Home sales rose Canada-wide for the sixth straight month in August, leading one of the country’s largest real estate industry groups to increase its 2019 sales forecast on the back of the sustained strong results.

According to Canadian Real Estate Association (CREA) data and commentary released last week, the impacts of the new mortgage rules introduced in 2018 are running their course and the market adjustment is entering a new stage that will see more sidelined buyers return to the market.

The five percent annual sales growth recorded in August and positive overall economic outlook prompted TD economist Rishi Sondhi to note that the Canadian housing recovery still “has further room to run” into 2020.

“The beneficial combination of solid job markets, rising household incomes, healthy population growth, further distance from restrictive government policies and low mortgage rates have given a boost to demand,” Sondhi writes in a housing note published by TD Economics last week.

“And, with sales still somewhat low compared to population and employment levels, the recovery likely has further room to run. Our forecast anticipates positive sales growth through next year, contingent on the economy and job markets holding up,” he continues.

The outlook has certainly improved for the Canadian housing market since the tumult experienced in 2018 following the extraordinary ramp up in sales activity and prices through 2017 that eventually spurred intervention from the federal government as well as the two provincial governments home to the country’s hottest markets — Toronto and Vancouver.

That said, Sondhi cautioned that even as the strength exhibited over the last six months has caused housing markets to tighten across the country, growth expectations in Canada’s most expensive markets should be tempered by existing affordability challenges that will cap price gains.

Paul D’Abruzzo took a tenant to the Landlord and Tenant Board for three months of unpaid rent on an investment property he owned in Whitby, and through mediation—his best option—ended up coughing up a fourth month of rent-free living.

“My tenant sat there in mediation and said she can’t pay rent anymore, and after I asked her to leave she said she had nowhere to go,” said D’Abruzzo, who’s also a broker with Expert Investor Team at Rock Star Real Estate. “I was advised by the mediator that if I go before the board and ask for a standard eviction of 11 days, I’d most likely not get it because the adjudicator is going to sympathize with the tenant and give them 30 days to leave.

“I was footing the bill for someone who can’t afford to pay rent just so that I could get a proper eviction order. One of the risks is that during those 30 days, they could damage the place and once they leave I have no recourse. That was the best deal on the table and I had to take it. I was pushed into a corner and gave a lady 30 days of free rent on top of the three months she owed me from before.”

Bosley Real Estate sales representative Davelle Morrison, herself an investor, says every landlord in Toronto has a similar story to D’Abruzzo’s and the status quo is insufficient. She believes the Landlord and Tenant Board needs to be overhauled.

“It’s creating disincentives for landlords to be in the business and now you have fewer places to rent,” said Morrison, who added many landlords—herself included—rent their properties on Airbnb because the Landlord and Tenant Board have made long-term rentals risky propositions.

“The Landlord and Tenant Board is overweighted to the side of the tenant and that makes it hard for people to become landlords. You have to understand why landlords stopped renting long-term and decided on shorter terms in the first place. It isn’t all for money. If I didn’t have bad experiences with long-term tenants, I never would have turned to Airbnb.”

According to Urbanation, 33% of Toronto’s condo buyers are investor-landlords and Morrison says they need protection since they foot the bills. She recounts a client who sold their investment condo but had to give $7,000-worth of free rent to tenants who also negotiated staying an extra month—which derailed the buyer’s plan to move in.

“If your money is tied up, you have to take a HELOC out to make your mortgage payment,” said Morrison. “My client’s tenant wanted $15,000 to move out, then $10,000. They settled on three months of free rent through formal mediation at the Landlord and Tenant Board.”

A double-digit percentage increase in the number of Greater Toronto Area houses sold last month shows the region’s property market is “quite fine,” according to analysts, as it rebounds from mortgage controls introduced last year that sidelined some buyers.

Housing sales in the GTA rose 13.4 per cent in August compared with the same month a year ago, the Toronto Real Estate Board said in its monthly report. There were 7,711 homes sold versus 6,797 in August 2018, it said.

“The level of activity is almost bang on the 10-year average,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a research note on Thursday. “The sales-to-new listings ratio looks to be right around 60 per cent (seasonally adjusted), consistent with a very well balanced market.”

Toronto vies with Vancouver as Canada’s most expensive property market nearly a year after federal mortgage regulations were introduced to curtail speculation and rein in prices. The cost of property initially fell in both cities but began to creep up again in Toronto this year as supply hasn’t kept pace with demand while Vancouver’s average prices are still down.

