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Monthly rent across Canada expected to rise — especially in these 3 cities: report

“There’s no doubt there has been huge growth in rent prices over the last couple of years, but [anecdotally speaking], it seems to have stabilized in Vancouver,” adding that he predicts the city will not see rental increases in 2019, as there is a lot more supply coming to the market.

Andrew Scott, a senior analyst with Canada Mortgage and Housing Corporation (CMHC) who specializes in the Toronto rental market, said there may be an increase next year, such as the prices of houses, high demand for rental units and low vacancy rates.

Difficulty getting into homeownership
there are three factors that are making it more difficult to transition into home ownership — meaning people stay in the rental market longer.

These include higher housing prices, interest rate hikes and the tightening of mortgage rules.

Last year, Ottawa changed the national mortgage rules for Canadians getting, renewing or refinancing a mortgage. Many now have to undergo a stress test, proving that they would be financially OK even if interest rates were to rise substantially above their actual mortgage rate.

The Bank of Canada also raised the interest rate three times last year, which currently sits at 1.75 per cent. More hikes are also on the way, but the bank said the timing of its next one will hinge on changes in global trade policies as well as how higher interest rates from past increases affect consumption and housing.

“The new mortgage stress test, higher interest rates and higher home prices have dramatically increased the number of people looking for rental accommodations this year,”.

“Many young couples and families have decided to postpone purchasing a home, which has driven two-bedroom rental rates to nearly $2,600 a month in Toronto and over $2,000 a month in Ottawa,”.

High demand, low supply
The increase in rental demand has not been offset by new supply, according to the report.

For example, in Toronto, although the supply for rental units has been growing, Scott said the demand is so strong it has not outpaced the demand.

“But in the next few years, the number of rental homes that have been under construction will start going up,” adding that this may help offset the demand.

Low vacancy rates
According to the CMHC, the national vacancy rate fell to 2.4 per cent in 2018 (versus three per cent in 2017). That’s the lowest it’s been since 2009.

As for the year ahead, analysis said predicts vacancy rates to remain historically low but added that he does see it easing in the next couple of years.

“There are quite a bit of rental units still under construction, and the accelerated population growth may cool down, too, so the new few years may get better,”.

Immigration
According to the CMHC, the increase in Canada’s immigration contributed to a growth in demand for renting in 2018.

“Net international migration recorded an increase of 23 per cent in the first half of 2018, compared to the same period in 2017,” a CMHC report stated.

And since a majority of newcomers tend to rent when they arrive in Canada, this increased the demand on the rental market, the report stated.

Low unemployment rate
The slight growth in employment among young people aged 15 to 29 in the last 12 months may also have boosted rental housing demand.

When job markets improve, renter household formation follows, as some young adults are encouraged to leave the family home and start renting, CMHC said.

“Rents are also a function of income,”. “The economy is doing well in Toronto and the unemployment rate is low, meaning there is more income growth and renters have been able to afford the increases.”

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Expert answers to 9 common homebuyer questions about closing costs

Buying a home is a major investment and the largest financial transaction most people will make in their lives. In addition to the purchase price, interest rates, and condo fees, homebuyers need to be aware of their closing costs. Expenses such as legal fees, land transfer taxes and insurance can add up, leading many homebuyers to underestimate the amount of cash on hand that they’ll need when it comes time to close on the transaction.

To learn more about closing costs and what you should be prepared for, Livabl turned to Ara Mamourian, and David Duncan, vice president, real estate secured lending, at TD Canada Trust to answer our questions.

1. How much should homebuyers put aside for closing costs?
“As you save for your home, it’s a good idea to build in a 3 to 5 percent of the purchase price as a buffer for closing costs where possible,” says Duncan. “This way, you’ll have funds available if costs end up being higher than anticipated.”

If your final closing costs end up being less than what you put aside. you can put that money towards your mortgage or keep it as an emergency fund to help cover repairs or future renovation projects.

2. When are closing costs paid in a real estate transaction?
“Closing costs are typically paid at the closing of a real estate transaction,” says Duncan. “The closing is when the title of the property is transferred from the seller to the buyer, and the buyer officially takes possession of their new home.”

3. What are some common closing costs that people should save for?
“In addition to ongoing costs like mortgage payments, property taxes, maintenance and utilities, it’s important to understand all upfront costs over and above your down payment,” explains Duncan. “It’s a good idea to build in a little extra, just in case anything unexpected arises during closing or when you take possession of your new home.”

Examples of common closing costs include property assessments, property surveys, home inspection fees, legal fees, title insurance and moving fees. However, in most cases the land transfer tax amounts to the lion’s share of costs according to Mamourian. “If you’re a first-time buyer, you are eligible for a rebate of the municipal portion of up to $8,475 then legal fees would come in at around $1,800.”

Homebuyers should also be aware of any pre-payments by the seller that may need to be reimbursed. “Sometimes homeowners pay for all their property taxes up front for the year so if you move in half way through the year you’d have to reimburse the seller for that amount,” says Mamourian.

4. What are some unexpected costs that homebuyers could face?
Unexpected or hidden costs are always a concern for new homeowners so it’s important to plan ahead and build a buffer into your budget. “As you get closer to buying a home, consider taking your monthly mortgage payments for a test-drive by making an automatic transfer of that amount into a TFSA or other high-interest savings account for a few months,” suggests Duncan. “This two-fold approach allows you to see how comfortably you can pay off the monthly mortgage and save extra money for unexpected costs that could arise, while also helping you save for a larger down payment.”

In rare instances a special assessment may be required in a condominium when a major repair is needed that surpasses the condo’s collective reserve fund. “Special assessments only happen if something has either gone wrong or if the reserve fund isn’t able to handle a capital expense that the board and residents approve,” says Mamourian. “If this comes into play at closing, it’s not a surprise and the buyer signs up for it.”

