From the Desk of Faisal - Real Estate News for the Week of Oct 29th - Nov 4th
Welcome to Properties Ontario’s weekly update. Our team goes through numerous articles and summarize them for you! Please do not hesitate to contact me if there are any topics you would like to discuss further. If you have any questions about buying, selling, or leasing residential or commercial space, we’re the team for you. For current listings in the marketplace, check out our website www.propertiesontario.com
GTA Commercial Sales Declines
According to Urbanation, commercial real estate sales were down 30% to $4.7 billion for the third quarter. In addition, the number of $2 million and above transactions sits at 320 which is 23% lower than this period last year. Office buildings dropped the most, falling 58% to $879 million during Q3 2018. The average sale price of an office was at $285/Sq. Ft. while industrial properties averaged $144/Sq. Ft. Retail average sale price for Q3 2018 was at $278/Sq. Ft. Total value of apartment development sites for sale fell 63% year over year to $315 million and low-density residential land declined 66% to $281 million. Rental building apartments doubled in sale value to reach $1.1 billion on 30 transactions and sold for $271,000 per suite. The average cap rate was 3.13% in Q3 but ranged between 3.25-4.09 among the five largest transactions. House lots reached their highest quarterly sale value at $189 million with an average price per lot of $257,000. When comparing with 2017, you must be mindful that the economy was firing on all cylinders. To have these declines in sales is expected during credit tightening times. Investing in the right commercial property involves plenty of due diligence, something that we offer to our clients.
Canadians Total Debt Figures
As of end of September, Canadians owe $1.53 trillion in mortgages. This represents a 0.21% increase monthly and a 3.4% annual increase. The 3.4% annual growth is the slowest since June 2001 but once again, this is expected during credit tightening. The new mortgage rules which are stricter were expected to lower the debt of Canadians. Debt is still growing but at a much slower rate than we have seen in the last couple of decades.
Florida Takeover by Canadians
After the state of Florida reviewed its home purchases so far in 2018, it found out that Canadians make up of 22% of all foreign buyers in the state. This outpaced all European nations which were 18% of all foreign buyers and Asian countries which were 11%. Most foreign home buyers, not surprisingly due to Florida’s proximity, are from the Caribbean and Latin America which was 36%. About 67% of foreign home buyers paid all cash for the property and approximately 71% bought for vacation or rental purposes. Across all foreign buyers, 53% preferred townhomes or condos while 43% purchased single-detached homes, 3% purchased residential land and 3% other types of property.
Insured Mortgages Fall Annually
A residential buyer must have their mortgage insured if they are paying less than 20% on their down payment for their property. This insurance is done through Canada Mortgage and Housing Corporation (CMHC) which is a crown corporation and sometimes through a private insurer such as Genworth. A large part of these buyers are first-time homebuyers who may not be able to enter the market with 20% or more equity. The value of insured mortgages fell 2.61% quarterly and 8.52% annually at the end of Q2 2018. This is the largest drop, even beating out an 8.04% annual decline attained during Q2 2009. Buyer’s have less affordability so we greatly encourage them to buy smart and around their budget.
Condo Market Quarterly Update
The average selling price of new condominiums during Q3 2018 was $745 / Sq. Ft. This is a 11% annual increase from Q3 2017. For units that didn’t sell, the average price per square foot was $972. For condo resales, the average price was $690 / Sq. Ft. which represents an annual increase of 6.5%. This determines that the average price of a resale condo is $577,000 based on the average square footage of 837 square feet. New condo sales were up 4% to 4,738 units in Q3 2018 which is the highest it has been in the last 10 years. Year to date sales of new condos is at 14,055 but this is down 46% from the record of 25,839 units during the same period last year. Resale condo sales gained for the first time since Q1 2017 by 2% to 5,253 units. Construction had started on 8,150 new condos in Q3 2018 which makes the total number of condos under construction to 67,581 in 236 buildings. All these projects under construction had an average of 95% pre-sold when calculating the inventory. Currently, low supply and stabilized demand are causing upward pressures on price, however interest rates and further increases in inventory will cause downward pressure on prices. The upward pressure is still strong so expect price appreciation in the coming months in the condo market.
Conference Board of Canada Wage Report
According to a report released by the Conference Board of Canada, wages are forecasted to increase 2.6% year over year in 2019. The forecast for 2018 was 2.4%. Those working in food, beverage, and tobacco products industry will lead the gains at 3% while oil, gas, and technology industry is second at 2.9%. Unfortunately, those in the health sector will see a below average increase of 1.6% year over year. Saskatchewan will lead the gains with an average gain of 2.9%, followed by Quebec (2.7%), BC/Alberta/Atlantic (2.6%), Ontario (2.5%) and then Manitoba (2.3%).
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US Home Sales Update for Q3 2018
A combination of low inventory and strong demand has put upward pressures in the largest metro centres in the US. The National Association of Realtors (NAR) state the national median price of a single-family home went up 4.8% annually to $266,900. During the second quarter the median price had gone up 4.9% annually. Of the 178 metro centres, 166 of them saw price gains during the third quarter. There was a 2.6% decrease in existing home sales moving the seasonally adjusted annual rate to 5.273 million, down from 5.413 million from the quarter before. NAR claims there is enough inventory of high-end homes but medium to low end homes are currently facing a shortage, causing prices to rise.
Young Families Home Buying Survey
A survey of 1,743 young families in Vancouver, Calgary, Toronto, and Montreal was done by Mustel Group and Sotheby’s International Realty Canada. Some key findings included that 8 out of 10 young, urban families prefer single-family homes if money wasn’t an object. It also revealed that 43% of families who already own a property that isn’t a single-family detached home have given up on trying to find one. Another 18% plan on buying in the future within the city centre while 21% said they would prefer buying outside of the city centre. More than half of the families paid less than $500,000 for their main residence and the property was under 2,000 square feet. While 82% of families believed they made some compromises in their purchase, 93% thought they were somewhat or very satisfied with the decision they made. This survey shows that the condo mentality is not as strong amongst younger buyers. Nevertheless, with affordability being a key issue, some of these families have no choice but to purchase a condo, townhome, or semi.