Market Updates

Government Moves To Slow The Toronto Housing Market

In an effort to slow down our very zippy local housing market the government has proposed some changes to how we buy or finance property here in Ontario.

As of mid April they are proposing the following:

1/ If you are a first time home buyer you will have to qualify for your first loan based on a 5 year fixed term rate. Currently mortgage companies qualify buyers on a 3 year fixed term. Once qualified you can then generally choose the term of your choice. Since there is not a huge difference between 3 and 5 year rates at this particular moment that will not be terribly painful for most folks. This is a very good thing. When rates rise it will help to ensure that more people will be able to handle a larger mortgage payment.

2/ For sellers doing take-out mortgages on their homes they will only be able to max out on a loan up to 90% of their home’s value. Very smart idea.

3/ The government is proposing a way to slow down speculators by requiring them to put down 20% on properties. They are apparently targeting the condo flipping market. This is the same group that got into trouble back in the 80′s when thousands of condo deals didn’t close when the gov’t came down with a speculation tax. This had a radical effect on the Toronto market. Most builders look for 20% down to hold a unit for the 2 to 3 years it takes to get a building up so this should only affect those with fairly dicey deals anyway.

They are stating that this will not affect actual investors who buy multi unit properties to invest in and hold. In other words professional landlords rather than speculativ flippers.

So it will be interesting to see how this shapes up in the next few weeks. Check back again soon for an update.

January Resale Housing Market Figures

TORONTO, February 3, 2010 — Greater Toronto REALTORS® reported 4,986 transactions
through the Multiple Listing Service (MLS®) in January 2010. This result represented a large
increase over the 2,670 sales in January 2009 when the home sales were in a recessionary
trough. Last month’s sales were slightly higher than the January average in the five years
preceding 2009.

“The GTA housing market has rebounded well from the lows in sales experienced at the
beginning of 2009. Sales climbed back to healthy levels across the GTA because the cost of
home ownership remained affordable in the Toronto area,” said TREB President Tom Lebour.
“Increasingly confident consumers moved to take advantage of affordable home ownership.”
The average home selling price in January 2010 climbed 19 per cent to $409,058, compared to
343,632 in the same month last year.

“Expect strong annual growth rates for existing home sales and average price through the first
quarter as we continue to make comparisons to the weak market conditions at the beginning of
2009,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. “The rate of sales and
price growth will be lower in the second half of 2010.”

Summary Of January Sales And Average Price

          January
                                                   2010                                    2009
                                                  Sales      AveragePrice    Sales            Average Price
City of Toronto(“416″)     1,973       $428,151          1,106           $364,416
Rest of GTA (“905″)         3,013       $396,556          1,564           $328,935
GTA                                      4,986       $409,058          2,670           $343,632

Source: Toronto Real Estate Board

Canadian House Prices What’s Real and What’s Not

Newspaper editorials have been overflowing lately with speculation on how rising rates may lead to a surge in mortgage defaults. In response to this issue, CIBC Economist Benjamin Tal released a report that took a closer look at the facts and determined history doesn’t support this premise. Below is a summary of Tal’s report.

House Prices – Some Overshooting
Over the past two years, the degree of volatility observed in the Canadian housing market has been unprecedented. Within this short timeframe, house prices fell by almost 13%, only to rebound by an impressive 21%.

Meanwhile, resale activity is now rising by close to 67% on a year-over-year basis after falling by close to 40% in 2008. Housing starts are presently 33% higher than in April 2009 despite dropping by more than 50% earlier in the recession.

In fact, no other segment of the economy has rebounded as fast as the housing market, making it one of the real surprises of this recession. This rapid uptick in housing activity, in the face of recessionary conditions elsewhere in the economy, raises concerns about its sustainability, and is causing some to wonder whether house prices are, in fact, rising too quickly given current economic fundamentals.

Tal estimates that the Canadian housing market as a whole is indeed beginning to overshoot its “fair value”. At just under $350,000, the current average price of a home is estimated to be roughly 7% over what would be consistent with current housing market fundamentals such as interest rates, income growth, rents and demographics.

