July 3, 2017

Market Slowdown, First-Time Home Buyers Waiting and Montreal Market Heats Up: June 2017 Real Estate News Recap

A Slowdown Downtown

Toronto’s hot housing market seems to have cooled off for the first time in years. Total home sales in the Toronto area dropped 25.3 per cent from April to May, and average prices were down by 7 per cent in May compared to April.

Year-over-year, overall Toronto sales were down 20.3 per cent, with Toronto detached home sales dropping 26.3 per cent and Toronto townhouse sales decreasing 18.1 per cent.

Much of the slowdown is being attributed to the Ontario government’s Fair Housing plan. The government proposals were intentionally designed to slow things down and included a 15 per cent tax on non-resident foreign buyers. Vancouver introduced a similar tax last year that had an immediate slowing effect, but the market seems to have bounced back with a 23 per cent increases in sales from April to May.

Meanwhile, Montreal Moves In

With provincial governments implementing (or proposing) strategies to cool the red hot housing markets in and around Vancouver and Toronto, Montreal seems to have picked up the mantel as Canada’s hottest market. Total sales in May 2017 jumped 15 per cent over the previous May, the highest year-over-year increase since 2008.

Still, the average price of a home in Montreal was $368,558 in May, a steal compared to Toronto ($863,910) and Vancouver ($1,110,376).

First-Timers Holding Off

An Ipsos survey conducted in May for the Toronto Real Estate Board (TREB) suggested that first-time buyers may be holding off on buying in light of the sudden slowdown in Toronto’s real estate market.

“It makes sense that some first-time buyers have decided to at least temporarily put their decision to purchase a home on hold. First-time buyers are more flexible, and can take a wait and see approach. They can also re-enter the market quickly once they make the decision to purchase,” says Jason Mercer, TREB’s Director of Market Analysis.

Reality Bites

The Toronto Region Board of Trade commissioned a survey of young professionals (18–39-years-old) and found a disconnect between their aspirations and reality. Four out of five people (81 per cent) who planned on buying within the next year said they don’t want to live in a condo, slightly more than half (51 per cent) hoped to buy a detached home, and 69 per cent saying they want a house with at least three bedrooms. But the vast majority (83 per cent) of all housing units built in the city in the past five years have been condos.

A survey by HSBC Bank found that more than one-third (37 per cent) of millennial-aged buyers had used “the bank of Mom and Dad” to help finance their first purchase. Still, with the average price of a detached home in the city topping $1.5-million in May, all but a few will likely have to alter their dreams.

Food Fight

Homeowners and homebuyers should face a dent in their disposal income this year, with food prices projected to rise significantly. In a mid-year update of Canada’s Food Price Report prepared by Dalhousie University, researchers found that overall food prices will rise 3 to 4 per cent by the end of the year. But devout carnivores should take note that meat prices are expected to rise by 7 to 9 per cent by the end of the year.

Salad lovers shouldn’t gloat though. The report called lettuce “this year’s cauliflower” with heavy rains in California damaging lettuce crops, causing prices to spike, similar to peak cauliflower pricing in 2016.

High Mortgages But Low Default Rates

A CMHC report, “Homeowners’ Debt at a Glance” found that while Canadians continue to have potentially worrying levels of debt (collectively we owe $211-billion on some three-million home equity lines of credit), mortgage delinquency rates remain low, even in the Toronto and Vancouver markets. Average delinquency rates across the country are on average about 0.35 per cent.

Cottage Country Getting Pricey

If you’re in the market for a cottage, you’re going to have to save up. According to Royal LePage’s annual Canadian Recreational Housing Report released in June, the average Canadian cottage goes for $439,000. But those numbers are dragged up by hot recreational markets in the Vancouver and Toronto regions. The average price of a cottage in B.C. is $595,100, with the highest prices ($2.1-million for lakefront property) in the Okanagan Valley, about five hours east of Vancouver.

The average price for recreational property in Ontario is $413,000, with lakefront property in the Muskokas topping out at $1.5-million on average. Contrast that with New Brunswick where the average cottage price is $179,500, the lowest in the country.

Not surprisingly, cottage buyers tend to be in the older demographics with 36–51-years-old making up 60 per cent of buyers and baby boomers (52 to 70) accounting for the rest.

Got $22-million to Spare? How about $63-million?

For a mere $22-million you could own a 17,000-sq.ft. mansion sitting on an acre of land on 10 Highland Ave., in Toronto’s Rosedale neighbourhood. As of writing this piece, that made it the most expensive listing in the city.

Of course out on the left coast, Vancouver real estate prices make that seem like chump change. A 22,000-sq.ft. home on 1.28 acres in the equally tony Point Grey area just went on the market for $63-million, a record in a city of record-breaking prices.