Each week, The Glenn Team provide highlights from the weekly CP office meeting to provide a balanced overview of the Toronto and GTA markets and relevant issues affecting real estate markets. Meetings are overseen by Chestnut Park's CEO and Broker of Record, Chris Kapches, LLB, who provides weekly analysis and commentary. Additional input is provided by the CP Toronto office Realtors who give a day to day, real life perspective of the local markets.

First off, our apologies for not putting up a post last week but we've got lots of good stuff to share this week, among them many an acronym and pun-filled headings...

MARKET UPDATE

Chris continues to collect his own stats for the 416 area code, or the City of Toronto proper. We continue to see a rise in the average sale price up to $785,000 for the 416. Inventory remaining low is likely the best indicator for this continuation of an upward trend. All reports from CP agents working in the 905 indicate that things there are worse there however, and in some areas stagnant. TREB's stats, which came out today, indicate a decrease in average sale price across the GTA of about 2% since last November; not surprising given the number of detached properties that sold then as opposed to this November. However, as we've noted in previous posts, this negative variance is one which is shrinking by the month. January's numbers will likely increase this year over year negative variance given prices from the beginning of 2017 but again, it's important to recognize how unsustainable that market was.

TREB board president Tim Syrianos seems to now be echoing what we've been reporting on for months now...

"We have seen an uptick in demand for ownership housing in the GTA this fall, over and above the regular seasonal trend. Similar to the Greater Vancouver experience, the impact of the Ontario Fair Housing Plan and particularly the foreign buyer tax may be starting to wane. On top of this, it is also possible that the upcoming changes to mortgage lending guidelines, which come into effect in January, have prompted some households to speed up their home buying decision."

Lastly, condominiums have continued to make the biggest strides in prices, averaging 16.4% across the GTA. So long as inventory continues to be low, we can expect prices to continue to rise going into 2018. 

UNEMPLOYMENT ENJOYMENT

Canada's unemployment stats came out last Friday and are staggeringly low at about 5.9%; the best numbers seen since February 2008. Over the past 12 months, Canada gained 390,000 full-time jobs, with men in the 25 to 54 core-aged group, youths aged 15 to 24 and women aged 55 and older receiving the lion's share of the jobs. Not surprisingly, Ontario led the provinces with 44,000 new jobs created in November, mostly in the wholesale and retail trades in addition to the manufacturing sector. Ontario’s unemployment rate is now at 5.5%, which is the lowest it’s been since 2000.

Will this help or hinder the real estate industry? Chris indicated that these numbers could mean a further interest rate hike by the Bank of Canada; something that was already posited in past meetings and many in the mortgage world feel is almost certain in 2018. Last Friday, after the rates were published, the Canadian dollar jump up a cent against the U.S. dollar. Given this information, along with the proposed wage increases scheduled for next year, many economists feel that we're looking at further rate hikes in January. “It certainly firms the idea that there are more near-term hikes than previously anticipated,” said Michael Dolega, senior economist at Toronto-Dominion Bank.

R.R.S.P. FOR THE WHOLE FAMILY

The Canadian Real Estate Association is asking the federal government to extends it's policy allowing RRSP contributions to be used as a tax-free downpayment to parents wanting to help their children make a purchase in real estate. Additionally, the association wants the limit for withdrawal to be bumped up to $35,000 from the $25,000 that is currently allowed. Most in the CP office felt this limit could be raised even further given the average selling price across Canada now being up to $550,000. Though that average price is likely more reflective of the high values being seen in Toronto and Vancover, even a $35,000 deposit is only negligible for the purposes of making a down payment.

Chris did bring up the fact that many first time home buyers may not have even that much in their RRSPs but that certainly allowing parents to add some of their own RRSP funds to the mix should help, given there is good evidence to show an existing "shadow economy" already at play in the real estate market; ie. parent's giving money to their kids for down-payments.

Thomas Davidoff, a professor at UBC's Saunder School of Business said there is no clear answer as whether this policy is good or bad. Davidoff feels this policy could undercut people's retirement savings, would push up housing prices further, and would enable only wealthier families to have greater buying power. Davidoff feels that the government would better serve the market by introducing more taxation on home owners.

