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
RBC Economics Research
RBC released its aggregate housing affordability metric as a part of its economics research. This figure was at 53.9 in the 2nd quarter of 2018. This is based on household income required to cover ownership costs which include taxes and mortgage payments. This metric is up 43.2% from three years ago, 2.6% higher from last year or 1.1% quarterly increase. The affordability issue is still at the forefront of the real estate market. However, we do not encourage clients to buy simply because they fear missing out on a certain property. Market fundamentals are strong, but they cannot support these prices for much longer. If you are to make a purchase, ensure all research has been done for recent sales in the past few years.
Home Equity Line of Credit Statistics
Canadian Mortgage and Housing Corporation (CMHC) discovered that an average of 66.3% of HELOC borrowers have drawn on their line of credit across Canada. CMHC used data provided by Equifax. The average balance is $64,534 across Canada. In Ontario the average balance is $60,884 with 64.6% of HELOC tapped into. This measure includes tapped and untapped home equity line of credits. If we look at just tapped HELOC, the average balance is $97,347 while Ontario has an average of $94,198.
Swiss Bank UBS Claims Toronto and Vancouver Housing Bubble
UBS, a major Swiss bank with international reach completed its annual study of the housing market around the world. The study looks at salaries, home and rental prices, mortgage debt, and several other elements. Toronto scored 1.95 while Vancouver was at 1.92. According to UBS, anything above 1.5 means the housing market is vulnerable and into the bubble territory. The price analysis stated that Canadian real estate is valued 56% higher than it should be, placing Canada as the 3rd most overvalued nation behind Australia and New Zealand. Residents in Toronto would need six years of salary to buy a home at the average price point. For investors the outlook is not looking so pretty either. Investors would need 25 years of rental activity to make up for the cost of the asset. Real estate cycles are a crucial part of the economy so an eventual downturn was always a possibility. How soon it will come is the million (or trillion) dollar answer. Smart purchasing and investing is a service we provide so our buyers are able to weather whatever storm comes their way.
CMHC Long-Term Outlook is Strong
The Canadian Mortgage and Housing Corporation did a stress test on it self and found out that they pass it even with rates being at 7%. They have also prepared for long periods of low oil prices, trade wars, cyber attacks, and many other unlikely scenarios. If Canada undergoes a correction, CMHC is positioned to overcome it even at its most extreme.
Affordability Issue Not Entirely up to Builders
According to a case study done by Dunpar Homes, the affordability issue is not just created by the builder’s increased building costs. An even bigger factor is the taxation builders face from all levels of government. Development charges have risen 85% over the last few years. A 1,950 square foot townhome with three bedrooms would sell for $1 million. The builder receives $44,100 in profit after income taxes while the municipal, provincial, and federal government receive $258,540 in taxes. A 600 square foot one bedroom condo selling for $500,000 produces $17,640 in profit after income taxes. Meanwhile the government collects $110,748 in taxes. Understandably, these costs can get passed down to the consumers.
September 2018 Housing Market Update
- GTA September 2018 Statistics (September 2017 comparison in brackets)
- Benchmark Price: $765,400 (+2.02%)
- Median Price: $670,000 (+4.6%)
- Average Price: $796,786 (+2.87%)
- Sales: 6,455 (+1.91%)
- New Listings: 15,920 (-3.33%)
- Sales to New Listings Ratio: 40.55 (buyer’s market)
- Inventory: 20,089 (+5.61%)
- Months of Inventory: 3.11 if no new listings came on the market
- Toronto September 2018 Statistics (September 2017 comparison in brackets)
- Benchmark Price: $841,700 (+6.74%)
- Median Price: $660,000 (+5.6%)
- Average Price: $864,275 (+6.81%)
- Sales: 2,468 (+1.08%)
- New Listings: 5,456 (-4.81%)
- Sales to New Listings Ratio: 45.23 (balanced, slightly towards buyer’s market)
- Inventory: 5,830 (+1.7%)
- Months of Inventory: 2.36 if no new listings came on the market
Canadian Debt Levels Growth is Slowing
Canadians owed $1.526 trillion in debt at the end of August. This was up $4.22 billion from a month before but $53.14 billion higher when compared to a year ago. The growth of 3.6% makes this the 6th consecutive month of deceleration. Many banks and economists are expecting two more rate hikes in the next few months. This will further slow down credit and spending. Client’s are encouraged to save and budget themselves in order to cover their debt servicing during an economic slowdown.
Greater Montreal Area Market is Hot
The Greater Montreal Real Estate Board reported 3,220 sales in September 2018 which is 8% higher than September 2017. This is also a nine-year high for the month of September. The Montreal market has now had sale increases for 43 consecutive months. Areas that led the gains were South Shore, Laval and Island of Montreal. Condo sales jumped 23% to 1,206 while plexes gained 1% to (349). There was no change in the single detached (1,660) market. Median prices increased 7% for single family homes to $336,000. For plexes the median price increased 6% to $504,040. Lastly, condo median prices increased 4% to $263,000. During the month of September, there were 21,227 active listings which is 17% lower than last Septembe