020, overall mortgage delinquencies declined 5.8% due to the forbearance program. The share of mortgages 60 to 89 days past due declined to 0.5%, lower than 0.6% in December 2019.

It’s worth noting, however, that serious delinquencies — defined as 90 days or more past due, including loans in foreclosure — increased when owners who owed large amounts left forbearance. By year end 2020, the serious delinquency rate was 3.9%, up from 1.2% in December 2019.

Inevitably, some owners in forbearance will fail to secure a loan modification or a lengthy repayment period from their lenders. Unless the government provides a bailout for these beleaguered owners, they will lose their homes when forbearances end. ATTOM Data Solutions expects at least 200,000 defaults in 2021 and a 70% increase in foreclosures over the subsequent two years ─ a significant increase from current levels, but a far cry from the 6 million foreclosures following the 2007 crash.

Factor #3: The Cushion of Homeowners’ Equity
Equity is the difference between the current market value of your home and the amount you owe on it. In other words, it’s the portion of your home’s value that you actually own. Equity can be an incentive to stay in your home longer; if prices rise — something we’ve seen almost universally across the country in recent months — your equity increases, too.

Why does this matter? Simply put, higher levels of equity cushion homeowners from default when home values fall.

Over the past decade, American homeowners have enjoyed housing stability and growth, building up large home equity reserves. In the third quarter of 2020, the average family with a mortgage had $194,000 in home equity, and the average homeowner gained approximately $26,300 in equity over the course of the year. In contrast, 2009 saw nearly a quarter of the nation’s mortgaged homes valued for less than the amount their owners actually owed on those mortgages.

Factor #4: Price Growth Will Slow, But Not Stop
The sales boom following the outbreak of the COVID-19 pandemic in April 2020 surprised many real estate economists; like most other business sectors, real estate was expected (if not required in many locations) to lock down. But by mid-April, sales were soaring as buyers, many of them millennials, took advantage of record-low mortgage interest rates. Through the remainder of 2020, rates remained below 3%, and existing home sales reached their highest level in 14 years.

The combination of solid sales and depleted supplies drove the nation’s median existing-home price for all housing types to $309,800, up 12.9% from December 2019 and marking 106 straight months of year-over-year gains.

The multi-year run of significant price increases will end, at least temporarily, but inflationary pressure on entry-level homes will continue in most markets until new home construction will relieve it. Economists at Fannie Mae, Freddie Mac, the Mortgage Bankers Association, and the National Association of Realtors forecast median prices will rise between 3 to 8% in 2021, a significant drop from 2020 but nothing like the crash in prices seen in the last housing crash.

A Moving Target
While no one can say for sure what will happen with the real estate sector, most experts are confident that we’ll experience a market dip, but certainly not a crash. Still, it’s important to stay informed of market trends, consumer sentiments, and expert insights. Check back with Homes.com for all the latest!

/by

Condo investors ‘stealing activity’ from future amid low rates: Tal

Real estate investors are piling into the condo market and taking advantage of low interest rates – even if it means withstanding short-term losses, according to a prominent Bay Street economist.

“It’s really about the supply-demand mismatch and people are looking at interest rates, they know… interest rates will rise,” Benjamin Tal, deputy chief economist at CIBC Capital Markets Inc., said in an interview. “So basically, they’re stealing activity from the future in order to be part of this low interest rate environment and take advantage of it.”

Tal, who developed the report in conjunction with real estate analyst group Urbanation to be released later this week, explained that investors are piling into the condo segment as it provides a more affordable entry into the real estate market than single, detached housing.

He said that the investors interviewed for the report are absorbing monthly losses, sometimes worth hundreds of dollars, for the longer-term value proposition. Data from CIBC found that about 40 per cent of condo investors had a negative cashflow. The investors said having a portion of their mortgage paid by someone else in the short-term will lead to profit as prices in hot markets like Toronto continue to climb.

And Tal believes they will continue to climb.

“If you think that Toronto is unaffordable now, you wait,” Tal said. “Toronto is becoming like Berlin, like London, like Manhattan. It’s becoming more and more unaffordable, and therefore we know that our kids will struggle.”

Condo sales have been taking off according to data from the Toronto Regional Real Estate Board (TRREB), up 85.5 per cent in January on a year-over-year basis. During that same time, prices had softened by 4.7 per cent. However, TRREB warns that the growth in condo sales outstripping the new listings growth may prompt a surge in prices, according to its market watch report.

/by

Toronto Real Estate Is Getting So Intense There Are Now ‘Bidding Wars’ For Rentals

Despite rent prices plummeting in the city during the pandemic, new competition for value in Toronto’s rental market is driving prices up for certain listings.

Strata real estate agent Francisco Hiebert told Narcity “strong competition for desirable units” has caused bidding wars among tenants who are “waiting out the current buying frenzy” by renting.

“Tenants are taking advantage of the lower prices,” and are even submitting offers over the asking price, said Hiebert, particularly for spacious units with balconies and nature nearby.

“I would never ask a client to do that, but many are volunteering,” Hiebert said. “Seeing multiple offers on rentals is becoming more common, thanks to increased demand and a decline in inventory.”

For example, an Upper Beaches one-bedroom with a den is now being rented for $300 more than it was originally listed at. The same goes for this two-bedroom unit in Markham.