When it comes to homeownership, it’s a good idea to prepare for unexpected repairs or maintenance items. “Don’t ever expect to buy a house and have zero expenses,” says Mamourian. “That’s the thing about houses versus condos — most people have this misconception that condo fees are just wasted money but when in reality it’s just a fixed, predictable maintenance cost whereas in a house that annual cost is variable.”

5. Can homebuyers roll their closing costs into the mortgage loan?
“The only closing cost that can be rolled into a mortgage is your CMHC insurance premium,” says Mamourian. “CMHC premiums are payable only by those who are putting down less than 20 percent of the purchase price in cash as a down payment.”

“Homebuyers can always consider reducing their down payment to help cover closing costs however, they’ll end up with a larger mortgage,” adds Duncan.

6. Do closing costs differ by location?
As mentioned above, land transfer taxes can take up a large portion of your total closing costs but not all land transfer taxes are the same. They can vary significantly by province and municipality. “The City of Toronto has its own land transfer tax on top of the provincial one so buying in Toronto is more expensive not only with the price of properties but also with closing costs,” says Mamourian.

7. Can homebuyers negotiate with sellers to pay the closing costs?
Homebuyers can always try to negotiate on closing costs, but it depends on the market. “In a seller’s market, you can’t be making demands like this,” says Mamourian. “In a buyer’s market, it’s open season, but rather than asking to pay closing costs like you see on TV, it’s usually just built into the offer price and still paid by the buyer.”

8. What are some tips for how homebuyers can potentially reduce their closing costs?
“The total cost associated with items you’ll need during closing can range, depending on location and who you work with to do the close,” says Duncan. “For example, someone moving within the same province or city should pay less in associated moving fees compared to someone who is moving across the country. The associated legal costs may also vary depending on who you work with and what they charge for closing the transaction so it’s a good idea to contact different firms and ask for quotes.”

At the end of the day, when it comes to closing costs, the most important step is to plan ahead and build a buffer into your total budget.

9. Is there anything else that homebuyers should be aware of when purchasing a home?
From closing costs and land transfer fees to property taxes and everyday maintenance costs, the price of homeownership is much more than your down payment and monthly mortgage payments.

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Some Canadian real estate markets held strong in 2018. Can they keep it up in 2019?

With data in for all but one month of 2018, Canadian home prices have posted an average decline of 4.1 percent, as many local markets have weakened against 2017 numbers.

However, a handful of markets have held strong this past year, bucking the national trend downward, one that was driven considerably by a slowdown in the Prairies and west coast markets.

While struggles in markets like Calgary and Edmonton are widely expected to persist amid lower oil prices, can 2018’s stand-out markets keep it up in 2019? Here’s what the experts say.

Montreal

According to BMO, Montreal has surpassed all of Canada’s other major housing markets in terms of price growth. Home prices are up 5.5 percent through 11 months. Montreal is one of the markets BMO Chief Economist Douglas Porter expects “to remain generally healthy in 2019.”
He is not alone. In a forecast published last month, the Canada Mortgage and Housing Corporation (CMHC) predicts surging demand in Montreal’s resale market in 2019 and 2020. CMHC anticipates this will come on the shoulders of increasing full-time employment among a key homebuying demographic, the 25 to 44 age group.

While in recent years annual price growth has been about 2.5 percent, CMHC expects the rate of increases to be “definitely higher” than that over the next two years.

Ottawa

Ottawa is the other market BMO’s Porter says will be generally healthy next year. To date this year, prices in Ottawa are up 3.6 percent, and the president of the local real estate board predicts continued strength in the coming years.

“We believe the market is going to remain strong in Ottawa, we think we’re still going to have an inventory issue over the next couple of years,” Dwight Delahunt, president of the Ottawa Real Estate Board, tells Livabl.

Federal government jobs and a booming tech industry are supporting demand, as well as immigration and a shortage of land that’s ready for development.

Halifax

Halifax trails Ottawa in terms of price growth over 11 months this year at a rate of 2.1 percent.

“Positive net interprovincial migration will continue to boost Halifax’s resale market,” reads CMHC’s Atlantic Canada outlook. “In fact, not only have fewer Nova Scotians been leaving the province for opportunities elsewhere, but Halifax’s more affordable housing market has been attracting buyers from other parts of the country.”
Partly as a result of this — and also an uptick in employment — the national housing agency suggests existing home sales and prices are going to increase in the next couple of years.

Windsor

In a comment that may surprise some, BMO has called Windsor one of the hottest real estate markets in the country.

While sales in the Windsor area were down 7.9 percent annually in November, the most recent month for which data was available, they remain near historic highs. And prices were up a scorching 10.6 percent.

“Our supply is still low — like, super, super low,” Tina Roy, president of the Windsor-Essex County Association of Realtors, tells Livabl of what’s elevating prices still. The area’s relatively affordability (the average price of a home is south of $300,000) has drawn buyers from the GTA, and retirees have been snapping up waterfront properties.

“It doesn’t look like it’s slowing any time soon,” she says, noting the expectation is for another strong year, albeit one that doesn’t match this year’s heat.

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The problem with the Canadian government’s mortgage stress test

On a recent segment of BNN Bloomberg, Toronto realtor John Pasalis voiced support for extended mortgage stress testing nearly a year to the day after the federal government introduced it.

“The stress tests are great,” Pasalis says of the measure which requires mortgage applicants to qualify for their loans at a higher interest rate than they are signing on for.

As he sees it, there’s just one problem. “The problem is, it was probably too much, too quick.”

The new mortgage rules have come at a time when mortgage rates are on the rise. Pasalis, president of the Realosophy brokerage, notes how the Bank of Canada has hiked the overnight rate five times over the past six quarters. That, together with the stress testing, has added 300 basis points to the qualifying rate for homebuyers.

Pasalis highlights how much the lending landscape in Canada has changed for borrowers over the past 10 years.

“Policymakers thought extending credit to households was a great idea,” says Pasalis, noting that a decade ago consumers had access to 40-year amortizations.

Today, amortizations are capped at 25 years and a stress test has come with higher interest rates.

