Sales of Houses, Condos expected to slow across Southern Ontario

Excerpted The Toronto Star

Sales of houses, condos expected to slow across southern Ontario
Published on Tuesday August 14, 2012

Susan Pigg
Business Reporter

Sales of both condos and high-end homes have slowed so significantly in the last few months across the GTA that the Canada Housing and Mortgage Corp. is downgrading its housing market predictions for the rest of this year and next.

In fact, housing activity is expected to cool across much of southern Ontario well into 2013 because of high prices, rising inventories of new condos, tougher mortgage lending rules and less investor demand, CMHC says in a Housing Market Outlook report released Tuesday.

“Housing activity will hold up better in northern and southwestern Ontario communities thanks to improving goods sector performance, relatively less expensive housing and an improving migration picture,” says the report.

While condo sales are slowing, highrise construction continues to dominate the GTA housing market because most of the record number of units that were sold last year — some 28,000 — have yet to be built.

“Toward the second half of (2013) we’re going to see more of a moderating effect because of the slowdown in new condo sales that we’re starting to see now,” said Shaun Hildebrand, a senior market analyst with CMHC.

When it comes to the resale housing market, CMHC had been predicting some 95,000 real estate transactions across the GTA by year’s end. It now expects closer to 91,500.

Next year, that number could drop to 88,000, according to CMHC projections in its forecast report, released quarterly.

The drop in demand is not only hitting the lower end of the housing market — condos — but high-end homes of $1 million and up. The latter have been in especially high demand the last year but are now facing a drop in demand. Hildebrand attributes that to continued economic uncertainty, poor stock market returns, slow income growth and prices that have grown out of whack because of inadequate supply.

“The $500,000 to $1-million bracket seems to be holding up relatively better than the lower end and higher end of the market,” he notes.

Demand remains strong in that sector, in large part because homes have virtually doubled in price across the GTA over the last decade, boosting the equity available to those homeowners looking to move up.

While that is opening up supply for first-time buyers, some of that demand is now being offset by yet another set of tough new mortgage rules, introduced by Federal Finance Minister Jim Flaherty in a concerted effort to cool Toronto’s and Vancouver’s housing markets, that have locked some first-time buyers out of the market.

While the CMHC predictions may sound worrisome to some, Hildebrand termed the housing forecast “optimistic.”

“We’ve been waiting for this moderation in the market to materialize for some time,” he said. “We’re starting to see homes sit on the market a little bit longer now and fewer instances of multiple offers.”

While high prices and tougher lending rules may shrink the ranks of eligible first-time buyers, “this is the ideal buying environment for somebody who is looking to move up in the marketplace.”

Canadian Housing Market Headed for 10% Downturn: Scotia Economics

Excerpted from Moneyville, The Toronto Star
Housing prices headed for 10% slide: Scotia Economics

Canadian home prices are likely to decline 10 per cent over the next two to three years, before facing a period of “prolonged” softness in both prices and sales, says a new report from Scotia Economics. TORONTO STAR

By Susan Pigg | Wed Aug 8 2012

Canadian home prices are likely to decline 10 per cent over the next two to three years before facing a period of “prolonged” softness and lower demand, says a new report from Scotia Economics.

“The correction will be concentrated in the Toronto and Vancouver markets, where supply risks and affordability pressures have the potential to trigger larger price adjustments,” says the report by Scotiabank’s Global Economic Research Group.

There are signs that Toronto’s condo market “is beginning to self-correct” with a sharp downturn in sales in the second quarter of 2012. Prices are likely to moderate and a record inventory of unsold units is likely to force some developers to delay or cancel some planned projects, it notes.

Vancouver’s notoriously overheated housing market is now seeing a 20 per cent decline in demand over long-term trends and prices are likely to follow, the report notes.

Toronto may not be far behind: Sales remain 10 per cent above historic averages and the short supply of detached homes in particular continues to drive up prices. (The average price of a detached home in the GTA hit almost $600,000 in July. A detached in the 416 area was up to $752,4310, according to the Toronto Real Estate Board.)

“This is beginning to present affordability challenges, and raises the risk of a bigger price correction down the road,” says Scotiabank’s report.

Pent-up demand for housing has been “effectively exhausted” right across Canada by the decade-long housing boom, fuelled by historically low interest rates, which has helped push home ownership to record levels, the report notes.