/by

5 Toronto areas saw condo sales soar over 75% in February

Condo sales are on a sustained upswing across Toronto after spending much of 2020 in the red.

Citywide condo sales rose over 63 percent annually last month with 2,167 units changing hands. While most areas tracked by the Toronto Regional Real Estate Board (TRREB) saw substantial increases in sales, a handful recorded transaction totals that significantly outperformed the citywide growth figure.

Of the areas that saw a high volume of condo sales, five recorded annual growth that was healthily above 75 percent.

TRREB’s C08 and C10 posted condo sales totals that were more than double what they recorded during the same period last year, with gains hitting 138.6 percent and 111 percent, respectively. C08 covers the Distillery District, the eastern Waterfront Communities, Regent Park and the downtown core east of Yonge Street. C10 includes the eastern section of Yonge and Eglinton, Davisville Village and Sherwood Park. Both are home to areas with significant condo density.

C01 — encompassing Cityplace, Liberty Village and a large swath of the Financial District west of Yonge Street — posted an 85 percent sales boost over February 2020.

The area covered by W04, which includes Yorkdale-Glen Park, Mount Dennis and Briar Hill – Belgravia, recorded an 82 percent rise in condo sales over the previous year. In the city’s east, E09 — consisting of the Bendale, Woburn and Morningside neighbourhoods — posted a 77.4 percent annual sales gain.

Despite February being a shorter month, all areas with the exception of E09 also recorded monthly accelerations in condo sales compared to their January totals.

Taken together, just over 50 percent of all condo transactions that took place in Toronto in February happened in these five areas. There are 36 distinct areas in the City of Toronto tracked by TRREB.

/by

Planned subway line will drive King St

An argument can be made that Toronto’s downtown east is the most connected part of the entire megacity, and it stands to reason that owning a piece of real estate there will yield above-average returns.

As it turns out, Bauhaus Condos is located within a juncture that, in addition to slick connectivity to the Don Valley Parkway and Gardiner Expressway, will have a subway station seconds away. The 32-storey, 218-unit tower from Lamb Development Corp. will be located at King St. E. and Berkeley St., where the new Ontario Line subway route will have a station.

“There’s nothing better than living in central Toronto and having a subway nearby,” said Brad Lamb, owner and CEO of Lamb Development Corp. “King St. E. goes through the original 10 blocks, which are Spadina to Parliament, known as the historic city, and it’s better connected than the west side of downtown approaching Bathurst.

“King St. is also a high street, and it’s more important to commerce in Toronto than even Yonge St. It’s the most prestigious street in central Toronto, and around Bauhaus an office building and a high-rise condo are being constructed.”

That’s not all. Dream Office REIT is developing two new office towers and a residential building within a block of Bauhaus, and Lamb Development Corp. is building three other high-rises in the neighbourhood. Also, perhaps fittingly, the SAS Institute has its Canadian headquarters nearby.

Lamb believes the neighbourhood is Toronto’s most liveable because of its proximity to Corktown, the Distillery and Canary Districts, River City, St. Lawrence Market, the downtown highway network, and Union Station. It’s also near Ryerson University and George Brown College.

It’s for that very reason that Lamb, who used to sell condos for Peter Freed of the eponymous Freed Developments when units were 100 per sq ft, says owning a piece of real estate in the neighbourhood will yield returns far and above the majority of Toronto’s other neighbourhoods. There is no more untouched land in Toronto, and that means new builds will only ever be found in established locales. Lamb questions whether there’s a better neighbourhood than King St. E.

“For our financial models for three Bauhaus units, which were 434, 460 and 516 sq ft, we use pre-COVID rents, but Bauhaus won’t be completed for another three and a half years, and by then rents will get back to where they were. They will probably get back there this year or early next year—and that’s just recapturing what was lost because of COVID,” said Lamb.

“They showed a positive return on equity with 30% down, meaning that you’re making 6-6.5% on rent alone. These rents were achievable before COVID and in three and a half years, they’ll be easily achievable. The compounded returns, according to TRREB, will be a 6.6% average return over 30 years.”

Factoring in inflation, Lamb says that in 25 years a studio condo in downtown Toronto will cost substantially over $1 million.

“Inflation is not going away. It’s absurd to think in 25 years you will pay $2.5 million for a studio in downtown Toronto, but you will,” he said. “When you factor in leverage, which you don’t get with a stock but you get with real estate, you’re buying a house or investment property for 25% and your actual return, in terms of price appreciation, is 30% compounded annually plus whatever you make from rent.”

While Lamb concedes that another recession or viral outbreak could be in the cards, he noted that COVID-19 hardly made a dent in Canada’s real estate market, and that it is, therefore, unlikely anything else calamitous enough will occur.

“The six-month negative growth rate was worse than the Great Depression at minus-15%, and since then we’ve clawed back to minus-4-5% on an annual basis. What happened to real estate? Nothing. Condo prices dropped about 10% but, already in March, we’ve recovered from that and prices are already higher than they were last March.”

/by

Oshawa condo market surges to become hottest in the GTA

Housing prices all over the GTA have been skyrocketing throughout the past year, but it’s Oshawa that has come out as the frontrunner in the GTA’s condo market.