The MLS Home Price Index Composite Benchmark for August 2019 rose by 4.9 per cent on a year-over-year basis, the Toronto board reported. Last month’s average selling price of $792,611 showed a 3.6 per cent increase year-over-year, it said. Condominiums, up 8 per cent from a year ago, jumped the most in price followed by higher density low-rise homes, then detached houses with a 3.1 per cent gain from a year ago, the statement showed.

“The GTA’s strong economy, cultural diversity and internationally recognized quality of life continues to attract newcomers to the region each year,” TREB CEO John DiMichele said in the statement. “However, our housing supply has not kept up with population growth, which has led to pent-up housing demand.”

BMO’s Kavcic said that Toronto prices were firming “in another strong month” and that the country’s central bank didn’t seem concerned about higher prices when it kept the benchmark interest rate at 1.75 per cent for the second consecutive meeting after raising them five times from 2017 to last October.

So far, this is a near-perfect landing from a policymaker’s perspective,” Kavcic said. “And the Bank of Canada didn’t seem too worried yesterday about stoking another positive run.”

However, the Toronto board noted market conditions have become tighter than a year ago because there are fewer new listings – down 3 per cent from August, 2018 – while sales have increased. The board called on government levels to help increase the area’s housing supply and for politicians ahead of next month’s federal vote to state their policies.

“The overall pace of price growth is moderate,” Jason Mercer, the board’s chief market analyst said. “However, if demand for ownership housing continues to increase relative to the supply of listings, the annual rate of price growth will accelerate further. This underpins the importance of solving this region’s housing supply issues.”

 

Avison Young has appointed five highly regarded finance and strategy professionals to its team as it continues its rapid expansion worldwide.

The appointments include several thought leaders and comprise two promotions and three hires for newly created positions.

Tom Morande becomes chief financial officer for North America. He joined the firm as a principal in 2015 and has 22 years of commercial real estate experience. He will serve as a strategic business partner to the US, Canada and Mexico leadership teams and managing directors.

Ricardo Jenkins is promoted to chief accounting officer. He has been with the firm since 2006 and was previously with JLL. He has 13 years of real estate experience and will be responsible for all aspects of reporting on financial and operational performance against both the annual budget and the company’s long-term strategy while also overseeing financial planning and analysis.

The new hires include Robert Dunlop who becomes the company’s global treasurer having been VP & group treasurer at INEOS Styrolution Group GmbH in Frankfurt, Germany.

Also joining the Toronto-headquartered firm is director of strategy Ashwini Sawhney. She previously worked in the corporate development groups of Fortune 1000 companies, as an advisor to private-equity-owned middle-market companies and at a global financial advisory firm.

Finally, Steve Cresswell joins as European director of finance and operations, working with Gerry Hughes, president of Avison Young’s European business.

“The finance team comprises thought leaders who have proven track records and understand the financial intricacies of the commercial real estate business and other industries,” said Avison Young chair and CEO Mark E. Rose. “They have confidently – and competently – navigated companies through exponential growth while minimizing disruption and enhancing shareholder value. Working closely with our Chief Financial Officer Christine Battist, they will lead Avison Young’s global finance operations, oversee the aforementioned capital deployment, help implement our investment strategy and manage day-to-day accounting operations as we expand further.”

The market for condo apartments remained strong in the Greater Toronto Area in the second quarter.

Greater Toronto Realtors reported 7,038 sales of condo apartments through the Toronto Real Estate Board’s MLS in the three months, up 3.2% compared to a year earlier.

New listings for the sector were down 3.5% year-over-year to 11,110; and the average price gained 5.1% to $589,887, although in the City of Toronto (70% of transactions) the gain was 5.9% to $639,316.

“As has generally been the case in the region since the implementation of the Ontario Government’s Fair Housing Plan in 2017, the condo market segment has remained tight in comparison to other major housing types. However, from a price point perspective, condo apartments continue to offer prospective buyers a relatively affordable housing option when looking across the GTA,” said TREB president Michael Collins.

Rental market also tight

In the rental market, average rents for one-bedroom and two-bedroom apartments increased above the rate of inflation on a year-over-year basis in Q2 2019 as the market remained tight.

“However, we have seen an acceleration in the number of units listed for rent, which has provided renters with more choice in the market place and has coincided with a slower pace of average rent growth over the past year,” said Jason Mercer, TREB’s Chief Market Analyst.