But this modest overshooting is, far from uniform across the country. Those figures are skewed to western Canada, which has seen the most dramatic swings in house prices over the past 24 months. That market now appears to be overvalued by roughly 10-15%, suggesting that the imbalance in the rest of the country is much more modest.

Note, however, that overvaluation does not necessarily mean a bubble or a dramatic price correction.

Given that the current overvaluation is occurring in a context of historically low interest rates, what we are most likely witnessing is a temporary period of exuberance that is “borrowing” activity from the future, as households take advantage of lower rates and accelerate their borrowing and home purchasing activities.

To the extent that current activity is simply a redistribution of sales from the future to the present, the housing market of tomorrow may be in store for a more muted level of activity. Housing starts will also catch up with the sudden spurt in demand, with the increase in supply helping to moderate price trends. Rather than plunging, house prices are more likely to stagnate in coming years (or fall modestly in the most overheated markets) as fundamentals catch up with a market that has gotten ahead of itself.

Tax Tips For 2010

With the rush of the holiday season and New Year’s celebrations now over, many Canadians are turning their attentions to their taxes. Following are some useful tips to help simplify your 2009 tax filing process and get the most out of future returns.

While the 2009 tax filing deadline is months away, January is often the best time of year for
Canadians to evaluate their overall tax strategies, especially as time will run out to realize a variety of tax-saving opportunities early this year.

Advice for homeowners and prospective homebuyers

In 2009, significant tax changes were introduced in the federal budget to benefit homeowners, prospective homeowners and even homeowners who renovated their home, cottage or condo. These include: changes made to the RRSP Home Buyers’ Plan; eligibility for the new non-refundable First-Time Home Buyer’s Tax Credit; and the Home Renovation Tax Credit (HRTC).

A $5,000 increase to the RRSP Home Buyers’ Plan means that first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

The First-Time Home Buyer’s Tax Credit includes a $750 tax credit for first-time homebuyers to help with closing costs, such as legal fees, disbursements and land transfer taxes.

And if you’ve been thinking about doing some home renovations, keep in mind that the 15% HRTC of up to $1,350 only applies to eligible home renovation expenses undertaken before February 1st, 2010.

RRSP Contributions

A Registered Retirement Savings Plan (RRSP) continues to be one of the best tax shelters available to the average taxpayer.

Eligible RRSP contributions are deducted directly from income reported on your tax return.
This means that you save taxes at your marginal rate, which may be up to 50%, depending on your income level and province of residence. In addition to the initial tax savings when the contributions are deducted, all income earned inside the RRSP accumulates tax-free until the money is withdrawn.

Remember that you have 60 days after the calendar year to make a contribution that qualifies for a tax deduction for that year.

RESP Contributions

Registered Education Savings Plans (RRSPs) allow people to save for the post-secondary education of children or grandchildren on a tax sheltered basis while reducing taxable income. There are, of course, other advantages to RESPs. With an RESP contribution of $2,500 per child, the federal government will contribute $500 in the form of the Canada Education Savings Grant to the RESP. If a client has prior non-contributory years, the annual grant can be as much as $1,000 in respect of a $5,000 contribution.

Do You Have a TFSA?
With the introduction of Tax-Free Savings Accounts (TFSAs) on January 1st, 2009, 26 million Canadians aged 18 and older received $5,000 in tax-free contribution room from the federal government. On January 1st, 2010, an additional $5,000 in tax-free contribution room was added to each account. Now is an excellent time to discuss your options for making the most of this new contribution room.

Remember that it’s important to review your overall tax-planning strategy with a professional to ensure you’re making the most of any opportunities available to you, especially as a result of new savings and investment vehicles, credits and policy changes that came into effect for the first time in 2009.

Canada’s Recession Finally Ends

Canada’s Recession Officially Ends

As the third quarter’s GDP numbers come in, they show an official end to the recession.  Although the positive 0.4 percent growth is less than the 1-2 percent expected, it is nonetheless a positive sign. In terms of unemployment and GDP decline, this recession was less severe than those of the early ‘80s and ‘90s. The less-than-expected growth also signals that this may very well be a slow recovery and, like many of the other countries emerging from recessions, Canada is not fully out of the woods.