Darlene Hanley - our resident mortgage expert - said that she's seen this shadow economy in action already. With some families contributing upwards of $200,000 in down payment gifts for their children. While that scenario is likely rare, I feel like it underscores the reality of what wealthier families are already able to do. This policy might better serve families who don't have as much. Whether it hurts their retirement savings is something each family would have to judge for itself.

We would love to know your thoughts on this matter. Leave a comment or get in touch directly!

LTT TO SAVE T.O.'s B

Last Thursday, the City of Toronto announced their new annual budget and among the expected revenues, the municipal Land Transfer Tax is expected to make up almost 10% of the city's earnings for 2018. In total, city manager Peter Wallace is conservatively estimating about $800M to come from the LTT despite what many call a slow down in the housing market. If you've been keeping track with our weekly posts however, I think Mr. Wallace is likely correct. We've been experiencing steady price growth and it seems the same with be true in 2018. It is astonishing however to consider how much home buyers contribute to the infrastructure of this city. There have been more than enough articles being critical or down right angry about the upward trend in housing prices but in realizing how much of that money goes to essential services in the city, you'd expect any commuter or tourist to sing the praises of the Toronto home buyer.

For more information on how LTT has and will have an effect on the proposed budget, check out this article in the Globe and Mail

YOU SAY PROPRIETY, TREB SAYS PRIVACY

No matter how you want to argue it, the Federal Court of Appeal ruled against the Toronto Real Estate Board in deciding to uphold an April 2016 Competition Tribunal ruling that TREB's practices prohibiting sharing information online are anti-competitive. The general sentiment in the CP office was that TREB should have made this an argument about propriety; namely that for years, members of TREB have paid dues to develop a system whereby Realtors are better able to serve their clients through the use of sales data and other companies that have similar data (VISA for instance), would never be made to share that data. TREB however, didn't make an argument based on propriety but instead on consumer privacy. TREB CEO John DiMichele said that

TREB believes strongly that personal financial information of homebuyers and sellers must continue to be safely used and disclosed

The tribunal found that TREB's actions had been in line with anti-competitive practices and hopes that this ruling will open up competition in the digital space to companies like Realosophy or Zillow; based in Seattle. Proponents of the anti-competition viewpoint feel that this data would allow buyers to make a better informed decision prior to seeking the use of a Realtor and would allow realtors and brokerages the ability to publish better sales information; ie. which neighbourhoods are appreciating the fastest. 

In the U.S., where this data has been available for sometime, the real estate market continues to thrive but we're sure there will be more than a few realtors who aren't happy about the decision. TREB is appealing the ruling in the Supreme Court.

Chris' sentiments on the matter were that competition bureau outcomes have had effects on the real estate industry in the past and we still have a thriving marketplace. What he did find offensive is that the media seems to be painting Realtors as being dishonest in how we are using this information; that we would use it to our benefit in obtaining a higher sale price, regardless of the data. We would echo Chris' sentiments and also argue that sellers are just as interested in getting the highest price for their property. That being said, any realtor who uses deceptive practices to build their business will fail at some point. Perhaps we are more honest than most?

Again, we would value your feedback on any of the topics mentioned. We try to offer our clients and reader base, the most informed and accurate opinions of the market and of the real estate world in general. Please leave a comment below or get in touch directly. 

Each week, The Glenn Team provide highlights from the weekly CP office meeting to provide a balanced overview of the Toronto and GTA markets and relevant issues affecting real estate markets. Meetings are overseen by Chestnut Park's CEO and Broker of Record, Chris Kapches, LLB, who provides weekly analysis and commentary. Additional input is provided by the CP Toronto office Realtors who give a day to day, real life perspective of the local markets.

MARKET UPDATE

We started this week's meeting as we do every week, reviewing the stats for the month. As we continue to wait for TREB to republish weekly stats, Chris continues to develop his own for the 416 area code. We're currently on track for about 3000 sales for the month of November, which would account for a negative variance yr/yr of about 12-15%. This negative variance is likely to dwindle as we close out the year, but will skyrocket as we head into 2018 given the intense market we experienced for the first half of 2017, so be prepared for some negative press at that point. 

The average sale price for the 416 this past week came in around $785,000 across all housing types; about a 1.5% increase from this week last year. Chris now feels we've reached "the perfect market", stating that this is “how the market should be behaving.” Sales are consistent with an active but not overheated market though some analysts remain pessimistic about the potential for a return to the high numbers we saw up to April of this year.  