A new report from Strata has found that property values in Oshawa have increased 48% over the past year. This is staggeringly higher than the increases seen in other GTA cities like Mississauga, Brampton, and Vaughan, which have gone up 6%, 11%, and 5%, respectively.

The average Oshawa condo is now priced at $483,000, or about $540 per sq ft.

According to the report, Oshawa real estate is attractive because it typically has more spacious layouts compared to Toronto, and low-rise condo townhomes — an alternative to the typical Toronto high-rise — are abundant.

“Given today’s migrational trends, it’s not surprising to see Oshawa, and Durham Region as a whole, outpace the rest of the GTA. Whitby, for example, may not be as hot as Oshawa. But it, too, is seeing an increase of 20% in property values over the past year,”

For years, Oshawa, known as Ontario’s “motor city” thanks to the General Motors headquarters located there, has been in “an auto industry slump,” the report says. But the city is now becoming more attractive to families and young professionals.

“Oshawa is no longer that sleepy bedroom community you once knew. I used to hear a lot of Toronto homebuyers swear they’d never go past Pickering,” said Van Rhijn. “But with today’s remote working options, I’m seeing more clients push their geographic boundaries and wonder what’s further east.”

And with Toronto’s condo market continuing to be much to expensive for many buyers, it’s pushing more people to further out GTA cities.

“The average selling price for a condo in Toronto is well over $700,000,” said Strata agent Jessie Pereira. “That’s why Oshawa has become an attractive option. Not only can you buy property here for much cheaper, but you’re also getting in on a market with long-term possibilities for profit.”

So any buyers looking to get in on a growing market would be smart to turn their attention to Oshawa.

/by

The rise of the second home

Real estate brokerage firm Redfin recently did an analysis of “mortgage-rate lock data” taken from the analytics firm Optimal Blue. A mortgage-rate lock is an agreement between a lender and a borrower guaranteeing a particular interest rate for a particular period of time.

What’s potentially interesting about this data is that (1) approximately 80% of mortgage-rate locks apparently result in an actual home purchase and (2) buyers must specify whether they’re applying to secure a rate for a primary home, a second home, or an investment property. So there’s a high degree of intent that goes along with these applications.

What Redfin found when they looked at the data is that the growth in demand for second homes is exceeding that of primary homes by quite a wide margin. They argue that this is largely a result of people now working remotely.

But this rise in demand — at least according to the above data — appears to have started in the second half of 2019. So I think a few more data points would be helpful in understanding what’s really going on. Is what we’re seeing more about acceleration than about causation? And what does this look like a year from now?

/by
,

Toronto is changing its map around to create 34 new neighborhoods

 

Congratulations to everyone living along the downtown portion of Toronto’s waterfront, all 65,000 of you who, for decades, have been clumped together on the city’s official map of neighbourhoods as one ill-defined, enormous blob called “Waterfront Communities — The Island.”

Big ups also to Liberty Village, Fort York, West Queen West, and all of Ontario Place, which together will no longer be classified by the city as one sprawling super-hood called “Niagara.”

Toronto is finally redrawing its seemingly-ancient map of neighbourhoods to better reflect how more than a dozen monolithic regions across the city are actually divided in terms of population and use.

Freshly unveiled by the municipal government, these new boundaries present a Toronto with 158 different neighbourhoods — up from the current total of 140, which has been in place since the late 1990s.

“In recent years population growth has made each neighbourhood’s population unbalanced in relation to the others,” reads the city’s website under a headline that states “Neighbourhoods Are Changing.”

“To balance population growth, the Social Research & Information Management unit (SRIM), together with partners in other City divisions and public agencies, developed neighbourhood splits that resulted in 34 new neighbourhood areas with more balanced populations.”

Are you used to saying that the City of Toronto has 140 neighbourhoods? Well, that number is about to be updated to 158 (h/t @Diane_Dyson).

And, since the old numbers are being retired, we’ll now have 158 neighbourhoods numbered 1-174.https://t.co/NMl0nurIdv pic.twitter.com/9EWcpLrfqz

— Shauna Brail (@shaunabrail) March 15, 2021
It’s not yet clear when the new boundaries will be formally recognized, but the city has released a map showing how large areas such as Rouge, Dovercourt-Wallace Emerson-Junction and Islington-City Centre West are being divvied up.

The latter neighbourhood, for instance, will be split in half horizontally, creating two new hoods called Islington and Etobicoke City Centre.

With more than 43,000 residents as of the last Canadian census, this makes sense.

The area currently known as Willowdale East (population 50,434 as of the last census) will be split into three new neighbourhoods called Empress, Avondale and Dunforest-Hollywood, which I’m certain people will eventually call “Hollywood North (of Bloor.)”

Downtown, the neighbourhood currently known as Niagara will be split into West Queen West and Fort York-Liberty Village.

Waterfront Communities—The Island will become three new hoods called Wellington Place, Harbourfront CityPlace, and St. Lawrence-East Bayview-The Islands.