The concerns largely remain unchanged–unemployment and the still high currency value. A strong Canadian currency makes spending domestic dollars abroad or on imports more enticing because they are now cheaper, but it also sends the economic benefit of that purchase abroad rather than keeping it at home. It also makes Canadian goods more expensive for other countries to import, and this is a major component of Canada’s economy. A concern that has more recently cropped up is that the cheap and readily available credit could be creating asset bubbles in gold, housing, and some other financial products.

The strength of the domestic economy has “saved the day.” Because the credit problems that plagued many other major nations were not largely seen in Canada, it has allowed it to take advantage of the low interest rates in ways that other countries could not. This has helped stir a rapid and dramatic recovery in the housing market and will likely have a spillover effect, as the new homeowners purchase new items for their homes and complete renovations. It has also helped spur a surge in personal and in business investment not seen since 1997. 

Source: Canada.com

This Month In Real Estate

Housing Market Activity in Canada

Home Sales

Sales activity reached the highest level ever for the month of October. National resale housing activity had a record-breaking month with 45,818 units trading hands. This is up 45 percent compared to October 2008 and 74 percent above the decade low reached in January. Low interest rates, coupled with upbeat consumer confidence, continue to release pent-up demand from last year and early this year, boosting national sales activity.

Average Home Price

The national average home price reached new heights in October, rising 21 percent to $341,079 from the same month last year. A sustained increase in sales activity, including a sharp rebound in Canada’s priciest markets, continues to draw the national average home price upward.

Inventory

Sales-to-Listings Ratio

The number of new listings coming onto the market in October declined from year-ago levels for the tenth consecutive month. New listings fell 15 percent from October 2008 but inched up on a month-over-month basis to 65,148 units. According to CREA Chief Economist Gregory Klump, “New listings are still expected to rise in the coming months in response to headline average price increases.” Nationally, there were 4.1 months of inventory in October. The sales-to-listings ratio was 70 percent, signaling a stronger seller’s market.

Mortgage Rates

Average for: 25-Year Amortization, 5-Year Term

A recently released study from the Canadian Association of Accredited Mortgage Professionals shows Canadians are benefiting from the lower interest rates. The average mortgage rate negotiated in the past year was 4.55 percent, down from 5.41 percent a year ago. In October, the 5-year conventional mortgage rate edged down to 5.59 percent, 1.61 percent lower than this time last year.

2009 Real Estate Results for Canada

This month came with more encouraging news, tempered by a cautious air of concern. Canada has officially emerged from the recession and the housing market is hot. A survey showed the sentiment of senior accounting executives on the economy rose sharply in the third quarter. However, consumers remain cautious amid concerns over employment and the strong Loonie. 

Due to a stronger currency, Canadians have been able to more easily afford luxury imports, vacations, or properties abroad – the National Hockey League has even benefited. The strong Loonie helped spur the highest operating profits for several Canadian NHL teams in more than a decade. One team’s president said, “There are always two absolutes: Winning is good, and it’s always better when the Canadian dollar is stronger.”

The Bank of Canada has not indicated any intention to discontinue its conditional commitment to hold key interest rates steady until the end of the second quarter of 2010. However, there is concern that the low interest rates could potentially spur financial bubbles.

Canada, like most other countries emerging from a recession, is seeing several positive signs, but should expect recovery to come in small steps. This is especially true as Canada depends on strong demand from other countries to import its goods.

Cooling Down The Housing Market

Ottawa now wants to cool down the hot housing market which lead the way out of our current recession.
Ottawa makes the claim that prices have increased buy 20% in 2009 and this is too much.
Here is reality.  Between April 2009 and April/May 2009 housing prices dropped by 15%.
In 2009 they picked the 15% back up & went up another 5%.  
5% is a pretty normal amount of increase in a year for house price to rise.
So the question is was there truly a 20% gain or is this just Ottawa trying to control things again.

I am sure that with the gov’t announcment of course this will create another rush in the market as first time buyers scramble to get in. So who are they trying to kid.  The same thing happened when they announced the Toronto land transfer tax everyone rushed into the market to make a purchase quickly and avoid it.

