December 15, 2017
A Buyer for the Royal Love Nest, BC Bans Unfair Rent Hikes, and Canadians Get Net Worth Boost: Weekly Real Estate News Recap
Rising Home Prices Are Making Canadians Richer: Stats Can
Canadian households are enjoying greater net worth, up almost 15 per cent over the past four years to a median of $295,100 – and rising home values are the main driver of that increased wealth, reports Statistics Canada.
According to its Survey of Financial Security, which collects info on Canadian household assets, debts, and income, families who list a principal residence among their assets have seen a considerable boost.
To determine net worth, Statistics Canada calculated how much money the median household would be left with should they sell off all assets and pay off all debts; for most households housing is simultaneously the greatest of both.
According to the data, 61.7 per cent of households reported having a principal residence as an asset, with 57.3 per cent also carrying a mortgage, and a median net worth of $349,000 – a 10 per cent increase from 2012, and doubled that of 1999.
Unsurprisingly, there’s a direct correlation between which provinces and cities have the highest net worth and regional home prices; Vancouver, which has the most expensive real estate in Canada, had the highest net worth at $434,400. That’s followed by Toronto ($365,100), Calgary ($339,400), Quebec City ($335,100), Winnipeg ($287,800), Edmonton ($230,200), and Montreal ($170,000).
Experts Surprised by High Level of November Construction
Toronto’s resale market may be in the midst of a correction, but condo construction is still going gangbusters – in fact, so many units broke ground in November, they pushed the national number of starts above a decade-long record, reports the Canada Mortgage and Housing Corporation (CMHC).
A total of 226,270 units were started last month, 9,628 more than in October, the national housing corporation states. Urban multiples account for 175,016, an increase of 16.9 per cent.
Condos continue to lead the market as the detached segment remains in too-expensive territory says CMHC Chief Economist Bob Dugan.
“The trend in housing starts reached its highest level in almost 10 years this November, reflecting a second consecutive increase in multiple starts. This largely reflects construction of multiple units in Toronto, where evidence of overbuilding is low due to the decreasing inventory of completed and unabsorbed multiple units and strong demand,” he says.
However, the flood of units are also due to two years-worth of brisk pre-construction sales that are only now coming to fruition.
States the report, “Given escalating house prices of single-detached homes, more home buyers continued to shift demand towards lower priced condominium apartments and townhomes. Higher sales of pre-construction condominium units in the past two years will continue to break ground throughout this year resulting in more condominium apartment starts.”
The surge was a surprise to housing analysts, who had forecasted a downturn to 213,000 units, rather than an increase.
Geographic Rent Hikes Now Banned in BC
A new rental policy was enacted this week by the BC NDP provincial government to close a loophole in the rental act that some landlords had used to hike rents higher than the allowed annual limit of 4 per cent.
Geographic rent increases – when a landlord greatly increases rent to match others in a specific neighbourhood or area – are now banned under the new rules.
Stated Vancouver-West End MLA Chandra Hebert, “Renters have been threatened with huge rent hikes under the existing rules – that’s a scary situation for renters.”
She added she has worked since 2008 to ban the practice and improve housing security for renters in the province.
Said Andrew Sakamoto, executive director of Tenant Resource and Advising Centre, to Daily Hive, “The Tenant Resource & Advisory Centre has too often seen landlords use the threat of excessive geographic rent increases to bully tenants into lesser but still significant increases that exceed the annual allowable percentage — 4 per cent for 2018. Faced with the prospect of a 50-per cent geographic rent increase, disadvantaged tenants often consent to a 30-per cent increase out of fear.”
As well, new restrictions have been placed on rent increases made between fixed-rate tenancies with the same tenant, as well as limits for fixed-rate tenancies with vacate clauses.
Don’t Get Used to Hot November Sales: CREA
Strong November sales activity – an unusual occurrence in the typically slower late autumn and winter housing markets – won’t last into the new year as new mortgage rules will effectively cool the market, reports the Canadian Real Estate Association.
CREA reports month-over-month sales are up 3.9 per cent from October, and 2.6 per cent higher than last year – the fourth consecutive month to see growth, and the first year-over-year gains recorded since March. Two thirds of sales can be attributed to an unseasonably hot Toronto market, CREA reveals, where regional sales jumped 16 per cent.