RENT OR BUY TORONTO 2019

With every passing year it seems that, for many, the dream of moving from renting to buying a home in Toronto slips farther and farther away. Many are posing the question, when will the Toronto real estate market crash in hopes of a price drop to get their foot in the door, both literally and figuratively speaking.

Comparably, Toronto also has the highest rental prices in Canada. So when it comes to rent versus buy Toronto, 2019 may be the year to really look at your finances and weigh the pros and cons of renting vs buying. If there’s one thing we know for sure, the best day to buy is always yesterday; as prices climb, the money you do have today will be worth less tomorrow.

RENT VERSUS BUY TORONTO 2019
According to TREB’s data, the average cost of a one bedroom rental in downtown Toronto has increased 30% since Q3 of 2016*. If you knew you’d be paying these record high rents five years ago, maybe you would have pulled the trigger on saving for a down payment and moved from the world of renting to buying. What you’re paying in rent today is comparable to what you could be paying for a mortgage on a condo.

If you’re tired of paying these high prices to rent a home when you could own a home, what can you do to make the switch from renting to buying?

RENT VS BUY ANALYSIS
One of the most challenging hurdles to overcome when it comes to buying vs renting a condo is having enough money for the down payment. This is the biggest factor in your rent or buy equation. Let’s say you find a one bedroom condo for sale with a $500,000 price tag. The minimum down payment you can make on that condo is 5% or $25,000.

Seems like a lot of money, doesn’t it? And it is.

Now compare that to what it costs to rent that one bedroom condo which, in Toronto, is about $2,200 per month. After one year of renting that condo, you’ll have paid $26,400 in rent. Congratulations, you’ve just spent more on a year’s rent than it costs for a down payment on the that same condo.

It’s no wonder so many millennials are choosing to live with their parents. It’s not because they’re lazy, it’s because it’s the only way they have a chance in hell at buying a condo in Toronto. According to a recent article by The Star, one third of young adults are living with their parents for this very reason, to save for a down payment.

Unfortunately, not everyone has the privilege of living rent-free for a year with mom and pops. Curious to know what you could afford based on your current rent? Use this rent vs buy calculator by RBC.

RENT VS BUY: COMPARING THE MONTHLY EXPENSES
Having enough saved for a down payment is one thing, but being a homeowner comes with a few extra monthly expenses. Let’s compare the expenses of renting vs buying.

To set the scene, let’s suppose you’ve purchased the $500,000 condo with $25,000 (5%) down. One thing to note here is that because you’ve put less than 20% down, you’ll need mortgage insurance which, in this case, is an additional $19,000 to your mortgage for a total mortgage of $494,000.

Don’t let this added mortgage insurance phase you. Honestly, paying the slight premium in mortgage insurance in order to start earning equity in the real estate market can be better than waiting to save for the full 20% down payment. We explain why in our blog “Why 5% Down Today is Better than 20% Down Tomorrow.“

In order to calculate the monthly costs affiliated with renting vs buying, let’s say you secure a 5 year fixed rate mortgage at 3.39% over a 25 year amortization period. Your monthly mortgage payments will be $2,438. Compared to $2,200 per month in rent, that’s not bad.

Remember, the difference between renting versus buying is that when you rent, you’re renting space. When you buy, you’re renting money.

So while you’re paying just over $1,000 more to own that condo, think of it as a forced savings account paying into your home equity, unlike renting where you’re paying someone else’s equity.

BUYING VS RENTING A HOME ADVANTAGES AND DISADVANTAGES
The disadvantages of renting are easy:

• Throwing away money
• Have no control/ability to customize your space

There are obvious benefits to renting:

• Low maintenance
• No unexpected costs
• Not locked in to one place

The disadvantages of buying:

• More responsibility
• Locked in to one place (though technically you could rent your place if you needed to relocate)
• Slightly higher carrying costs

There are also obvious benefits to buying:

• You have a place to call your own
• You can customize your space as you see fit
• You’re building equity in a high performing real estate market

That last point is the biggest homeowner benefit of all. EQUITY.

In Toronto’s real estate market, condo prices in particular have been sky-rocketing. In fact, the condo market was leading the industry at the end of 2018 with an 11.4% increase year-over-year. Conservatively and for the sake of projections we tend to use the historical average which is 5% growth per year.