“I think it’s a lot in a relatively short period of time, especially over the past 18 months, to introduce these measures, and I think you can’t sort of shift the underlying philosophy of how you’re lending to consumers significantly without there being consequences,” says Pasalis.
The stress test has been commonly cited as one of the main causes of the Canadian housing market cooldown that played out last year. Experts have estimated that the stress test eats away at a mortgage applicant’s buying power by about 20 percent.

In commentary posted to Twitter, Pasalis speculated that policymakers may ease stress testing if the Canadian housing market continues on its downward trajectory this year.

Already, he suggests, a significant number of borrowers are turning to private lenders, who typically charge higher interest rates but are not mandated to impose a stress test. “As a result, they are paying much higher rates for their debt, spending less, [and] saving less.”

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Thinking of becoming a landlord? Here’s what you need to know

Being a landlord isn’t without its challenges, but covering one’s bases in the following ways is bound to yield quality tenants and rents.

Every real estate professional understands the importance of location, and so should every landlord. Steve Arruda, a sales agent with Century 21 Regal Realty, has been a landlord for 18 years and advises taking one’s time performing due diligence on prospective neighbourhoods.

“You want to know where you’re investing in and what the demographics are in that neighbourhood, and whether there are universities and families there,” Arruda told CREW. “I’ve rented in depressed neighbourhoods, and it’s challenging. The price may seem really tempting, but then you attract a lot of renters who may not have the best incomes, and they could become problematic because there are issues each month with payment. Location is one of the most important things. Make sure you know where you’re investing and what the demographics in that neighbourhood are.”

If investing in a house rather than a condominium, ensure big ticket items like furnaces, wiring, roofs and windows are updated “because those are the things that are quite costly to repair,” added Arruda. “It’s good to have those larger items updated, otherwise if they fail, it’s always at an inopportune time like winter, and you’ll be left with an angry tenant.”

Beyond material concerns, Arruda says landlords invariably become arbiters in disputes between tenants, unfairly or not, and that managing personalities is a delicate art.

“When you have a house with four units, like a multiplex, it’s hard to get everybody to get along, and you’re their first line of defence,” he said. “So, managing personalities, managing expectations and being able to handle that
stress level are crucial, because for an inexperienced landlord, the first call they get because of an issue with a tenant or an issue with a clogged toilet can make their already stressful life even more stressful. Always be prepared for anything, whether issues with tenants or the property itself.”

Additionally, tenants need to be thoroughly screened, and Arruda recommends landlords run their own credit reports and confirm bank statements are real. Even calling an employer to confirm the information provided by potential tenants isn’t beyond the realm of the reasonable. As well, call their previous landlords to find out what kind of people they are.

Over 18 years, Arruda also learned that units with dishwashers, washers and dryers are not only highly sought after, they attract good-quality renters.

Renu Ashdir, a sales agent with iPro Realty Ltd., says clients for whom she seeks rental accommodations flock to buildings with amenities like gyms, but warns too many amenities—especially swimming pools—result in higher condo fees.

“If you’re a person in your 20s and 30s, fitness amenities are the most used,” she said, adding older tenants prefer the security of a concierge. “People care about the kind of neighbours they have in a building and whether or not there’s transit nearby.”

Most importantly, says Arruda, “Look after your renters and know rental laws.”

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10 top tips for a successful tenant background check

We’ve all heard the horror stories of tenants who destroy property or fail to pay rent. A bad tenant can be a nightmare for any landlord, as well as both emotionally and financially draining.

Fortunately, there are many steps that landlords can take to avoid being put in such situations. With the right tenant screening processes in place, landlords can detect the bad tenants before it’s too late.

As a landlord, your job is to verify the legitimacy of the information a tenant has provided to you through their rental application and supporting documents. You’re looking for anything that might be suspicious or doesn’t support the claims made by the tenant through their paperwork. If you find one red flag, it’s probably a good idea to pass on the tenant altogether.

These 10 tips will help you conduct a tenant background check with total confidence.

1. Ask the right questions

Asking the right questions is the first and most essential step to a great tenant background check. Before you meet tenants face-to-face, you will likely talk to them over the phone. This is your opportunity to prequalify them.

There is no point in showing your rental property to someone that is not the right candidate. For example, if a tenant is looking to move into a place immediately and your rental unit is not available for another two months, it would be a good idea to uncover that over the phone before you waste more of each other’s time. This is where asking the right questions can help you ensure the best tenant screening possible.

It’s also important to not assume anything about a tenant from the way they come across over the phone. Remain objective while asking your questions. It’s always helpful to be genuinely curious about a prospective tenant while simultaneously looking out for any inconsistencies.

8 Questions to ask during a tenant background check

  • When do you need a place by?
  • Have you given notice to your existing landlord?
  • How is your job?
  • How is your credit report?
  • What is your maximum budget?
  • How many bedrooms do you need?
  • Do you have pets?

Who else will be living with you?

2. Get them talking

How one ends a relationship tells you a lot about them. That’s why it’s a good idea for a landlord to get a prospective tenant to talk about his current or previous landlord. If a tenant left the relationship on a bitter note, it is helpful to know what happened. You can bait a tenant into opening up about their current situation by saying the following: “I know a lot of landlords can be difficult to deal with. How has your experience been with your current landlord?”

If you happen to uncover a prospective tenant that is suing his current landlord, don’t risk taking that person on as a tenant. You could be the next landlord they go after.

As a landlord, you cannot rely on the paperwork alone to carry out a tenant background search. You have to be creative and willing to engage with tenants on a personal level. Conversations can help you better understand the way your tenants relate to others and how they handle conflict, all of which are essential to achieve the best tenant screening.

3. Look for troubling signs

As part of due diligence, it’s important to look out for any suspicious signs. A lot of landlords mistakenly think that a tenant background screening is just about checking landlord and employment references. Though that is an integral part of the process, a good landlord will also do some extra detective work.