Other “downside risks” of the housing market are Ottawa’s tightened mortgage lending rules — the move to restrict repayment to 25 years instead of 40 years — high household debt and interest rates that have only up to go, it says.

Just shaving 15 years off the maximum allowable amortization period has added about $387 to the monthly carrying costs on an average-sized home for buyers with just a 5 per cent down payment, notes Scotiabank’s economists.

“Even beyond mid-decade, Canada’s housing sector faces the likelihood of a prolonged period of relatively modest sales and price gains,” the report says.

“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand.”

Those downturns after the housing booms in the 1970s and 1980s — defined as periods of flat or negative real price growth — lasted 8 and 9 years, respectively, it notes.

“Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe,” it stresses, adding that “Canadian household balance sheets remain in reasonably good shape.”

The equity Canadians have in real estate averages 67 per cent compared to just 41 per cent in the United States, which helped leave homeowners there particularly vulnerable when house prices took their dramatic downturn.

Toronto Home Sales Slide in July; Prices Still Up

Excerpted from The Toronto Star
Toronto home sales slide in July

The Canadian Press
Vanessa Lu

TORONTO — The Toronto Real Estate Board says July home sales in the city slipped 1.5 per cent compared with a year ago.

The board says there were 7,570 homes sold last month compared with 7,683 a year ago, as condominium sales slowed.

Board president Ann Hannah says new mortgage lending guidelines and the additional cost of the Toronto land transfer tax prompted some to put their buying decision on hold.

The average selling price in July was $476,947, up four per cent from a year ago.

Board president Ann Hannah says new mortgage lending guidelines and the additional cost of the Toronto land transfer tax prompted some to put their buying decision on hold.

The average selling price in July was $476,947, up four per cent from a year ago.

More: Vancouver home sales hit lowest level since 2000

GTA Real Estate Softens. Reduce Risks..

Excerpted from Moneyville, The Toronto Star
As GTA real estate softens, how to reduce risk

Buying a house can be daunting, but a little planning makes it less stressful.
Shutterstock/Shutterstock

By Mark Weisleder | Sun Jul 29 2012

For every pundit who says the GTA real estate market will crash, there is someone else who says it will remain stable or even grow. I fall into that camp. Even so there are signs of weakness in the market. June resale figures for the GTA are 5 per cent lower than a year ago, according to the Toronto Real Estate Board. June prices were also lower than April and May, although still 7 per cent higher on average than last June. Some say this is a typical summer slowdown while others see storm clouds on the horizon. Whatever your vieww, here are some ways to reduce your risk, whether you own a home or investment property.

Pay down your mortgage: Increase your monthly payment. Even a little makes a difference. The more equity you build in your home, the bigger the cushion if prices go down.

Lock in your interest rate: There has never been a better time to lock in your interest rate. Three year rates are 2.84 per cent this week and 6-years at 3.59 per cent. This cushions you from unexpected rate or price swings.

Cover your costs: When thinking about a real estate investment, do the math. After making the down payment, the rent should at least pay for all expenses on the property. This includes mortgage interest, property taxes, insurance and utilities. Add another 10 per cent to pay for a property manager, who will make your life easier in managing your investment. Do not invest in real estate that does not carry the expenses. That’s just speculation that prices will increase. You can get caught if there is any slowdown.

Share your risk: Consider taking on a partner in any investment real estate. You get some equity out and share the bills and risk. Always get tax advice to check how much tax you may have to pay as a result of any sale. Draw up a partnership agreement to make sure everything is clear.

Do tenant checks: This is true for commercial or residential tenants. Do proper background checks and get additional guarantees if you are not satisfied with anyone’s credit or prior rental history. If you lose your tenant, you will have trouble paying your expenses.

Treat your tenants with respect: Your tenants are protecting your investment. If you treat them with respect, they will look after your building better. If your tenant is nearing the end of their lease, especially in a commercial situation, approach them to negotiate an extension to the lease early, to protect against someone else taking them away. If you treat your tenants the right way, they won’t bother to look anywhere else.

If markets collapse, no investment is safe, including stocks and real estate. Still, by taking the proper precautions, you should be able to safely ride out the storm and may even be in a position to take advantage of any falling prices by becoming a buyer.

