Happy New Year! We are continuing the initiative started last year. 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.

As we move into 2018, we've been a bit slow on the uptake given the seemingly relentless strain of viruses going around. Whether it's the result of extreme cold or too many holiday revelries, we encourage everyone to stay warm and healthy this new year! Now onto the meeting...

REWIND & FAST FORWARD - 2017 into 2018

To begin this recap, we have a recap! Chris thought it best to review some of what affected 2017's market as we go into 2018. Canada was the top performing country in the G7 with an annual growth rate of 3%. Consumer activity drove the majority of growth throughout the year; though is expected to slow in 2018. Economists are estimating anywhere b/w 2-5%, with 2% being the more realistic expectation. Unemployment is now below 6% nationally having created around 79,000 jobs, but Canada is still behind the U.S. (4.1%), Japan (2.8%), Germany (3.6%) and the U.K. (4.2%); there is anticipation those unemployment numbers will continue to drop. The downside there is that lower unemployment will lead to hikes in Interest rates. Canada is currently the most indebted nation in the world, with 170% debt to household income, so some adjustment to prices in the housing market would be helpful to most.

There is another rate hike by the Bank of Canada anticipated and the new stress test has officially been implemented. Given both of those factors, some economists speculate about 10% of the buyers in Toronto to drop out of the market. Chris doesn't share this sentiment given many buyers have had to qualify at the stress test rates prior to January 1st. The new stress test is unlikely to impact housing volume but likely will impact sale prices. If a buyer with 20% down was approved at $800K in 2017, the same buyer today may only be able to get $650K. Buyers may start offering less for less or seller’s may find they need to lower their price point, but anyone purchasing properties over $1.5M are unlikely to be affected given the downpayment required for such properties. What IS likely to be affected is the condo market, as condos remain the most affordable property on the market, regardless of lack of inventory.

Uncertainties that for 2018 include NAFTA talks and the upcoming election in Ontario. Both will play key roles in shaping the economy and subsequently, our housing market. Overall, however Chris felt that there was nothing seriously bad on the horizon for the housing market this year but given it is a year of uncertainty in certain areas and that last year saw what he called “most incredible oscillation in real estate” and a “very, very tumultuous year”, we should expect to see decent sales and more normalized sale price increases.

 

DECEMBER MARKET STATS

December is typically a "boring" month stats-wise as the market tends to die down with people getting into holidays. What we do get however are the stats for the year. This year saw a high total for number of sales reaching coming in just over 92,000 for the GTA, about 2% below 2016's highs of 113,000; the most sales ever seen in TREB's history. The bulk of those sales took place prior to May, after which, the drastic drop in activity and prices took place. Our total for 2017 ranks in the top 4 number of sales over the course of the TREB. For December, the average sale price came in at $735,000 across the GTA ($741,000 in the 416), with 4930 sales total. That's an increase in both the average sale price and sales volume year/year. The average sale price for detached properties in the 416 was $1,250,000 (-2.8% yr/yr). In the 905, the average was $910,000, further echoing the disparity b/w both markets. Semi-detached properties averaged $903,000 (+11.5% yr/yr) and condominiums came in at $532,000 (+14.1% yr/yr) in the 416. Given these numbers, clearly buyers are still unwilling to pay the high prices some sellers still demand for detached properties and are moving to more affordable property types; a trend no doubt to continue into 2018. All properties sold in 27 days or less, which remains a fast market pace. 

The number of high-end properties (over $2M+) for the month came in at 116, including 7 condominium apartments, so some condos are now inching up to that $2M+ range as well. Toronto's East end seems to remain the strongest area for price and time to sale, with all properties being sold for 100% of asking or more. Other areas of the city are not going for 100% of ask so it’s likely sellers will be pricing properties to sell as opposed to expecting a flood of buyers to pay the big prices we saw at the beginning of 2017. Overall, the data for December is very positive. There is a strong likelihood that the media will report huge drops in prices when January’s numbers come out and may paint a negative picture of the market but that’s only due the the over-inflated prices from the early part of 2017.

Here's a handy infographic developed by Chestnut Park's marketing team giving a summary of the December stats. 

PERIODIC PIECE

Changes to the Condominium Act in the late part of 2017 introduced the requirement of condominium boards producing a Periodic Information Certificate. This PIC is much like the summary retained in most Status Certificates without the attachments. It provides general information on the property, who the property management for the building is, the number of units leased in the building, directors of the corporation and addresses to contact them. It also gives details regarding insurance amounts for the building along with deductibles and financial Information to get some stance of the financial stability of the corporation, ie. the amount of expenses, liabilities and any foreseen costs coming up, or what the increase to the reserve fund will be going forward. Lastly, it details any legal action or party to judgements the corporation has. This document should be issued every 6 months to condo owners, so if you live in a condominium currently and have yet to receive one, you should contact your property manager to inquire. This is a helpful document for anyone thinking about selling their unit or simply interested in how their building is doing in a general sense. 

