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...

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 mid-month stats are still unavailable from TREB (see our previous post regarding that), Chris has continued to prepare his own stats within the 416 districts. The average sale price has moved up to $862,000, for a 7% increase in average sale price since October 2016. We’ll have to wait until next month to see whether that number will be reflected throughout the GTA, but odds are good, it will be below that mark as the 905 properties will likely continue to be undervalued. The number of sales for the month are also down from last year by about 22% which is a shorter gap from the 35% we experienced in previous months. All of this would indicate a better and more balanced market moving into 2018. Anecdotal information from CP Toronto reps also indicates a lot of activity in central and eastern districts.

STRESS CASE

It’s now official that the newly proposed stress will be instituted come January 1st, 2018. What does this mean for potential buyers or those looking to trade-up on their existing property? Chris did a basic scenario to arrive at some numbers. Assume you’re looking to purchase a $900,000 property and have a $400,000 down payment; far past the 20% requirement. A typical 5 year fixed rate would likely amount to a monthly payment in the $2,500 area and require your yearly income to be around $95,000. Under the new rules that same buyer is required to qualify at their broker contracted rate + 2% or the Bank of Canada benchmark rate (around 4.89%), whichever is the greater of the two rates. That difference in rate would require their mortgage payment to go up $3,295/mo. and require their yearly income to be $112,000. That’s about a difference of 20%. 

Does that mean we should expect 20% of the market to simply disappear? Both Chris and Darlene Hanley (of The Hanley Mortgage Group) say no. They claim that the majority of buyers or re-financiers that can already afford 20% or more of their down payment can already cover that difference in cost. Who will be affected however? Most experts feel that it will be the buyers looking to move up to a larger, more expensive property. This new test will likely dissuade them from looking to buy or force them to buy something that is more within their means and will lower their potential debt load risk. We’ll have to wait until next year to see how much, if at all, this affects prices and activity the marketplace. 

CASE IN POINT: A Case Beyond the Pines... or Cedars

Chris brought to light a court case, which isn’t often discussed, as it rarely goes to litigation. This case relates to trees on or over property lines. In this case, the defendant, a neighbour to a property with cedar trees along the property line, trimmed and cut down some of the cedars to erect a fence, so no further trees would impact on his property. Under the law (excluding any towns’ particular by-laws) you are allowed to trim any portion of a tree that encroaches on your property but may not affect the roots of that tree. The case went as far as the court of appeals, who sided in favour of the prosecution, as the neighbour had no right to cut down any trees in erecting his fence and didn’t receive consent from the tree owner. A lesson learned for anybody with a neighbouring tree and a grudge.  

Have you got a grudge regarding the Toronto real estate market or a nasty neighbour? We'd love to hear from you. Either email us directly or use add a comment below.
 

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

As our latest CP market report was just published, there isn't much to discuss related to market stats that was covered there or in last week's meeting. For more information on where the GTA markets are at, go to that post or subscribe to our neighbourhood house price reports. 

WORD ON THE STREET

A poll of the agents in the CP Toronto office revealed that the type of property as well as it's price range has a significant impact on the market's interest in it. For example, listings over the $2M price point in central districts have had little interest in the past week, whereas condo apartment listings in both eastern and central districts under $1M have had intense, fetching multiple offers. Clearly the more affordable condo apartments continue to be the market's hottest prospect currently. Though volume is up in the 905 area code, the 416 continues to come in at 25% of those numbers, with condo apartment inventory all but gone. 

TAX TALK

As agents in the Toronto office have found more foreign buyers coming back to the Toronto market, Chris felt it important to review who is affected by the recent foreign buyer's tax. Some of the most relevant points are listed below. For the full breakdown, click here

Doesn't apply to Canadian citizens or permanent residents, unless those parties are buying property with a foreign national. 

Who Does the Tax Apply To?

• Foreign Entities: Foreign nationals and not Canadian Citizens or Permanent Residents. 
• Foreign corporations: ie. corporations NOT incorporated in Canada or incorporated in Canada but controlled by foreign national or other foreign corporation (unless corporations shares are listed on the TSX.
• Foreign corporation controlled directly or indirectly by a foreign national for the purposes of the associated corporation rules under Canada's Income Tax Act. 

What Types of Properties are Affected?

• Single Family Detached, Semi-Detached, Condo Apartments, Duplexes, Triplexes and Multiplexes up to 6 units; over 6 units, no tax applies
• Each condo unit is considered a single-family residence so the tax applies to each one

How is the Tax Calculated?

• Any property is taxed at a rate of 15% including any Land Transfer Tax associated with the property, ie. if the property is located in Toronto, you would pay tax on both provincial and municipal land transfer tax. 
• If ANY buyers are a foreign entity, 100% of the property will be taxed, ie. you can’t purchase a property with a Canadian citizen or permanent resident and avoid the tax. 

Who is Exempt from the Tax?

• Anyone confirmed under the Ontario Immigrant Nominee Program. If you can establish you’re a bonafide immigrant in theprogram or a student or WILL be a permanent resident in the next 4 years
• If you’re a refugee
• If you're a foreign national with a spouse who is already a Canadian citizen, permanent resident or a Nominee or a Refugee. 

 

STRESSED OUT!

Going into 2018, it is expected that the government will introduce new mortgage stress test rules. Under the new rules, people seeking a new mortgage will have to qualify at the bank posted rate, which would currently amount to about 5.25% for a 5 year rate; that's about 2% more than most lenders would currently require and amounts to about 6 rate hikes from the BoC. David Smith, a mortgage broker with Hanley Mortgage Brokers thinks this policy will effectively take buyers with the greatest stake in entering the real estate market out of the game. It will also likely negative influence anybody looking to make their next jump up to a larger property if they are already close to their mortgage maximum. In Toronto, this means any first time home buyers, likely entering the condo market, which is already under heavy stress for inventory.

Is this good policy or just the governments attempt at chastising banks and lenders? We love to know your thoughts. Either get in touch directly or leave a comment below!