Here’s the new downtown neighbourhoods that’ll come into effect later this year. Quibbles: Is “Wellington Place” actually a thing? And, uh, are we totally sure we want to name more things after Ryerson? pic.twitter.com/QzQHFQS5cN

— Matt Elliott (@GraphicMatt) March 15, 2021
In total, 16 old neighbourhoods are being replaced with 34 new ones. The rest will stay the same, as will the outer boundaries of all old neighbourhoods.

“Only internal lines are made for new neighbourhoods. This allows old neighbourhoods to be compared to new neighbourhoods,” explains the city. “Neighbourhood splits follow Statistics Canada’s census tract geography for maximum compatibility with existing datasets.”

Confused? This map from the city shows the locations, names, numbers and split lines of both new and old neighbourhoods.

In terms of the city’s old neighbourhood numbering system, all areas being split up will effectively see their numbers retired.

New neighbourhoods have been given numbers starting at 141 and going up to 174. Minus the old neighbourhoods, Toronto has 158 different areas that residents can call home on the new map.

Frivilous as it may seem to do all of this work just to rename a bunch of blocks, Toronto’s neighbourhood profiles are more than a vanity project — they exist to help government and community agencies with local planning by providing socio-economic data on a meaningful geographic scale.

/by

Toronto home sales break record in February as condo market storms back

Home buying activity hit a record high in the Toronto region last month as 10,970 properties changed hands.

February’s sales total represented a 52.5 percent increase over the same period last year, according to data published today by the Toronto Regional Real Estate Board (TRREB).

While buyer interest in suburban single-family homes has dominated headlines for months, the city’s condo market is climbing its way back into the spotlight. Continuing a trend established in December, condo sales jumped 64 percent last month with strong increases recorded in both the suburban 905 area and the urban 416.

The region’s condo market — especially units in Toronto’s downtown core — have been a notable weak spot in an otherwise robust housing picture. Despite the significant sales growth, condo prices continued their streak of annual declines in February, down 3.7 percent on the regional level and 6.4 percent in the city-proper. That said, TRREB’s Chief Market Analyst Jason Mercer sees potential for condo prices to begin posting gains again this year.

“[I]f we continue to see growth in condo sales outstrip growth in new condo listings in Toronto, renewed price growth in this market segment is a distinct possibility in the second half of the year,” said Mercer.

The balance between new listings and sales that Mercer is referring to was strongly tilted toward listings for much of 2020’s second half as many condo investors sought to offload their units while other condo owners took advantage of record-low interest rates to move-up to a larger property.

The balance has been shifting in recent months and, in February, condo sales were up 64 percent, outpacing new condo listings which grew by 42.6 percent annually. This trend will need to continue for condo prices to start increasing again, but things are moving in the right direction.

For the region’s housing market as a whole, TRREB President Lisa Patel is anticipating more supply-driven challenges this year as demand is already exceptionally strong moving into the typically busy spring homebuying season. Patel says that population growth is expected to pick up again as Canada’s vaccination campaign ramps up, so this could exacerbate the problem further.

TRREB’s Home Price Index rose nearly 15 percent annually in February while the average selling price of a Toronto region home was up a similar amount to $1,045,488. Buyer confidence and low borrowing costs have led to fierce competition in the single-family home market, where price growth has been concentrated.

“In the absence of a marked uptick in inventory, the current relationship between demand and supply supports continued double-digit average home price growth this year,” said Mercer.

It’s also worth noting that February 2020 was the last month of that year in which homebuying activity remained mostly unaffected by the looming pandemic. By the second half of March 2020, home sales began to collapse as the market froze in the face of accelerating virus transmission and widespread lockdowns. Expect some huge annual spikes in TRREB’s sales activity data during the months ahead when 2021’s booming market is compared to 2020’s lockdown-curtailed market.

/by

Pre-construction condo vs resale: which should you invest in?

When it comes to purchasing a condo as a first-time home buyer or investor, there is a wide range of opportunities and benefits. However, when it comes to choosing whether or not to buy a pre-construction condo or a resale condo, things can get a little tricky. Either way, the condo market is thriving in Canada and you can get in the market with a good purchase price if you know where to look.

In real estate markets like Toronto, the average price for a stand-alone family home was just under $930,000 as of December 2020 whereas the average price for a condo in Toronto was just over $660,000. For someone looking for a first-time home or an investment property, they could save almost $300,000.

“The pros of it for most first-time buyers it’s more affordable,” said Our Expert’s said. “The reality is, if that’s what your budget allows for, then you’re going to do [better with] a condo. And with that being said, depending on your lifestyle there’s a lot of advantages to living in a condo.”

Purchasing a condo unit comes with its pros and cons, like occupancy fees, carrying costs and living in a dense high-occupancy housing community. You’ll also need to pay the amount of land transfer taxes on a condo that you would on a single-family home.

Investing in condos is a great way to break into the real estate market, but once you choose to go with condos instead of homes, you have to look at the benefits and disadvantages of choosing a pre-construction or resale unit.

The benefits of pre-construction

One of the main benefits of buying a condo during its construction phase is that it’s cheaper than a resale model. When you buy pre-construction, you’re taking the risk of your new condo not being built on time due to delays.

Another benefit to this is that you’re getting on the on-sale price before the condo is built, so you’re the price you’re paying will be less than that of people who are buying a new condo after the construction phase. So the market value of your condo is already increasing and working for you!