So Flaherty wants to increase the amount of downpayment required to purchase a home, thereby cutting a large percentage of first time home buyers out of the market.  What most people don’t realize is that the first time home buyer market is about 65-70% of the total market.  If these folks get cut out of the market the move up market cannot move either and the whole housing market goes into stagnation. First time home buyers drive our market in Toronto and the GTA.

However, the government does have a legitimate concern.  Over the past 35 years the average interest rate for a mortgage on a home has been in the 10-11% range.  What should happen if rates were to double from their current status.  Mortgage payments upon renewal would also double. Could these first time home buyers afford that.

The government does not want to see us in a situation like the one south of the border with a large number of folks losing their homes because they can’t make the payments. Interest rates will rise and probably in the coming year.  So it is a double edged sword.  The gov’t will have to very carefully dance around this one or they could generate disaster in the market.  The housing market makes up a large percentage of our economic engine.

Some suggestions are to raise the downpayment required, knocking many folks out of the market.
Shortening the amortization period from a maximum of 35 years to 25 years, this could be a very good solution as it forces people to build equity in their homes faster.
One thing for sure is that when interest rates start to rise the housing market will slow down radically.

We will have to wait and see what happens.

November Update

Greetings, I hope you have  enjoyed  the bit of good November weather we have been having.

Looks like we are in for the rainy season now.

A quick Toronto Real Estate Update and some Important Info About the HST and How It Affects You.

Because Rates are still very low we are having a stronger than expected market with 5 year rates below 4% with prime just over 2%.

In fact in the first half of November the volume of sales is up 84% over the same time last year.  As you probably remember,

we were having a bit of market exhaustion and a cyclical slump.

If you are considering selling you will want to Click here to view “This Month in Real Estate”.

Our companies real estate update and insight into what makes for a very saleable property.

This is a robust sellers market so if you are buying, do your research, put in logical offers and be patient because the market will change.

Many folks feel that they cannot afford to buy in this type of market and that all homes sell for more than asking price.  This is just not true.

About 12 % go over asking that leaves about 98% that don’t.  For a little insight on how to buy in this market  Read this article  about Ugly Betty and Some Toronto Homes. You can also contact me Direct at (647)886-1550 or if you would like to talk about taking advantage of all this confusion because there are great opportunities available.

Or Click here  to have new listings sent to you daily.

Click Here   to see our November E-Newsletter with some tips on avoiding holiday risks,  and some great videos on Fire safety & appliance makeover.

And finally, something very important to us all Taxes

If you want to understand better the effect the HST will have on us.  Go to my blog at  HST and Your Taxes  and you will begin to get the picture.  Pretty soon taxes here in Canada will be much on the same scale as Great Britain, where people are loaded with debt and can barely pay their bills. Does that start to sound familiar.

In the next couple of months I will be conducting my 90 minute workshop on Four Steps to Debt Irradication.  I will keep you informed of the date.

The Canadian Real Estate Association has requested that I forward this to you and ask you to please take action.

Subject: Stop the HST – Cost of buying, owning and selling a home to go up by 8%

Earlier this week, the Government of Ontario formally launched its latest assault on homeowners, purchasers and sellers with the introduction of legislation to harmonize the provincial sales tax and goods and services tax.

Homebuyers and sellers will pay 8 per cent more on legal fees, appraisals, real estate commissions, home inspection fees, and moving costs, adding about $1,500 in new taxes to the average residential real estate transaction in Ontario.

For homeowners the HST will also add hundreds of dollars in additional tax on utility bills (gas, electricity and home heating fuel), on home renovation labour, the cost of lawn upkeep or landscaping and the cost of snow removal.

Please help Ontario REALTORS® fight this tax. In less than 30 seconds you can send an email to your MPP asking them to vote against sales tax harmonization legislation, by clicking here: http://bit.ly/stopthehst. 

When you get to this page after reading the letter just scroll down to the bottom of the page.

When you fill in the blanks it automatically generates your name and info into the letter.

You can send it by e-mail or by snail mail.

Or you could choose to do both.  I did.

 E-mail is expedient but snail mail is much more effective, just envision the pile of letters on your MPS table rather than you e-mail in his spam box.

Yes you have to care enough to get out an envelope and buy a stamp.

But given the amount of taxes we will be paying shortly that should be a minor issue.

Best Wishes until next month.

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