Active listings are currently around 5800 in the 416 which is down significantly from the approximately 7500 when Chris began collecting stats in August/September. Though this isn't the case in the 905 where sales numbers stay high and average sale price continues to move at a slower pace, the 416 seems to be experiencing an inventory shortage consistent with what's happening in Toronto's rental market. If we stay in the 5800 range, we should have about 1.6 months of inventory which is quite a quick market. Furthermore days on market are remaining around the 16-18 day market, which is also very fast compared to "normal" market activity. Reports from Toronto CP agents indicate as much, as many open houses saw lots of visitors and many listings in the office are experiencing multiple or bully offers; particularly if the property is unique or move-in ready. We will have to wait for TREB's final numbers to get a read on whether the entire GTA is on track for similar results.

THE TROUBLE WITH RENT CONTROLS

The media are finally being critical of the measures taken by the Ontario government putting controls on rental price increases. In a new segment from the Financial Post, Murtaza Haider and Stephen Moranis argue that rental controls have never been a good solution to rising rental rates. Since April’s introduction of the rental control, Urbanation reports that "no fewer than 1,000 planned purpose-built rentals have been converted to condominiums in the GTA." 

In what is perhaps the most concise analysis of the situation, the authors quote Nobel Laureate Paul Krugman from the New York Times, stating that the “analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial.” Krugman noted that 93 per cent of members of the American Economic Association believed that “a ceiling on rents reduces the quality and quantity of housing.” 

The article goes on to list the reasons why rent controls don't work beginning with the builder, who has less cash-flow incentive in building rental-specific housing given the capped rate increases. Secondly, those who investors who have purchased condominium units (for example) also see less upside and so might choose to sell their investment, rather than rent it, lowering the inventory for the 84% of Toronto renters who are already renting in the private market. Lastly, the article notes that "when rent restrictions limit landlords’ profits, they are less likely to keep rental stock in a state of good repair. As the profit margins squeeze periodic maintenance and upgrades become less frequent. This is also true for public landlords. All one needs is to look at the dilapidated housing units owned by municipal housing authorities in many cities."

There is good evidence to support the article's thesis in Massachusetts, where rent controls were eliminated 1995. The elimination increased condominium conversions and overall condo numbers by 32% from 1994 to 2004 in Cambridge. "Decontrol even benefitted the valuation of housing that had not been subject to controls: It appreciated on average by 12 per cent as a result."

So what was intended to help renters has actually hurt them. It appears there are more voters who rent than who own, too many of whom don't know a bad thing when they see it. 

GOING ONCE, GOING TWICE...

A new company based in Vaughn called On The Block Realty are now selling properties by auction. Properties will appear on MLS and the brokerage's website for 6-7 days before any bids are taken. During that period, potential buyers can go to view property with an accompanying Realtor. After the 6-7 day period there can be up to 4 days (determined by the seller) for potential buyers to bid on the property; the seller sets the reserve price for the property. The brokerage is intent on providing an open and transparent offer process, as all bidders can see any new bids coming in and are notified when bidders "max out".

This practice is common in other countries such as Australia, where approximately 20% of all listings are done by live auction. Chris pointed out that this type of process has been attempted in Ontario before but wasn't ultimately successful. This could be due to a disadvantage to the seller as in typical "bidding war" scenarios, buyers can increase bids by any amount, easily overbidding their competition and winning the sale.

The process would likely be more successful in a strong buyers market, but clearly that's not something we're in currently; at least in Toronto. Perhaps the brokerage is targeting the 905 area where sales continue to be slower. The auction system has had great success in Sweden, where there are no buyer's representatives and buyers must do their own due diligence on any property they might but. Chris argues that our current system, bolstered by the MLS system works quite well. 

What are your thoughts? Should all properties be put up for auction or will this just lead to a lot of litigation? We'd love to hear from you. Leave a comment below or contact us directly

Each week, The Glenn Team provide highlights from the weekly CP office meeting to provide a balanced overview of the Toronto and GTA markets and relevant issues affecting real estate markets. Meetings are overseen by Chestnut Park's CEO and Broker of Record, Chris Kapches, LLB, who provides weekly analysis and commentary. Additional input is provided by the CP Toronto office Realtors who give a day to day, real life perspective of the local markets.