Are you finding these meeting recaps useful? We'd love to hear from you! Feel free to leave a comment below or get in touch directly! 

Due to the team being sick this week and an unforeseen audio glitch that's prevented us from reviewing this week's meeting, we are unable to bring you the regular weekly meeting recap. We do however have the latest infographic for November's numbers along with Chris Kapches' analysis. We hope that will suffice until next week's meeting. 

As always, please feel free to leave a comment below or get in touch with us directly. 

November finished strong but in a fractured fashion. To use a cliché, not all markets were equal in November.

The City of Toronto (area code 416) continues to strengthen, following the market declines after the province’s announcement of the Ontario Fair Market Plan and in particular a 15 percent tax imposed on foreign buyers in late April. In the City of Toronto, where generally there was much less foreign buyer activity than in the 905 region, the shock of the foreign buyers tax has been absorbed. The impact of the tax in the 905 region continues to negatively impact that residential resale market.

The only drag on the City of Toronto’s residential resale market is the sale of detached properties.

Detached property sales in the City of Toronto were off by 19 percent compared to November 2016. Sale prices faired more favourably. Compared to the same period last year they declined by only 5 percent, a clear indication that the market is further stabilizing.

Semi-detached and condominium apartments in the City of Toronto produced very strong results. Semi-detached property sales were only off by 4 percent compared to last year, and impressively prices were flat compared to November 2016. Condominium apartments provided even more remarkable results. Sales were up by almost 18 percent compared to last year, and sale prices declined by only 6 percent. This data makes it clear that the residential resale market has almost returned to where it was a year ago, which was the beginning of the irrational market runup that began in January of this year and was crushed by the provincial Fair Market Plan.

Although the market will continue to recover into 2018, it is not anticipated that it will parallel the Vancouver phenomenon after the British Colombia government promulgated a foreign buyers tax in that province in 2016. Since then we have seen two quarter point interest rate hikes by the Bank of Canada and the announcement by the Office of the Superintendent of Financial Institutions that commencing in January 2018, uninsured borrowers (borrowers who put down more than 20 percent of the purchase price of a property) will have to demonstrate that they can afford their mortgage payments at either the five-year average rate noted by the Bank of Canada or two percentage points higher than whatever rate they were able to negotiate with their bank. Simply stated, borrowers will have to show more income to qualify for a mortgage than they did in 2017.

Overall sales of residential resale properties have shown an impressive improvement compared to the months following the Fair Housing Plan announcement. There were 7,374 properties reported sold in the Greater Toronto area. This compares to 8,503 properties reported sold in November last year, a decline of only 13 percent. Notwithstanding this negative variance, it compares very favorably to the massive negative variances in June, July, August and September. Another positive sign of market recovery. Although sales were not occurring as quickly as they were last year at this time, at only 24 days on market, sales were brisk by historical standards.

The large negative variances in sales in the months mentioned above, (June, July, August and September) and an increased number of properties coming to market have increased the supply of properties available to buyers, with the exception of condominium apartments. Due to their price point, condominium apartment demand has remained strong, resulting in tight inventory. At the end of November, there were 18,197 properties of all types available to buyers in the Greater Toronto Area. This compares with only 8,639 last year, an increase of 110 percent. It should be remembered that the 8,639 properties available last year was a critically and dangerously low supply. That was made evident by the explosion of the irrational resale market that we experienced between January and April 20th of this year. In November, 14,349 new listings came to market, a 37 percent increase compared to the 10,456 new listings that came to market in 2016. There is no question that buyers have considerable choice compared to last year. This is another factor that mitigates against a repetition of what occurred in Vancouver, here in Toronto.

For the first time in years on a month-over-month, year-over-year comparison, the average sale price declined. Last year the average sale price came in at $777,091. This November it came in at $761,091, a decline of 2 percent. The decline was primarily due to the decline in the average sale price of detached properties in the 905 region. There were 2,319 detached properties sold in the 905 region in November. Their average sale price came in at only $898,605. By comparison, the average sale price of detached properties in Toronto (416 region) was a staggering $1,276,184. Unfortunately, there were only 812 properties in this category, not enough to have a significant impact on the overall average sale price.

Going forward, what we do not need is any further government intervention in the market place, unless it is designed to stimulate the supply of housing, particularly purpose built rental units. The provincial government’s politically motivated decision to move to universal rent controls in Ontario may win the liberals the next election, but it will have a devastating impact on the rental housing market and will only hurt those it was “designed” to help – tenants. The market has moved into balance, with more choice for buyers, and price increases now consistent with inflation and wage growth. A balance that will be further stabilized by the new mortgage stress testing. Government should let market forces control the residential resale market, just help with supply.

Prepared by:Chris Kapches, LLB, President and CEO, Broker 

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.