“You know if you’re buying today you’re buying an asset. You’re buying something in 2025 [but at a] 2021 price,” Our Expert’s said.

Another huge benefit to buying a pre-construction condo is that you get to choose a floor plan and your own specific finishings since your condo hasn’t been built yet. Typically, developers let buyers choose their own flooring and fixtures to give their new condo a personalized touch. However, certain finishes may be pricier than you anticipated so keep your eye out for any product that looks great, but can also save you money (like laminate flooring that looks like real wood for example).

“It’s a very passive investment,” Our Expert’s said. “You don’t have to deal with tenants and there’s nothing that you need to do until the condo is ready.”

The benefits of buying resale condos

Obviously, everyone wants brand new condos they can be the first to live in, but resale properties offer the opportunity to move into your condo much sooner than a pre-con. For resale condos, you’ll probably need a mortgage since purchasing these units isn’t the same as buying a condo during the building phase. However, interest rates are at an all-time low in Canada, which means it’s never been a better time to look into real estate investments.

Resale condos also offer the opportunity for great liquidity, meaning you can do whatever you please with your condo as long as you follow building guidelines. This is specifically appealing to investors who want to invest in a rental property as you can immediately move in yourself, or rent it out and start seeing an immediate profit.

“In most areas like in Toronto, if you pay a million and a half dollars for a home on the rental market you will not be cashflow positive,” Our Expert’s said. “Whereas on the condo market, in a normal rental market, you have that opportunity.”

Pre-construction real estate investment properties

When it comes to paying for pre-construction condos, it works a little differently than buying a single-family house or resale condo. The pre-construction market in Ontario only requires a 20% down payment compared to other markets in Canada where you have to pay from 50-100% of the cost of the property upfront.

Unlike a mortgage, you don’t even have to pay the whole down payment right away. Buying a pre-construction condo gives you the freedom to pay your down payment over the course of the first year of ownership, which means you have more time to come up with the down payment before they start building your brand new condo. This is especially appealing for first-time buyers who are looking to break into the real estate game or are just looking to upgrade from their current unit.

Selling a pre-construction condo

As the owner of a pre-construction condo, you technically can’t sell your pre-construction condo because it hasn’t been built yet. Sometimes it can take years to build condos and your plans change, or you’re looking to put money into a different investment opportunity. An option to get around selling your investment condo is to actually sell the contract for your pre-construction condo.

This means that as the owner, you can sell off your condo unit but the buyer has to agree to the same terms and purchase price that you already agreed to. Basically, they have to be alright with what you’ve already agreed to in terms of condo developments, tax implications, closing costs, occupancy, maintenance fees and any other things you may have agreed to when buying pre-construction units.

Using equity for a resale real estate purchase

Using equity to buy any condo is a great option for anyone looking to use their existing home equity for investment opportunities. Pre-construction and resale condos are both great options for those looking to use equity instead of taking out another mortgage, but in order to see a return on your investment immediately, resale is where it’s at.

“The price of real estate has gone up so much and people have a lot of equity, which is borrowing power in their real estate,” Our Expert’s said. “If you bought something for half a million dollars, and it’s now worth a million dollars you have half a million dollars in equity that you can really access.”

Using equity instead of a mortgage to purchase resale units works because your resale property can become a rental property and you can make money immediately from your investment. Waiting for developers to build pre-construction condos hinders your opportunity to see a return on your investment and that’s the one thing you don’t want to see as an investor.

Increasing resale value

Resale condos are also one way to flip your investment for a higher profit. Since they’re already built, the value of your resale property will skyrocket because the need for housing in Toronto is soaring. This will ultimately lead to your resale property being worth more money if you flip it instead of renting it out and lets you pay off the balance on your mortgage thanks to the increasing market in Canada.

“I think right now the markets on fire and especially like once there’s a major reopening, everyone’s comfortable, the global confidence is returned and the disease is more contained we’re going to see massive appreciation,” Our Expert’s said. “There’s more money than has ever been on the sidelines waiting to come in right now.”

Pre-construction vs resale: what makes sense for you?

When looking at pre-construction vs resale condos, it’s important to note the benefits of pre-construction condos. Typically, pre-construction condos give you the freedom to break into the real estate market at a slower pace than resale condos where you have to be ready with a large percent of the purchase price upfront. Construction and resale investment opportunities are abundant in Ontario and new buildings are springing up daily in the GTA and across the country.

Property developments in general are a safe investment. The question that remains is if condos are right for you, and if they are, what are the pros and cons of a pre-construction unit vs resale? One of the main things to keep in mind is when you’re looking to occupy the unit. Obviously, pre-construction condos take time to build whereas a resale condo can be moved into the week after you buy it.

A resale is a safer investment if you’re looking to get into the property rental business as its main advantage is the option to move in tenants in right away. To purchase resale condos as real estate investments is purchasing the option to rent immediately, or flip the condo in a few years’ time once the value has appreciated. The bottom line is when considering the pros and cons of pre-construction property vs resale, the market isn’t going to let you down.

One of the safest investments

“I think what’s really important that people remember is that real estate is an asset,” Our Expert’s said. “Specifically Toronto real estate has done incredibly well over the last, you know, three, two decades. It’s a really safe place to put your money where you can get really solid returns. And as long as you’re investing with, with a long time vision. You know, historically you’re going to do incredibly well.”