MARKET STATS

As TREB has continued it's stoppage of weekly stats, Chris has continued to generate his own within the City of Toronto (the 416), and interesting things are happening. Up to October 28th, total properties sold for the month are at 2653; last years numbers for October were 3715. Projecting to the end of October for 2017, we expect just under 3000 sales, which means there will be a negative variance of 20% year over year. That may seem like bad news but that variance is up from the -29% we saw in September, so the gap is lessening. 

In addition to number of sales, the average sale price for each of last 3 weeks has been $833,000,  $826,000 and last weeks average of $825,000. The total for October should be about $828,000, an increase of 6%. 

Chris' opinion that is there is “essentially a stabilization of the market." So long as we can stay on this trajectory, we should be good going into 2018.

Open house reports from Toronto CP agents indicate a bit of a mixed bag, with many open houses in the central core garnering lots of visitors and the same buyers at various open houses listed in similar price ranges. Agents also reported seeing more buyers who had already sold their property; practically the opposite situation from months prior to April's downturn. This would seem to indicate buyers are being much more cautious about where and what they're buying.

3RD QUARTER CONDO & RENTAL REPORT

TREB did publish it's 3rd quarter condo and rental report. Among the data, sales volume was down by 29% and new listings were down by more than 10%, from 11,000 to 9000. At this pace, condos will be in short supply in the 4th quarter and going into 2018; something we've already noted in previous week's posts. Active listings in the quarter are down a little over 1%

Despite sales being down, the average days on market for condos was 22. Last year that number was closer to 25. This would give credence to the market accelerating and as noted, there is still a supply issue. The average sale price increased by almost 25% from $415,000 in 2016 to $510,000 for the GTA. Of the 5684 sales in the GTA, almost 65% took place in the 416. Additionally, the average sale price in the 416 is higher at $542,000. The central district accounted for 66% of all condo sales in the 416 and had an even greater average sale price at $603,000. 

RENTAL CRISIS CONTINUES

Toronto continues to be in a rental crisis, with the average rent in the city going up by 11% year over year. Renters can expect to pay $1,976 on average for a 1 bedroom apartment and $1,672 for a bachelor. We, as well as other continue to question the Liberal governments housing initiatives based on these numbers. There is clearly no product available and things appear as though they'll only get worse for renters going into 2018.

KEEP CALM AND TARION  

In more positive news, the Tarion Warranty Corporation announced that effective January 1st, 2018, it will be increasing it's coverage on deposits for new construction of free-hold properties from $40,000 to 10% of the purchase price. The insurance will go from a minimum of $60,000 to a maximum of $100,000. 

Unfortunately, deposits for condominium apartments will still only be insured up to the $40,000 mark. We guess this is because most new construction for condos will fall into the $400-500,000 range.

ASSIGN OF THE TIMES

The CRA has announced that it will now force the disclosure of assignment sales from developers. In the past, there was no way for CRA to know an assignment took place as it was a privacy issue.

The CRA is now taking the position that the profit, or "lift" as it's commonly referred to, from the assignment sale will not be a capital gain but instead income. Additionally, anyone selling an assignment who doesn't declare the income and is subsequently found to have done so, will have to pay tax penalties. This means we'll likely see fewer assignments going forward, and more sales going to so-called "end-users"; where buyers intend to live in the unit. As investors are less likely to purchase units for the purposes of realizing gains prior or just after incorporation of the condo. This is potentially positive news given the inventory issues mentioned above.

NEW ZEALAND IS FOR NEW ZEALANDERS!

The new New Zealand government has announced it will ban foreign buyers from buying property of any kind. No non-residents may purchase property. The rationale here is based on low interest rates, limited housing stock and immigration rising causing housing prices to have been pushed up. Sound familiar? This is a strikingly similar situation to what's happening in Toronto. This news comes after the latest election of a new government in NZ, who feels that overseas buyers are putting too much pressure on infrastructure and housing prices. Chinese buyers account for the largest percentage of foreign buyers. 

Average sale prices were up 10.4% in most cities and 18.1% in Wellington (the country's capital). The average sale price for in Auckland is now at $1,000,000, about $881,307 Canadian. Toronto's average as mentioned is now about $828,000. With all the same pressures going on here, is this what's next for Toronto?

What's your take? We'd love to hear from you! Contact us directly or leave a comment below...