Welcome to Properties Ontario’s weekly update. Our team goes through numerous articles and create summaries for you! Please do not hesitate to contact me if there are any topics you would like to discuss further or if you have a general question about buying, selling, or leasing residential or commercial space. For current listings in the marketplace, check out our website www.propertiesontario.com
New Technology that may Disrupt the Mortgage Industry
A firm by the name of Viva Network has introduced a new technology platform that allows consumers to exchange private mortgages. Investors will have the ability to invest fractional shares which will be used for consumer mortgages. Borrowers who obtain a mortgage through this platform would also make their payments through it. The platform uses tokenized debt securities that is basically blockchain technology for its transactions.
Fewer Bankruptcies Across Canada
According to the Office of Superintendent of Bankruptcy Canada, there were 8.3% fewer bankruptcies across Canada in June 2018 when compared to the month before. When compared to June 2017, it indicates a 1% reduction in applications for bankruptcies. If you were to break this down, there are 0.8% less consumers and 10.2% less businesses. For the 12-month period, consumer defaults fell by 0.5% and businesses defaults fell 3.8% when compared to the previous 12 months.
Affordability Issue Still Here
National Bank’s Affordability Monitor, a quarterly report, shows the monthly mortgage payment as a percentage of income. For quarter 2 of 2018, the index went up 0.2%. It had gone up 1.2% the previous quarter. The benchmark mortgage rate set by the Bank of Canada went up 0.14 points while median household rose 0.9% (3.6% annualised). Condo affordability worsened more than non-condo units nation-wide. For the City of Toronto, a homebuyer would need to save for 111 months at a saving rate of 10% to afford a down payment on an average home ($897,747). They would require an income of $160,577. Also for Toronto, condo units require 45 months saving with a rate of 10% on a down payment for a $512,223 condo. In this scenario a homebuyer requires an income of $91,620.
High Debt Levels for Canadians
Canadians set a record for outstanding mortgage credit at institutional lenders. The current outstanding mortgage amount is $1.52 trillion as of July 2018. This is $54.22 billion higher from June 2017 or 3.68% increase. If you factor in inflation, the real growth is 0.68%. This growth as been at its lowest since July 2001. We will likely slow down more as interest rates continue their climb. MNP conducted a survey where they found 44% of Canadians are anxious they will not be able to service all living and family expenses in the next 12 months without incurring further debt. It is crucial clients budget themselves honestly to avoid putting themselves in a debt cycle.
TREB August 2018 Statistics
All percentages in brackets are a comparison from August 2017. Benchmark price is a seasonally adjusted price, while median and average show the dollar flow. These are used together along with other tools to determine a value of a home.
GTA Statistics for August 2018
- Benchmark price: $764,800 (up 1.45%)
- Median price: $659,900 (up 4.79%)
- Average price: $765,270 (up 4.50%)
- Sales: 6,839 (up 7.85%)
- New Listings: 12,166 (up 5.58%)
- Active Listings: 17,864 (up 8.8%)
- Sales to New Listings: 56.21% (balanced market, closer to sellers than buyers)
- Months of Inventory: 2.61 months if no new listings came on the market
Toronto Statistics for August 2018
- Benchmark price: $838,200 (up 6.07%)
- Median price: $637,500 (up 9.16%)
- Average price: $785,223 (up 8.05%)
- Sales: 2,441 (up 1.57%)
- New Listings: 3,752 (up 4.13%)
- Active Listings: 4,808 (up 1.37%)
- Sales to New Listings: 65.06% (seller’s market)
- Months of Inventory: 1.97 months if no new listings came on the market
Overall this shows that the suburbs are starting to pick up while Toronto is moderating.
Reasons Why Canadian Demand is so High
Numerous economists attempt to quantify the price increases in real estate. In terms of Canada, we have determined prices will continue to rise due to immigration, Baby Boomers, and peak millennials. Firstly, the government aims to bring in 310,000 to 340,000 people each year until 2020. This means that 1 in 5 Canadians are foreign born. Secondly, Baby Boomers (aged 53 to 72) are the largest group of homebuyers (and sellers). They aim to retire in 5 to 10 years, so they will look to either down-size, help their children purchase, or buy a recreational home. Lastly, millennials who are now old enough will enter the market. A resounding 87% believe homeownership is a smart investment. Furthermore, 35% currently own a home and 69% hope to own a home in the next 5 years. When looking at price per square foot, Toronto and Vancouver are still cheaper than other global cities such as Mexico City, Sydney, San Francisco, Stockholm, Vienna, Seoul, Paris, New York, Rome, Singapore, Tokyo, London, Beijing, and Hong Kong.