The main advantages of both pre-con and resale investments are that the value of your condo will continue to grow and continue building until you choose to resell. When you purchase a property, there are countless opportunities in terms of how to get your unit to give you the most bang for your buck.

Post-pandemic rising markets

“We’re seeing the market come back to life,” Our Expert’s said. “Now that people know that there’s a cure and there’s that certainty because rates are at all-time lows, people really are confident on where the market is going. And as soon as we see the borders open up. We’re going to see a real, real increase in rental demand as well.”

This means that now is a great time to purchase a condo as an investment. A by-product of this pandemic is how quickly every city is building in terms of growth. Using a condo to get in on the floor level of real estate is a real advantage in 2021 because new condos are popping up in every major city in Canada. The market value of condos is increasing at exponential rates and guarantees a great return profit on your investment unit.

Is the condo lifestyle for you?

“Depending on your lifestyle there’s like a lot of advantages of living in a condo,” Our Expert’s said. “If you’re someone who goes away on the weekend, who doesn’t want to bother with landscaping, or it’s important you don’t want to own a car and you want to live close to work. I mean these are all great reasons why you would own a condo.”

Living in a high-rise building comes with benefits like not having to worry about maintenance or knowing there are certain rules every tenant in the building must follow. These benefits ring true for 0wners of pre-construction and resale condos. Your unit is just a small part of a community that works together to live in harmony. Buying pre-construction just means you may have to wait a little longer before you get that sense of community belonging that comes with living in a condo.

Ready to find make an investment?

At the end of the day, choosing a pre-construction vs resale condo is up to you, but there are pros and cons to each option. Real estate investments are a great opportunity to get your money to work for you and to take part in a growing market that will only increase in value as the years go on.

Whether you choose a resale condo or one that’s in its construction phase, you know that your real estate purchase will bring you a profit. Why? Because the demand for condos continues to rise (no pun intended). Either way, you can rest assured knowing that looking into new or existing condo developments for sale is the right move when it comes to investing your hard-earned money into something profitable.

/by

Average house price increase per year: Toronto

It’s no secret that the Toronto housing market is one of the most competitive real estate markets in Canada. In January 2021, statistics from the Canadian Real Estate Association (CREA), showed that home sales have set another all-time record, but statistics are also showing a lack of new listings. Since we’re just coming out of the second COVID-19 lockdown in Ontario, trepidation among sellers is understandable. But as we emerge from a winter spent in lockdown, sellers may start feeling better about listing their homes as the GTA real estate market continues to boom and soar to new heights.

What the Canadian Real Estate Association is saying
According to the MLS graph, in 2019, the benchmark price of a home in the Greater Toronto Area was just over $763,000 compared to January last year, where the average price was just over $927,000. This means the price has increased by 21% in 12 months. Because of the rapid price rise, people are able to take advantage of the market and sell their homes at a reasonable price.

According to the Canadian Real Estate Association (CREA), the same graph shows Toronto home prices have risen by 128% in the last ten years. The price for property in the GTA was only $405,000 in 2011 on the MLS graph. The City of Toronto has seen major growth in the last decade, but the price range of houses has made it more unattainable for residents to put a down-payment on a stand-alone single-family home.

However, members of CREA and many real estate professionals are predicting the demand for housing in Toronto will rise post-pandemic and post-vaccination. Currently, interest rates are at an all-time low and property value is increasing at a rapid rate. But the lack of listings is causing bidding wars and that’s just driving the price increase much higher. In contrast, the housing market is less competitive with the border remaining closed as buyers don’t have to fight with people coming to Canada from out of the country and buying property.

What’s more interesting is looking at the average home price across Canada. Members of CREA say the year over year (Y-O-Y) increase in Canada is affected by areas like Vancouver, British Columbia and the GTA. The national sale price in January 2021 was just over $628,000. But if you take away areas like Vancouver, British Columbia and the GTA, the average goes down by $129,000. The Y-O-Y increase was calculated using CREA’s trademark MLS multiple listing service graph to assess and graph housing trends across the Greater Toronto Area and Canada.

Toronto housing market options
Maybe you’re not ready to commit to a million-dollar stand-alone house in the GTA, and that’s totally understandable. Population growth has drastically impacted price increases in the past few years. However, there are a number of other options for someone looking to break into the Toronto real estate game.

Since house prices are so steep, considering the condo market is a great opportunity for many first-time buyers. In the Greater Toronto Area, condos are being built in the blink of an eye, plus, the price tag for condos is more appealing than houses. One of the hottest real estate trends in 2021 is pre-construction condos. They can take up to three years to build but are a safe long-term investment. The condo market in Toronto is booming and with house prices rising, investing in the condo market is more appealing than ever for people looking to find affordable housing.

Another interesting alternative to stand-alone homes is townhouses. In the city of Toronto, townhouse prices are lower than stand-alones, but not by much. However, with the demand for rental housing increasing, snatching up these listings could help you see a profit if you’re choosing to convert your townhome into a rental unit. With housing prices going up, rental demand is increasing and investing in this property type can help you in the long run.