Professional tenants are people who make a living from deceiving landlords. They know how to lie about their identities to get their rental application approved. Once they move into rental properties, they don’t pay the rent and disappear before landlords can ever take them to court. These are the worst tenants you can possibly have and it’s important to watch for any telltale signs.

Here are two signs you should be watching out for during a tenant background check:
If a tenant acts really excited and wants the property right away, you should be cautious. Good tenants begin searching for a rental property at least four to eight weeks before they need one. That is why it’s important to ask yourself why this tenant is so desperate. Could it be that the tenant’s application has been rejected by everyone else? Or does the tenant suspect you are so desperate to find someone that you will overlook serious problems with their application?

Either way, you need to be cautious.There could be legitimate reasons for why a tenant might need the place right away. Perhaps you’re dealing with a new immigrant or someone with an immediate job transfer. Regardless, it’s your job to verify the facts to your satisfaction.

There is the old saying: “If it sounds too good to be true, it probably is.” This applies especially for tenant background checks. When a tenant starts telling you a bunch of things that you want to hear, you should be suspicious of them. For example, if they insist on taking care of certain renovations for you or tell you stories about how they helped their landlord fix things around the home for free.

Though these may be true stories, you need to verify these facts as best you can. For example, when talking to the landlord ask them about the stories your tenant told you. Be as specific as you can about the details in case the landlord reference is phony as well.

4. Confirm their identity online

The internet is a helpful tool for carrying out a tenant background search. You can use large search engines, such as Google, Yahoo or Internet Explorer, to verify the identity of a prospective tenant. Simply type in their names and see what comes up.

While searching online, it’s important that you cross-reference everything you come across with the rental application and supporting documents provided by the tenant. Is the employer they claim to be working for online the same as the one that appears on their rental application and letter of employment? Does the online photograph match the identity of the tenant you met in person?

It is also important to check for any past criminal or fraudulent activity associated with their names. Social media platforms are helpful in getting to know the tenants as well. Check their profiles on Facebook, LinkedIn, Twitter and Google+.

5. Never use the employer contact number provided

How do you know whether the phone number listed on a rental application is legitimate? It’s easy for any tenant to have a friend pretend to be their employer over the phone. To avoid being duped like this, you need to research the company’s phone number online. This should be a regular practice for any tenant background screening. Never make a call using the phone number provided on the application. Most companies can be found on the Internet. If you can’t find the company listed anywhere, you should be suspicious.

If you’re able to find the number online, call the company’s operator and ask to speak to the tenant. If the operator can’t find the tenant’s name listed, this may be an indication that he or she is lying about their employment status.

6. Verify the landlord’s name using proper channels

How do you know whether the current or previous landlord’s names and phone numbers listed on the rental application are valid? A tenant background check is only as reliable as the information provided. That’s why it’s important to verify the landlord’s identity.

A good way to do this is to get your Realtor or lawyer to conduct a land registry check on the addresses belonging to the tenant’s current and previous landlords. If the names provided match with those listed on land registry, the tenant has been honest and forthcoming about this information.

7. Confirm the current rental period

When tenants lie about their current landlord reference, they also lie about the time period in which they rented their current home. A robust tenant background screening will attempt to detect deception on multiple levels so as to lessen the probability of approving a bad tenant.

If a prospective tenant is currently living in a rental home that was leased out through the help of a real estate brokerage, a record of them leasing out this home will exist on a centralized MLS system. As such, you can request that your Realtor check all previous records related to the tenant’s current address. If the property was rented or sold in the past, your job is to cross-reference the dates to see if they match up with the date the tenant claims to have moved in. Any discrepancies with respect to dates will indicate that the tenant is lying to you.

8. Ensure affordability

Affordability is a critical element in tenant background screening. How do you know whether a tenant can afford to rent from you? You have to consider how much they earn with respect to the rent owing, their current liabilities and their spending habits as reflected by their credit report.

If the rental property exists in a city where the cost of living is high, you need to take this into account when assessing affordability. For example, two-bedroom Mississauga condos typically rent for an average of $1,700, plus a hydro bill that can range from $30 to $80 depending on usage. In this region, the cost of living is moderate and landlords can typically feel comfortable if the tenant’s rent is less than 40% of their after-tax income. Every city will have its own rule of thumb with respect to an acceptable rent-vs-income ratio.

Since it’s very easy for tenants to submit fake letters of employment, it’s a good practice to ask for their three most recent paystubs. Paystubs are more difficult to duplicate. Making them a requirement helps lessen your chances of being a victim of tenant fraud.

9. Pull your own report

In my many years of being a Realtor and real estate investor, I have come across my share of fake credit reports. That is why I always advise landlords to pull a second credit report on any tenants they are seriously considering. This should be a standard protocol with respect to any tenant background check.

Before you approve a tenant, you should get a third party to pull a credit report for you. Do not rely entirely on a credit report you received from a prospective tenant. It’s okay to use that as an initial reference. However, once you’re about to make decision in favour of a tenant, it’s important to pull their credit report to see if it matches the one provided. If it does, you can rest at peace knowing that the tenant has passed the best tenant screening processes one could possibly implement.

10. Verify photo identity

Now that you’ve approved the tenant, it’s time to make it all official through the signing of the lease itself. When you meet the tenant in person for this final paperwork, it’s very important that you request photo identification before signing any documents.

This is the final step to the tenant background check process, as it helps validate whether the identity you used to approve the application is belonging to the person standing in front of you.

It’s impossible to protect yourself entirely from the possibility of assuming a bad tenant. This risk comes with being in the business of renting out residential homes. Nonetheless, the 10 tips provided here will help you administer the best tenant background screening possible. I can guarantee this from my own experience as a successful landlord.

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Ontario’s best investment hubs this year

A new report from independent research think-tank Real Estate Investment Network (REIN) ranked Ontario’s largest metropolitan areas by real estate market performance and suitability for investment over the next 5 years.