RENTING VS BUYING: THE 5 YEAR OUTLOOK
Circling back to our one bedroom rent or buy Toronto scenario, let’s fast forward five years to the end of your term and see how the numbers compare:

After five years of renting, using the current guideline for an annual 1.8% rent increase, your five year rent adds up to $136,838 along with your expenses (insurance and utilities) adding up to $4,500 for a grand total of $141,338.

After five years of owning, you’ve paid $68,639 towards your mortgage principal, $77,629 in interest, and just over $52,000 in additional expenses. Your grand total after five years of owning is $198,288.

Sure, you’ve spent roughly $57K more to own that same condo, but let’s not forget about that sweet, sweet equity. Let’s say your condo’s value increases 5% per year, your property’s market value over that five year term would resemble something like this:

Purchase Price: $500,000
Year 1: $525,000
Year 2: $551,250
Year 3: $578,813
Year 4: $607,753
Year 5: $638,141

That’s $138,141 you’ve earned in equity just by living there! So while renting you’ll have paid your landlord $136,838 towards their equity, as an owner you’ll be ahead by $138,141 in equity plus the $68,639 towards your mortgage principal.

HOW MUCH DO YOU REALLY PROFIT?
Even though after the five year term your mortgage balance is $425,361, the equity you’ve earned over five years means, if you were to sell that condo, you’d still make a profit.

Let’s say you decide you want to upgrade your living situation and at the end of your five year term you decide to sell your condo at its current market value of $638,141. After paying your mortgage balance, closing expenses and legal fees, you’re still walking away with $179,373!

Not to mention that because this was your principal residence, all profits earned are 100% tax free!

RENTING VS OWNING IN RETIREMENT
The renting vs buying conversation isn’t just for first time buyers. If you’re a retiree looking to downsize you may be asking yourself should I sell my house and rent when I retire? We thought it would be worthwhile crunching the numbers for those considering renting in retirement vs owning.

If you’re downsizing, you’re likely not buying a one bedroom $500,000 condo, so for this example we’ll use a two bedroom condo with a price tag of $700,000. Below we’ll compare the cost of owning this condo with a 20% downpayment and mortgage rate of 3.39% with renting a two bedroom condo based on the City of Toronto’s average two bedroom rental rate of $2,989 (Q2 2019).

Are you surprised to see the difference in monthly expenses is only $657? The key benefit that comes with owning is that you’re building equity alongside those monthly payments, rather than just paying your landlord. If you’re able to build equity in retirement, you’ll have more to live off in your golden years. Let’s have a look at the five year outlook of renting vs owning that two bedroom condo.

After the first five years, you’ll have paid about $37,375 more to own in retirement versus choosing to rent. And the equity gains? If we use the historic average of 5% per year, your property’s market value over that five year term would resemble something like this:

Purchase Price: $700,000
Year 1: $735,000
Year 2: $771,750
Year 3: $810,337
Year 4: $850,854
Year 5: $893,397

The conclusion here to consider is that if you’re able to sell your current home to downsize, choosing to use the profits from the sale of your home to buy a Toronto condo has the ability to give you a great return during your retirement. In this case, you could earn $193,397 in equity in just five years.

Remember, real estate is a long term investment and the longer you hold a property, the better the returns will be. Not to mention the ability to leverage your equity into building a real estate investment portfolio. But that’s a story for another day!

It’s east versus west when it comes to the upper echelons of Canadian real estate.

A new report from brokerage Sotheby’s International Realty Canada highlights the chasm separating the luxury segments of housing markets on either end of the country.

Price and sales performance of top-tier residential properties in Toronto and Montreal provide a stark contrast to the struggling luxury markets in Calgary and Vancouver, according to the Sotheby’s 2019 Mid-Year Top-Tier Real Estate Report.

A total of 103 properties priced over $4 million changed hands in the Greater Toronto Area, down 19 percent annually through the first six months of the year.

But Sotheby’s suggests this decline is inflated. Increasingly, well-heeled sellers are avoiding the multiple listings service system used by the Toronto Real Estate Board (and the source for the sales data in the report).

Following the Supreme Court’s refusal to hear the TREB’s appeal of an earlier decision in favour of the Competition Bureau — which was battling the board over access to home sales data — wealthy sellers are exclusively listing homes to maintain privacy.

Looking at just the city of Toronto, sales in the $4-million-plus range were roughly flat, declining 2 percent year-over-year in 2019’s first half.

To the east, Montreal’s luxury market is on pace for a record-breaking year.