Consult with home sales professionals
Working with a realtor can help you navigate multiple listings, mortgages and interest rates, along with real estate prices in Toronto, Canada. For first-time homebuyers searching through new listings and viewing Toronto house prices can be daunting but guidance from professionals who are members of the Canadian Real Estate Association can give you an edge in the Toronto housing market and help you pass your stress test as it’s important to keep your stress test expectations realistic.

Real estate professionals include mortgage brokers, not just realtors. This also means you’ll have to complete an Ontario mortgage stress test to ensure you can keep up with mortgage rates and interest rates while still being able to provide a sizeable down payment. Real estate professionals can help you keep up with mortgage rates outlined by The Bank Of Canada and vice versa. They can also help you navigate your much-dreaded mortgage stress test.

Real estate professionals can help you determine your qualifying rate and help you find a property listing at prices that are more reasonable. However, the property market in the GTA is one of the highest in Canada and population growth is only contributing to the price growth even more. Professionals who are members of CREA can help you find housing markets that may be more in your price range if you’re willing to change your city.

Post-pandemic real estate demand
Once people get more comfortable in post-pandemic life, the price trend is going to continue. The demand for property is going to increase further and, therefore, so will the prices. The average price of new listings in Canada is often less than the selling price of properties because of intense bidding wars that are become harder for first-time buyers to win.

The house price listed on real estate websites is often less than what the buyer actually pays. Sellers can list their house for one price and sell their house for $50,000 over-asking. And since bidding wars are so prevalent in today’s real estate landscape, sellers are also listing their homes for cheaper than the amount they’re expecting to receive. Sales of new homes in the GTA have temporarily halted because of lockdown restrictions and border closures, but as soon as we see that change in our society, price growth is going to contribute to an even higher Toronto housing landscape.

Listings waiting for recovery
A number of listings are on the sidelines waiting for the market to open up even further and wait for demand to increase so their property can make the most for them. A realtor may even suggest waiting to list your property now because the GTA real estate market is being slated to expand and grow within the next year. Depending on property type, housing prices and the sales of houses will continue to rise in 2021.

Increasing sales activity
Last year, Canada saw a huge dip in the number of homes sold during the onset of the COVID-19 pandemic. Although demand remained high, listings dwindled as homeowners were more worried about strangers coming into their property. The Bank of Canada quickly cut interest rates to cushion the blow and regardless, the real estate landscape in Toronto, and across Canada, thrived. The Bank of Canada also put in motion a couple of programs to help lenders during the pandemic, which increased overall sale activity in the housing market.

As Canada and Toronto put economic recovery strategies to work in the coming year, home prices will continue to rise to help the economy. The Ontario Fair Housing Plan (OFHP) was created to help cool the red-hot real estate market, but the impact of the pandemic will inevitably contribute to home price growth and economic recovery nationwide. But again, working with a realtor can help mitigate some of the stress and help you in your sale and real estate endeavours so you can reach your goals.

Hot Toronto neighbourhoods
The red-hot Toronto housing landscape can be intimidating, but looking at some trending neighbourhoods can help you get excited about the opportunity of homeownership even if house prices aren’t extremely desirable.

The Beaches
The Beaches is a transit-friendly neighbourhood in Toronto with house prices hitting over a million dollars. However, the condo market in The Beaches is much more affordable and offers residents access to scenic Toronto landscapes and fantastic bicycling infrastructure. Most family homes have 2-3 bedrooms in this quiet neighbourhood for young families. Naturally, the proximity to Lake Ontario is one of The Beaches’ main attractions when looking for homes in the GTA.

Bloor Village West/ Roncesvalles/ High Park
These three villages in Toronto’s downtown core have a higher house price point with most townhomes sitting just over a million dollars. It’s the close proximity to subway transit and the downtown core that makes these areas so popular. By subway, these neighbourhoods lie 30 minutes from Toronto’s commercial and business districts. Sales activity in the area has been rising recently and townhouse prices are steadily increasing in these areas, so getting in on these properties is a good idea for anyone looking to see market value increasing in their home.

Scarborough
On the outskirts of Toronto lies Scarborough. Once thought of as a “rough part of town”, Scarborough has become a multicultural hub of opportunity much like the rest of the Greater Toronto Area. Long-term housing in Scarborough is more affordable since it’s on the outskirts of the downtown hub and house prices are slightly more affordable. For those who work in Toronto, downtown is a short subway ride away, making Scarborough a desirable market with better prices than downtown neighbourhoods.

Toronto’s changing housing market
The average house price has increased exponentially in the last two decades. Since Toronto is an epicentre for business and entertainment in Canada, it’s no surprise that the demand for homes in the area has seen a change with the times. Real estate trends and prices change all the time, but one thing that is constant is the real estate market in these areas. As homes become more scarce and the average home price rises, we’ll see a change in the way the City of Toronto appeals to residents across Canada.

Since the housing landscape in the GTA is so highly-priced, many smaller communities surrounding larger cities are seeing an increase in home prices. A market like Hamilton, for example, has seen the average price of a house increase by 174 percent from roughly $285,000 to $784,000 in the last ten years because of a steady influx of new residents coming from the GTA.