In terms of growth, diversity, and fundamental strength, Ottawa came out on top of the wide-ranging survey, which looked at multiple factors including economic health, employment numbers, GDP and population growth, housing prices and overall affordability, rent and vacancy rates, and several others.

REIN ranked the following cities in order of their housing market strength and potential performance over the next half

decade:

  • Ottawa
  • Kitchener -Waterloo-Cambridge
  • Hamilton
  • Barrie
  • Brampton
  • Durham Region
  • Toronto
  • Kingston
  • Orillia
  • Grimsby and St. Catharines

REIN also cited the following cities as honourable mentions, in no particular order:

  • Milton
  • Niagara Region
  • London
  • Thunder Bay
  • Vaughan
  • Chatham

 

 

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GTA Retail Overview

GTA Retail Overview Similar to Vancouver, the GTA retail market continues to receive new international retailers who are either looking to enter the GTA market, or are using the GTA as a launching pad to reach the rest of Canada. The GTA retail market vacancy rate has edged down, by 50 bps year-over-year to end 2018 at 2.7%, with the average net asking rent up 5.3% over the same period to $25.40/SF per annum. Construction activity has been relatively slow, with only 1.5 million SF of new supply delivered over the past year, and construction activity is virtually unchanged from year-end 2017, at 4.4 million SF as of the end of 2018, presenting a mere 1.5% of existing inventory. Despite the new vacant space that came to the market as a result of Sears Canada closing in Q1 2018, the limited amount of new supply is not enough to satisfy the demand from tenants who are struggling to find space amid low vacancy and increasing rents. As a result of this demand, vacancy is expected to actually decrease to approximately 2.5% before once again increasing in 2021.
Despite the impressive fundamentals, there are some clouds on the horizon. The latest national GDP data indicates that retail activity has come off the boil. Furthermore, retail sales have been showing weakness for some time, with much of the total increase as a result of inflation and population growth. Although retails sales growth is expected to remain positive, higher interest rates, which are expected to continue increasing in 2019, along with increasing debt service costs will take a bite out of retail sales. As a result, GTA retail sales are only expected to increase by 0.6% in 2018 but then rebound to increase by 1.4% in 2019, compared to 5.0% in 2017.
In order to combat the effects of e-commerce on the retail market, landlords of premier quality properties continue to work on turning them into experiential destinations. Such an endeavor often goes beyond simply adding more restaurants and services in malls. It can also include ventures such as Ivanhoe Cambridge and Cirque du Soleil, who have teamed up to offer family entertainment centres in shopping centres, due to launch in 2019. Landlords are looking at ways to further differentiate themselves from the rest of the pack in order to attract more shoppers as well as new and better retailers. Expect to see intensification of retail properties and repurposing of parking lots in suburban malls (Yorkdale Mall being one example), and redevelopment (like Aoyuan’s plans for Newtonbrook Plaza).

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GTA Industrial Overview

GTA Industrial Overview Despite the bad news on the manufacturing side, the GTA industrial market, which is being driven by the transportation and warehousing sector, has experienced continued strong demand. Overall GTA vacancy has decreased by 120 bps year-over-year to end 2018 at 1.9%. To keep up with demand, construction activity has been equally strong. There has been approximately 5.0 million SF of new supply delivered over the last year, with an additional 9.5 million SF currently under construction.

Unfortunately this construction activity has not been enough to keep up with demand, and furthermore, the GTA is now facing land shortages, which will impact the amount of future construction activity. Projections show that the GTA industrial vacancy rate will continue edging down to approximately 1.3% to 1.5% early in 2019, before starting to climb slightly back above the 2.0% range by 2020. There remains strong demand from transportation, warehousing and logistics tenants, as well as non-traditional tenants focused on film and cannabis industries, and as a result of this strong demand and limited supply, the average net asking rental rate continues to increase, up 9.3% year-over-year, to $7.07/SF per annum at year-end 2018.

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GTA Office Overview

GTA Office Overview

The GTA office market is experiencing exceptionally strong performance and is deeply entrenched in landlord control. The overall market vacancy rate is down 80 bps year-over-year to end 2018 at 5.4, with the average net asking rental rate up 1.6% over the same period to $18.50/SF per annum. With strong demand from finance and technology companies that continues to drive vacancy down, rental rate growth is expected to remain above 2% until approximately 2021, just after the next wave of new supply starts coming online.

There are currently only nine existing properties in the GTA that can accommodate a tenant looking for 100,000 SF or more of contiguous space. The good news on the supply front is that construction activity continues to increase, with approximately 10.5 million SF now under construction or about to kick off, representing 4.0% of existing inventory. These projects include CIBC Square at just under 1.6 million SF with CIBC as the lead tenant; the 1.2 million SF office project at 160 Front St. W., which was announced by Cadillac Fairview in June, 2018 with the Ontario Teachers’ Pension Plan as the lead tenant; and the 829,910 SF speculative project at 16 York St., also being developed by Cadillac Fairview. Furthermore, Oxford Properties continues to market its proposed 1.4 million SF (60-story) office tower, The HUB, at 30 Bay St. Although there is a mountain of new supply in the development pipeline, it should be noted that this new supply will do virtually nothing to alleviate the tight market conditions until it starts being delivered between 2020 and 2022.

Downtown vacancy remains exceptionally tight, at 3.2% at year-end 2018, and although this is down 50 bps year-over-year, it is up 20 bps from Q3 2018, whereas the suburban market vacancy rate has decreased by 100 bps year-over year, to 6.5%. Although suburban vacancy is now falling faster than downtown vacancy, with the delta between downtown and suburban vacancy narrowing from 380 bps a year ago to 330 bps at year-end 2018, there continue to be many opportunities in the suburbs for tenants who do not need to be downtown. Furthermore, tenants will likely need to pay more attention to the suburban markets if they need a large amount space before 2020. With demand remaining strong, and new supply limited in the short term, expect rental rates to continue edging up

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November 2018 GTA New Home Sales Recap

There were 2,823 total new home sales in November 2018, with 369 Low Rise sales, even with November 2017 (down -71% from 10yr avg) and 2,454 High Rise sales, down -24% from November 2017 (down -6% from 10yr avg).