The MLS Home Price Index rose 9.3 per cent from 2016, while the average sale price increased 2.9 per cent to $504,000. Excluding Toronto and Vancouver would strip out over $120,000, to $381,000.
However, that won’t be the case once Guideline B20 rules take effect on January 1st. The new rules, which require all new mortgage applicants to be stress tested, are expected to knock 20 per cent out of the typical home buyer’s budget.
As a result, CREA has updated its forecast for the end of this year and next – it calls for sales to decline by 4 per cent to 513,900 units in 2017 (mostly concentrated in Ontario) with prices to grow 4.2 per cent to $510,400.
They then expect sales to decline 5.3 per cent to 486,600 in 2018 – 8,500 fewer units than previously forecasted for the year – and prices to fall 1.4 per cent to $503,100. This will partly be due to fewer higher-priced homes, such as detached houses, changing hands in markets like Toronto than was seen during the 2016 market peak.
CREA expects the second half of 2018 will be busier than the first, as buyers who have rushed in before the B-20 implementation will cause a “pull forward” effect.
“… With some home buyers likely advancing their purchase decision before the new rules come into effect next year, the ‘pull-forward’ of these sales may come at the expense of sales in the first half of 2018,” CREA states.
A separate study conducted by Royal Le Page’s House Price Composite took a more optimistic approach, calling for a price increase of 4.9 per cent to $661,919 by the end of 2018, “in the face of a series of measures aimed at affordability challenges in Greater Vancouver and the Greater Toronto Area.”
While the brokerage says a “large number of existing homeowners potentially failing the test when refinancing next year” will slow demand in the first half of 2018, tight supply in Canada’s largest markets will continue to drive prices higher, rather than improve affordability.
Buyer Confirmed for Meghan Markle’s Toronto Home
The former home of Meghan Markle, star of TV show Suits, humanitarian, former Reitman’s spokesperson – and oh, yeah, latest royal fiancée – officially has a buyer, according to a reports.
The two-storey, three-bedroom maroon-clapboard detached, which was rented by Ms. Markle while filming on location in Toronto, is located in the city’s upscale Seaton Village neighbourhood; it was listed last week for $1.395 million, with offers accepted on Wednesday.
While listing agent Alex Bearegard says he can’t divulge the final sales price until the funds are deposited, he confirmed the home had received multiple offers and received extraordinary attention, with over 150 viewers attending the open house. However, he tells the Canadian Press, many of these were “looky loo” royal fans who were more interested in snooping through the princely love nest rather than putting in a serious offer.
While Seaton Village real estate is nothing to sneer at – comparable solds are regularly in the $1.5 – $2-million range – Ms. Markle has seriously upgraded, taking up residence on the grounds of Kensington Palace with everyone’s favourite royal redhead, Prince Harry.
Toronto Neighbourhood Fights Against Rising Rents with Land Purchase Plan
The Parkdale Neighbourhood Land Trust is taking the fight against gentrification into its own hands, starting a crowdfunding campaign to raise money for the purchase of residential property it will use as affordable housing.
The trust aims to raise $50,000 by April 1st, to be combined with a $486,000 provincial grant, to put toward a down payment on a multi-unit building; six are currently under consideration, each with 15 – 36 units.
The purchase is part of efforts to keep rents low for Parkdale residents. The neighbourhood, which is considered one of the last enclaves of low-income housing in Toronto, has been the at the centre of increased scrutiny on the city’s rental market affordability. Earlier in the year, a group of local tenants staged a rent strike in protest of unsustainable lease renewal or between-tenant hikes, while a new condo development at one of its most prolific intersections has been met with intense backlash.
A study conducted this summer by the land trust identified 59 buildings considered at risk for profit flipping, including reverting boarding houses back into single-family homes, or higher-end rentals.
Joshua Brandt, executive director of the land trust, told Metro News that the goal is to prevent existing residents from being priced out by new development and buyer demand.
“The city is becoming more and more unaffordable, so we need models like this to keep our neighbourhoods inclusive, affordable, and vibrant,” he said.