The housing market in surrounding cities
Sales and home prices in cities surrounding the GTA have increased due to residents moving out of the big city and to a smaller city still within a commutable distance (mainly due to being able to work from home orders during COVID lockdowns). Areas in the Halton and Peele region have seen the average price of new listings in their once-affordable cities being raised to new heights. The market for housing in Toronto isn’t the only one rapidly expanding and seeing price increases.

Oakville
A number of Toronto escapees chose Oakville for its family-friendly neighbourhoods, transit infrastructure and greenspace. With direct GO Transit trains to Union Station in Toronto, Canadians are flicking to Oakville as a quiet retreat from the hustle and bustle of the city with more affordable houses for sale due to ongoing housing development construction.

Vaughan
Vaughan isn’t just the home to Canada’s Wonderland. This smaller city outside of Toronto is seeing an increase in property demand. Much like Oakville, Vaughan is a transit hub that makes it easy for people to commute to work in Toronto, and live in a smaller city like Vaughan. Vaughan also is host to the shops at Vaughan Mills and a booming condo market for people looking for more affordable unique listings

Hamilton
It wouldn’t be right to mention cities seeing price growth and increased sales activity if Hamilton wasn’t mentioned. The steel-city of Canada is one of the fastest-growing real estate landscapes and is seeing major revitalization due to residents from Toronto looking for more fair house prices. The city is home to a booming food industry and is close enough to Toronto that the commute is worth it for the lower home prices.

Mississauga
Mississauga is where you want to be if you’re looking for affordable trendy condos. In Mississauga, the condo market is running rampant and is becoming more and more appealing for residents of Toronto who are looking to escape the grind of Ontario’s capital city. House prices in Mississauga aren’t too far from Toronto, but the price of condos is improving and the condo market in Mississauga is thriving and competing with that of Toronto.

Appealing new listings
When it comes to house-hunting in Toronto or any larger market in Canada, finding new listings is the key. Working with a realtor can help you access listings before they’re made public and can give you an edge on competing for homes in the area. Having a down payment ready to go during your search for affordable long-term real estate investments is an important part of winning any bidding war and staying within your price range.

Property demand is running wild in Canada and it sometimes can seem like there are too many listings compared to people, or vice versa. It’s easy to get overwhelmed by appealing new listings and 3-bedroom homes with newly renovated kitchens. Having a set number that you won’t go over when purchasing a home can help you down the line in three years when you’re looking to buy a second car or start a family. House sales happen daily, so don’t get discouraged if someone else scoops up the house you wanted – something better will come along.

Take advantage of lower interest rates
The main takeaway from looking at the average house price increase in Toronto over the last few years is that taking advantage of lower interest rates and a less competitive market is a solid idea. Many Canadians may be waiting for the real estate bubble to pop – but if the pandemic couldn’t bring housing prices down it’s unlikely anything will. Taking advantage of the Bank of Canada lowering interest rates during a pandemic is a great way to hack the housing market and make the most out of your investment while getting a decent house price before everything explodes.

Home prices in Toronto are climbing and once the pandemic is over and the majority of the population has received their vaccines, more Canadians are going to be looking into purchasing real estate and more people are going to up the selling price of their property. Sales happen daily, and that means keeping your ears to the ground looking for hot real estate opportunities in the Toronto Area is more important than before.

When it comes to real estate, look at new listings, come up with a budget based on your mortgage stress test, and pay attention to price trends. Having a strategy is everything when it comes to finding a reasonably priced listing and purchasing the home of your dreams in Toronto.

Are you house hunting in Toronto?
Whether you’re using a realtor, or choose to not use a real estate agent, finding quality homes to purchase anywhere in Canada is an endeavour that must be planned and properly executed. The Canadian Real Estate Association (CREA) reported 551,392 were sold in Canada in 2020 and that projection is slated to increase in the coming years.

Housing prices in the Toronto housing market have reached new highs and it’s looking like it’s just going to keep rising. It seems the faster one jumps on a real estate opportunity, the better the long-term outcome. Whether you’re looking in the housing market or condo market, you can be sure that your investment in Canadian real estate will make you money – even with the seemingly astronomical housing prices we’re seeing.

As a whole, Canadian real estate has done relatively well handling the COVID-19 pandemic. With residents looking to spend more time inside and working from their houses, it makes sense that the demand for housing has substantially increased and will continue to post-pandemic. While getting in on real estate in Ontario is sometimes tricky, it’s a safe bet and a safe place to put your assets. Whether you’re looking for your first home, or you’re looking for an investment opportunity or a rental space, you can sure that real estate in the GTA is going to be worth it.

The housing truth
The Ontario Fair Housing Plan has tried to mitigate some of the unrealistic aspects of Canadian housing, but for greater Toronto residents, high price growth has become a reality associated with living in the capital of Ontario. The province has the highest number of residents, and most small-towns are slated to grow into bigger, small cities. It’s easy to blame the Toronto market for these circumstances, but when it comes to homeownership, everyone just wants their own slice and everyone who works hard deserves it.

Toronto home prices aren’t getting lower any time soon, but we can embrace the good things that come along with high real estate prices – like knowing the house you currently own is building equity that may help you in the future. Or you can just enjoy that Canada, and in particular Toronto, is a place where people want to be and we should view ourselves as lucky to be in one of the greatest countries in the world.

/by