The New Home Benchmark Price tracks the average Low and High Rise home or unit price in the Greater Toronto Area for a particular month and compares it to the previous month in the same year and to the same month in the previous year.

As of November 2018, there were 263 active Low Rise sites in the Greater Toronto Area and the total unsold inventory was 5,543 lots. The total number of active High Rise sites was 330, with a total unsold inventory of 11,254 units.

 

source: Altus Group

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lower tax rate for small business owners

A new year, and a new lower tax rate for small business owners across the country. Today, we cut the tax rate to 9.0% – the lowest in the G7 – so that businesses have more money to save, invest, and create good jobs.

 

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15 of the Most Important Questions To Ask When Buying a House

It might seem like all the hard work is done: You’ve determined that you want to buy a house, have the funds, and are prepped and ready to apply for a mortgage. Now comes the fun part of touring houses for sale and picking out your favorite one. But before you fall too much in love with that stately old home with the wrap-around porch, there are some key questions to ask when buying a house that you must not overlook. Virtually every house will have something that comes up during the inspection, from a minor adjustment that is required to a major structural issue. It’s critical to know these things before you close on the property. Failing to look into these issues can leave you unhappy and cash-strapped in your new home.

How old are the major appliances in the house, such as the heating and air conditioning systems, water heater, kitchen appliances, etc.

You might want a fixer-upper because of your budget or because you enjoy doing weekend projects, but can you afford to replace major appliances? Before you make an offer on a house, find out the age for each piece of major equipment. Older houses often have older –sometimes original –equipment such as the furnace, air conditioner or water heater. Those replacements can be very costly and you’ll want to take that into consideration. Also, check the age of major kitchen appliances for the same reason. By the way, even if the water heater isn’t old, be sure that you check the size of the heater: Not having enough hot water for the family to shower can be a rude awakening.

Have there been any major renovations and when were they done.

One of the key questions to ask when buying a house is what kind of work has been done to the house and if it was done legally. Watch enough home renovation shoes and you’ll see that new homeowners frequently find that modifications were not made legally or are not up to code and they later bear the financial burden of upgrades or even removal. You don’t want to find out that the new family room addition has to be torn down after you move in!

Are warranties and receipts available for renovations and new appliances?
Ask for the paperwork on recent renovations and newly installed appliances. These will be valuable if something were to go wrong. In many cases, warranties can cover unexpected service calls even after you take over as a new owner.

Has the house ever had a burst pipe, flood or other water damage?

You’ll want to know if the basement is subject to flooding, or if there have been problems with pipes bursting or other types of water damage. In fact, according to the insurance industry, burst pipes are one of the most common types of claims. These can indicate an underlying structural issue or lack of adequate insulation that your inspector will need to check. Also, previous water damage can identify areas that should be checked for mold.

How old is the roof?

While this is something that a home inspector will certainly check, it’s definitely one of the main questions to ask when buying a house before you make an offer on the property. A typical asphalt shingle roof lasts 15 to 20 years. Replacing a roof is one of the more costly things to do to a home and, depending on the size of the house, can easily exceed $10,000. Also, what material is used on the roof? A shake shingle or concrete tile roof lasts longer but is far more costly to replace.

What kind of foundation does the house have?
If the home does not have a basement, does it have a raised foundation? Both of these allow easy access to plumbing and electrical conduits. In some areas of the country, slab foundations are often found in new construction. If that’s the case, you’ll want to know what was on the land before the house was built. If the land is very wet or was previously a wetland, dampness might become an issue and your inspector should know this.

Does the home have a septic tank?
If the home you want to buy is not in an urban area, it might have a septic tank instead of being attached to municipal services. If it does have one, then you need to know the last time it was pumped. Ideally, this is something that should be done every three to five years. The frequency of pumping also depends on the number of people living in the house: A larger family means more frequent pumping. A typical pumping service will cost about $300.

What is included — or not included — in the sale of the house?
This is often one of the overlooked questions to ask when buying a house. What looks like built-in shelving might not be and that stunning chandelier over the dining room table that you love might be a piece that will move out with the current owners. You’ll want to have everything spelled out in the contract with regard to items that are included with the sale of the house as well as any that are not. This helps avoid surprises on move-in day, like arriving to find that all the blinds and window treatments have been removed.

How many different owners have there been?
You will want to know why the current homeowners are moving as well as how many different people have owned the house. Old homes may have a long list of owners, but if a newer house has changed hands many times, it could potentially signal a problem with the house or neighborhood.

How big are critical areas of the house such as the garage?
Have a pool table? Will it fit around the corner to go down into the basement man cave you have planned? How about that large sofa you want to put in the upstairs master bedroom? Even more important, will your large SUV, pick-up truck or van fit into the garage? These are some common unhappy surprises people find when they move into a new home. Avoid them by adding it to your list of questions to ask when buying a house measuring the spaces before you buy.

Has anything negative happened in the house?
This is one of the major questions to ask when buying a house — and one of the questions that no one really wants to ask: Was someone murdered here? Has the home been used as a drug house? Has there ever been a fire or damage from a bad storm? Some states require home sellers to disclose these things while others don’t. Be sure to ask. It’s also a good idea to ask the agent if there is anything about the house that he or she would want to know before they moved it.

What else is in the neighborhood?
Take a good look around the neighborhood. What is next door and down the street? Is there a store behind the fence or is a large apartment complex on a bordering street? Drive around and check out the area. Is it particularly busy or noisy? Make sure that you visit at various times of day to get an idea of the noise and activity levels in the neighborhood. Also, keep in mind that certain types of businesses can affect the value of your property: Industrial businesses, dry cleaners, restaurants – all of these can emit bothersome smells or use chemicals that can be toxic.