Mark Weisleder is a Toronto real estate lawyer.Contact him at mark@markweisleder.com

GTA Home Prices Up 23% Since 2008

Excerpted from Toronro Star..

Toronto housing prices up 23 per cent since 2008

Sales in the GTA were down 2.3 per cent from May and almost 8 per cent over a year ago, but are up sharply over the past five years.
DICK LOEK/TORONTO STAR

By Ashante Infantry | Tue Jul 24 2012

Toronto housing prices are up 23 per cent since 2008, according to a Municipal Property Assessment Corporation (MPAC) report on residential sales trends.

The hot spots, cited for the most significant increases are: northwest and southwest Scarborough; detached, semi-detached, and town homes north of Bloor St. through the central part of the city, close to amenities and the subway; and Mimico.

Rising sale prices of residential property in Toronto are driven by a number of factors, including immigration, foreign investment, low interest rates, the attractiveness of an urban lifestyle, and shortages of both developable land and homes for sale, said the report.

And in a city experiencing unprecedented condo growth, bungalows on large lots are coveted; they are being purchased for land value alone and have increased by up to 50% since 2008 to $1 million or more in some neighbourhoods, with buyers willing to pay a premium to build the home of their dreams, says the study.

The Market Snapshot, which tracked prices over the past four years in selected municipalities, echoes the observations of the Toronto Real Estate Board, said its senior manager of market analysis, Jason Mercer.

“Since we came out of the recession, in the second half of 2009, and what initially was a housing based recovery, we’ve seen tight enough market conditions to see very strong upward pressure on home prices,” he said.

“With a little bit more supply in the market we’ve started to see more listings come on line, so that should see a bit of moderation in terms of price growth. We’re expecting the average price to continue to grow, but just at a slower pace.”

During the same Jan. 1, 2008 to Jan., 2012 period, MPAC found the average sale price for residential properties in Ontario rose by 17 per cent.

The report underscores the continuing strength of the province’s real estate market, said Larry Hummel Chief Assessor for the Pickering-based non-profit corporation.

“The continuing strength is very positive, particularly when you look close to the border,” said Hummel. “You always expect that the trend that occurs there occurs in Canada, but we’ve reversed that situation” through prudent financing and not overbuilding.

While a sale price reflects mutual agreement in one particular transaction, an assessment, or a property’s current value, is based on the most probable sale price based on an analysis of all sales transactions from the local real estate market.

“We know in the Toronto market, by reading reports, that some people are more motivated than others,” Hummel. “Someone might have missed out on the last seven bids on a house and there may have been ten people competing in the auction; another month later, the market may have changed a little bit and there were four houses on the street available for sale; it’s not the same exact conditions and people bidding on those houses may not be nearly as motivated; or the person selling the property might be more motivated or less motivated. We analyze all of the sales prices in that local market in order to come up with the most likely or probable selling price.”

Toronto’s gains were the second-highest in the GTA: behind York Region’s 28 per cent, but ahead of Halton-Peel (22 per cent) and Durham (12 per cent).

Northern Ontario shows the biggest growth across the province with Timmins leading at 29 per cent, followed by Thunder Bay (26 per cent) and Sault St. Marie (25 per cent).

“What’s driving that is the increase in commodity prices and infrastructure to support the mining industry,” said Hummel.

In September MPAC will begin mailing out Property Assessment Notices for Ontario’s nearly five million properties with the assessed market value as of Jan. 1, 2012. Municipalities use the assessments, based on analysis of actual sale prices of similar properties, to calculate property taxes.

“Property owners should remember than an increase in assessment does not necessarily mean an increase in property taxes,” said Hummel. “It all depends on a number of factors including the amount of revenue required by your municipality or taxing authority to deliver services.

“If the assessed value of your home has increased more than the average for your local community, region and province, you may pay proportionately more in property taxes. If your home has increased in value less than the average, then you may pay proportionately less in property taxes.”

To help provide an additional level of property tax stability and predictability, the Ontario Government has introduced a phase-in program where market increases in assessed value between January 1, 2008 and January 1, 2012 will be phased in over four years (2013-2016). The full benefit of a decrease is applied immediately.

Hummel said Market Snapshot was developed as part of MPAC’s commitment to openness by sharing information about how assessed values are calculated with property taxpayers.

Prices Up Across GTA- as House Sales Decline Across Canada

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