Sales of condos priced above $1 million — considered to be a luxury threshold in this market, which is more affordable than Toronto — numbered 113 over the study period, up a jaw-dropping 40 percent annually.

And 11 Montreal homes sold for upwards of $4 million, an increase of 267 percent compared to 2018’s first half, although still only a small share of the market.

Calgary’s market remains overshadowed by previous highs recorded during the last oil boom, with the luxury market depressed, at least for now.

“With the conclusion of the provincial election offering fresh optimism, and growth forecasted for the next half decade, it is expected that the city’s top-tier market will continue to see a gradual recovery,” reads the Sotheby’s report.

Just one Calgary home has sold for more than $4 million this year.

And transactions involving residential property valued at more than $1 million plummeted 21 percent to a total of 275.

Vancouver’s decline was even more pronounced — some 73 homes priced over $4 million were snapped up, a 34-percent decline.

“Evolving conditions in Vancouver real estate have created opportunities for prospective top-tier real estate buyers to reevaluate housing options previously out of reach,” says Sotheby’s in the report.

“With market recalibration well underway, activity is expected to regain momentum.”

It appears even developers of pricier, larger condos are conserving space by removing their ovens.

A one-bedroom unit at 155 Yorkville Ave., a four-minute walk from the Royal Ontario Museum, boasts 610 square feet and is asking for $3,295 in rent in an ad on Realtor.ca. It includes a bedroom and bathtub, a swanky den and a kitchen — but no standlone oven. Instead it has a convection microwave, which combines the functions of a microwave and oven.

Another two-bedroom unit in the building is listed for sale for $1.1 million and also appears to lack a stand-alone oven. The ad says “Ready To Turn To Income Property. Furniture Included.”

In June, the Star reported on a condominium at Front and Bathurst Sts. that houses 162 units without stand-alone ovens. Agnieszka Wloch, vice-president of development at Minto Communities Toronto, told the Star those units were all under 480 square feet and had a convection microwave, chosen as a response to changing lifestyle preferences and as a way to offer “space saving efficiencies and functionality.”

At the time, an ad for one such studio unit in the building — advertised with a “gourmet kitchen” — was asking for $1,650 a month in rent.

But the Yorkville building’s ovenless units appear to be larger and have a bigger price tag, which has experts the Star spoke to highlighting two trends: a downtown-wide shift away from home cooking, and the popularity of short-term rentals.

The Front St. W. building was enacting rules against short-term rentals, Wloch told the Star.

But in the case of the Yorkville Ave. building, the Star found eight listings for what appear to be units in the highrise listed on Airbnb.ca.

Camrost Felcorp, the developer behind the Yorkville Ave. building, which was completed about two years ago, did not return requests for comments.

Thorben Wieditz, spokesperson for Fairbnb, a coalition of tenants’ groups, condo associations, rental landlords and hotel groups, said that ovenless units “will add to the ‘ghost hotel’ stock, but not necessarily to the long-term rental stock in the city.”

Ghost hotels refer to cases where people are leasing or buying multiple units, and taking them off the long-term market by turning them almost exclusively into short-term rentals, Wieditz said.

“These places are more designed and cater more to people that don’t cook, don’t necessarily live in them — and if you rent them out on Airbnb, (not having an oven) would not really matter,” he said, as people who use short-term rentals tend to eat out.

The main reason for the pop-up of ghost hotels? “You can make a lot more money on the short-term rental market than you could renting it out on the long-term market,” Wieditz said.

However, James McKellar, a real estate professor at York University’s Schulich School of Business, said there are a number of people who would choose to live in one of these condos, adding that the rise of ovenless units — even in luxury buildings — is a sign of a “lifestyle shift” among downtown residents.

“I think urban life today is very different than what it was even 20 years ago, and developers are working at these trends and trying to accommodate them,” McKeller said.

“There are single-person households today that would look long-term and an oven wouldn’t be that important if they have an alternate to it.”

McKeller also noted that downtown residents tend to be more “location-conscious” when choosing a place to live, and “an oven isn’t going to be a big deal” as their focus is more on the neighbourhood.

Forest Hill Real Estate’s Scott Stren, a broker for one of the Yorkville units, said the stand-alone ovens were omitted be because “of course they’re trying to save space,” pointing to a larger trend of conserving space in Toronto condos.

When asked if potential tenants and homeowners were hesitant on an ovenless space, Stren noted that it wasn’t really an issue.

According to Statistics Canada figures released last month, roughly one in three condos are not owner occupied.