Who are the Neighbors?
Speaking of the neighborhood, you’ll want to know who your neighbors will be when you buy a new home. This is another thing to check when you visit the neighborhood. Are the neighboring properties well-cared for? Are there lots of toys in the yard? This likely signals younger children. Numerous cars in the driveway? Perhaps there are older teenagers living there. Do the neighbors have dogs? Do they bark frequently or loudly? These factors can affect the noise level and perhaps your level of happiness in the new home.

What is the local school system like?
Schools are an extremely important item to consider when buying a home – even if you don’t have children. When it’s time for resale any potential buyers with children will want to know about the local schools. Quality of the school system is one of the key questions to ask when buying a house anywhere.

Can I afford any modifications that need to be made in order for me to be happy in the home?
Look past the cute front porch and the floor plan that you love, and consider the whole package. If the house needs repairs or if there are things you’d like to change, can you afford to make them within a reasonable timeframe? Can you live with the things you don’t care for? If you’re going to be miserable in the new place until the changes are made and don’t have the funds to do so right away, look for another property.

Our list of questions to ask when buying a house may not be exhaustive but it covers the major issues that frequently arise with home sales. It could be that one of these topics will lead you down a path to more questions. The most important thing to remember is never to shy away from asking. You’re making one of the largest purchases of your life and you deserve the answers.

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Basement dweller cliché needs to be buried

Mattan Lustgarten lives in his aunt’s basement and he loves it.

“I am fortunate to have such generous family,” says the 26-year-old surgical resident at the University of Toronto. “As my aunt says, it’s a mutually beneficial relationship. In the rare moments when we have time, it’s nice to have a coffee together, bounce ideas off one another, or talk family matters.”

Lustgarten doesn’t pay rent. Instead he helps out around the house with groceries, cooking and home improvement. “This summer I spent several weeks renovating a section of the basement into a kitchenette,” he says.

Living in his aunt’s Seaton Village basement has not only allowed him to become closer to his cousins who live upstairs; it’s also enabled him to start paying off his student debt. What’s wrong with this picture? Nothing, of course, except that it contradicts nearly every stereotype still pervasive in our culture about the kind of person who resides in a basement apartment, particularly one belonging to a family member.

“Basement dweller” is synonymous with many stereotypes, few of them positive: arrested development, unkemptness, internet trolling. Our media seems to pump out clichés about the nameless “guy in the basement” — or, more common these days — the nameless “millennial in the basement” on a near-daily basis.

“There’s this stereotype of lazy, unhealthy people that are basement dwellers who only come into the light when they have to,” says Ally Buso, a student at Humber College who rents a basement apartment for $1,200 a month (utilities included) in Parkdale.

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Mortgage brokers help the homeless across Canada

Mortgage brokers and staff from Invis-Mortgage Intelligence delivered more than 100,000 items of clothing and supplied to homeless shelters across Canada this week.

The Angels in the Night program began in 2002 and has raised around $4 million to date in cash and in kind donations for homeless shelters.

Funds are used to buy items identified by local homeless charities as most in demand, typically including coats, snow pants, rain ponchos, boots, hats, gloves, sweatshirts, pants, t-shirts, socks, underwear, pajamas, blankets/bedding and backpacks, and personal toiletries.

“As Mortgage Brokers in the business of helping people find their homes, it seems right to extend some support and help those who might not have a warm home to go to every night,” says Cameron Strong, CEO, Invis-Mortgage Intelligence. “Our brokers, employees and business partners are passionate about this cause and work tirelessly to make it a success each year.”

The annual program delivers items on the second Tuesday of December.

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Lack of homes for the ‘missing middle’ to impact GTA

Building the right homes to meet the demands of the population is essential to avoid a sizeable deficit in housing supply in the Greater Toronto and Hamilton region. A new report from the Residential and Civil Construction Alliance of Ontario warns that the region is at risk of missing provincial population targets, which could potentially result in 7,200 fewer new homes being built each year until 2041.

The report says that homes to encourage seniors to downsize and to provide the right space for families are essential to avoid skewing the region’s population older with a resulting impact on the economy.

The report – GTHA’s Unbalanced Housing Stock: Benchmarking Ontario’s New LPAT System – says that up to 165,600 homes are at risk of not being built over the next 23 years, equal to an annual loss of $1.95 billion in GDP from residential construction activity if various constraints continue to inhibit the goals set by the provincial growth plan, Places to Grow.

Medium density homes – the so called ‘missing middle’ are key to addressing this issue says Paul Smetanin – president of socio-economic research and data firm the Canadian Centre for Economic Analysis (CANCEA)who conducted the research.

“Hamilton has made the most progress on the ‘Missing Middle,'” Smetanin says. “Toronto, Mississauga, Markham, Newmarket less so, while Brampton is biased towards lower density starts.”

The big issues
The report highlights the key issues for the region’s most populous municipalities including:

  • Only 15% of GTHA households live in medium-density housing, which leads to an inadequate supply of appropriate housing types for a range of household sizes and budgets.
  • Toronto’s number of annual starts is 5-15% higher than required to hit P2G targets. However, the mix of housing is constrained by land, meaning the city’s supply will be highly skewed towards taller towers.
  • York Region is the only one in the GTHA with current annual starts on pace to meet its future target population.
  • Among municipalities with populations over 80,000 people, Oshawa, Brampton and Newmarket have the lowest share of higher-density starts.
  • Municipalities can better optimize infrastructure investments by ensuring that community growth planning is based on a long-term and strategic analysis of our future housing requirements.
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Don’t let market uncertainty prevent you from buying your dream home

Toronto recently plummeted in a global ranking of housing markets. Is it a bad thing? Is it a sign of things to come? I think it might be a good thing. Having the hottest market sometimes means there are more people who can’t afford a home.

Real estate consultancy, Knight Frank, released its global index of housing markets around the world, and Toronto real estate fell to 137th out of 150 for the second quarter of the year. A year ago, Toronto was number one, the hottest market in the world.

What changed?

Interest rates are on the rise, making the mortgage stress test even more of a burden on homebuyers. The Canadian dollar is strong and businesses are optimistic, that means we may see another rate hike this month. Since July 2017, the rate’s been increased four times.

In these uncertain times, I’ve had a few people ask me when would be the best time to buy a home. My answer is always the same. When you’re ready and you find the right home for you and your family.

You can try to time or predict the market, but what if you’re wrong? What if I’m wrong? Don’t think of your home from purely a financial perspective. It’s the place where you live, raise your children, work, play, eat, sleep. I see my home as a foundation. Do I have real estate investments? Yes, but only because I’m comfortable in my family home.

Rising interest rates combined with the stress test may very well have an impact on home prices. We’ve been watching the average selling price of detached homes drop gradually almost all year. But, there are also predictions of the average price per square foot in Toronto soaring to $2,000 in the next few years.

Think about the definition of affordable. For your home to truly be affordable for you and your family, your monthly shelter costs should not exceed 30% of your income. I feel like there is wiggle room here because everyone has different lifestyles. For example, someone who doesn’t own a car and bikes every day may be able to commit more of their income to their monthly shelter costs.

If you fall into this 30% area, qualify for a mortgage, and you find a home you want to buy, don’t let negative news headlines sway your decision making. Say you decide not to buy because of market uncertainty, prices may jump and your dream home will suddenly be out of reach.

On the other hand, you may pull the trigger on a home purchase, but then the market dips and suddenly your home is worth less than what you paid. Don’t worry. You bought because you can afford the home, and prices fluctuate. The value of your property will always go up and down.

My best advice I can give to buyers sitting on the fence about a purchase is to think long-term about your family home. If you can afford it, you qualify, and you love the home, what are you waiting for?

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Why VR and AR may become standard terms for real estate agents

The importance of effective listings is highlighted by a new report which shows that 1 in 5 homebuyers bought their home without physically walking through the property before deciding it was ‘the one’.

While that may be a risky strategy and most buyers still want to go inside their potential purchase, online listings do play an increasingly prominent role with almost three quarters saying that they toured or viewed images online before deciding which homes to physically visit.

The survey also reveals that 60% of respondents said they prefer to see homes furnished and professionally staged, or both furnished and empty, before making a purchase or signing a lease.

When moving into a new space, 65.4% of respondents said their top pain points included the stress of buying new furniture at once, shopping for furniture or designing their homes and finding furnishings to match their existing pieces.

The study was carried out by roOomy, a virtual staging and 3D modeling company which has just launched custom augmented reality (AR) and virtual reality (VR) tools for the real estate industry. The technologies allow for enhanced live views or an immersive digital experience.

“We’re enabling our Real Estate partners to transform the home buying and renting processes with the development of custom apps that allows users, both agents and home seekers, to take control of how they visualize a new space. In this digital era, consumers expect to use advanced technology regularly, including when considering one of the biggest purchases of their lives – a home,” said Pieter Aarts, CEO of roOomy.

Sothebys International adopts AR
Sotheby’s International Realty has launched an AR app called Curate, which it says has empowered agents and consumers to virtually stage properties and view them with AR technology.

Nick Church, Pacific Sotheby’s International Realty sales associate says it adds an extra tool to win business.

“The seller felt confident in my ability to use the latest technology to sell the home,” he said.

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Fraser Valley sales in line with historic averages

Home sales slipped back in the Fraser Valley last month but were broadly in line with historic averages for the time of year.

A total of 1,028 sales were recorded through the MLS system of the Fraser Valley Real Estate Board, including 383 residential detached homes, 241 townhouses, and 286 apartments.

This was a decline of 41% compared to the record high of November 2017 (1,743) and down 11% from October 2018.

“Lessening demand continues to impact our market significantly,” said John Barbisan, President of the Board. “In turn, that has given purchasing power back to buyers who now have more time and more options when it comes to making a decision.”

Although the number of active listings fell 5% month-over-month, buyers had 41% more choice than a year ago with 7,355 in the inventory. New listings totaled 2,077, down 25.2% from the previous month and down 10.6% from November 2017.

HPI benchmark prices varied
FVREB’s HPI Benchmark Price across the three main home types in November were:

  • Single Family Detached: $976,200, down 1.1% from October but unchanged from November 2017.
  • Townhomes: $532,800, down 1% compared to October 2018 but up 5.4% year-over-year.
  • Apartments: $422,500, down 2.4% month-over-month but up 12.2% compared to November 2017.

The market is shifting, albeit slowly. But while buyers are enjoying a more comfortable real estate environment, sellers will have to pay attention to how these changes will affect their chances at success,” added Barbisan.

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Competition has increased in some Toronto neighbourhoods

Moderate price growth and a decline in sales continued the trend in the Toronto residential home sales market in November.

But in some markets there appears to have been an increase in competition in some parts of the market according to the Toronto Real Estate Board.

Sales through the MLS totaled 6,251, down 14.7% year-over-year; although November 2017 has seen a spike in demand as the market was distorted by approach of mortgage stress tests.

“New listings were actually down more than sales on a year-over-year basis in November. This suggests that, in many neighbourhoods, competition between buyers may have increased. Relatively tight market conditions over the past few months have provided the foundation for renewed price growth,” said TREB president Garry Bhaura.

On a preliminary seasonally adjusted basis, sales were down by 3.4 per cent compared to October 2018.

Prices up from a year ago
The MLS Home Price Index (HPI) Composite Benchmark was up by 2.7% year-over-year while the average selling price was up 3.5% year-over-year to $788,345.

The average selling price after preliminary seasonal adjustment was down by 0.8 per cent compared to October 2018.

“Home types with lower average price points have been associated with stronger rates of price growth over the past few months. Given the impact of the OSFI-mandated mortgage stress test and higher borrowing costs on affordability, it makes sense that the condo apartment and semi-detached market segments experienced relatively stronger rates of price growth in November, as market conditions in these segments remained tight or tightened respectively over the past year,” said Jason Mercer, TREB’s Director of Market Analysis.

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