November 10, 2017
Toronto’s Large Condo Shortage, Vancouver’s Empty Homes Tax, and Ontario Condo Disputes Go Online: Weekly Real Estate News Recap
Toronto Condo Bedrooms Come Up Short: Study
As house prices continue to rise in the Greater Toronto Area, buyers are increasingly turning to condos as their market entry point and are living the highrise lifestyle for longer, rather than buying detached homes as their families expand. The problem, a new study finds, is that existing and pending condo stock doesn’t accommodate this growing need.
Just 41 per cent of the 105,000 condos currently in development will have two or more bedrooms, according to a report from Ryerson City Building Institute and Urbanation. Titled “Bedrooms in the Sky – Is Toronto Building the Right Condo Supply?”, it says a combination of rising home prices and a surge of demand from both up- and down-sizers will put intense pressure on the need for larger condo units. In total, there are currently 321,500 units in the GTA.
“Millennials are growing up. Today, renting and living in studios and one-bedroom condos may suit them just fine, but over the next five to ten years, they will be looking to upsize to more family friendly housing with an emphasis on larger two-and-three bedroom apartments given the affordability situation,” the report reads.
It says that the population of those in the age bracket between 35 to 44 is poised to swell to 207,000 by 2026 as millennials age. Meanwhile, the number of seniors will rapidly expand to 484,000 and that “in many cases they will be looking for similar housing options that young families struggling to afford will also want.”
However, the affordability gap between condo and house ownership is the main culprit behind overcrowded condo demand; it now costs $600,000 more purchase a detached home than a condo unit at October’s average prices of $1,134,000 and $511,000, respectively. That’s tripled since 2007. And, as a Toronto three-bedroom unit now sells for an average of $918,000, condo dwellers who wish to stay within city limits still lack affordable move-up options.
“This increasing demand for family-sized units means that young families will have to “drive to qualify” for any type of unit, not just detached housing,” says the report. “This may also contribute to pressure on green field lands and urban sprawl to accommodate outward building of family-friendly housing—unless we can find ways to build more affordable missing-middle housing units.”
Vancouver Empty Homes Tax Now in Force
The Empty Homes Tax (EHT) proposed and passed in Metro Vancouver last autumn is now in force, and the city is taking an aggressive approach to ensure homeowners come clean about their home’s occupancy status.
Homeowners have until February 2 to disclose whether their property is classified as empty, by self-declaring either by mail or online. Those who don’t will automatically be subject to the tax, which is a whopping 1 per cent of the property’s total value, plus a $250 fine. Those who falsely declare their home’s status will be charged an additional $10,000 fine. The city will create a team to randomly sample homeowners to enforce the new rules.
The tax applies to any property that is not a principal residence and remains unoccupied for at least six months of the year. It also applies to rental housing that remains untenanted for that period of time. However, there are a few exceptions including those who reside in Vancouver for up to 180 days for work purposes, owners and tenants receiving medical care, deceased owners, property titles that are transferred during the year, or if the property is receiving major renovations or redevelopment.
The EHT is intended to improve rental supply in Vancouver, which has a historically low vacancy rate of 0.7 per cent. Mayor Gregor Robertson says that by returning vacant properties to rental stock, that rate could be improved to as much as 3.5 per cent. It’s estimated 20,000 to 25,000 Vancouver homes could fit the tax criteria.
“Almost all homeowners in Vancouver will not be affected by the empty homes tax,” he told reporters, “but we know there are thousands sitting empty right now.”
“As long as it’s low as it is right now, we need to do everything we can to get rental housing available for people who live and work in Vancouver.”
A similar empty homes tax could also be a reality for Toronto, with the municipality empowered to implement one as part of the Ontario government’s Fair Housing Plan.
Montreal Sales Sizzle in October
While still a steal compared to Toronto and Vancouver’s real estate markets, Montreal housing continues to heat up, with October breaking an eight-year sales record.
Sales were up 7 per cent annually last month with 3,270 changing hands, reports the Greater Montreal Real Estate Board. The average price also rose across all home types, to $367,512 in the Greater Montreal area and $462,516 on the Island of Montreal.
Homes are also selling at a rate that’s two weeks faster than last year, lingering on the market for an average of 78 days, says GMREB President Mathieu Cousineau. “The single-family home and plex (structures with two to five units) markets are becoming increasingly favourable to sellers, as selling times for these property categories are falling,” he stated in a release.
He adds that the condo market, while leading growth in sales at 13 per cent, is also balanced, with units selling in 103 days – 17 fewer year over year, at an average price of $255,000. It’s the sixth consecutive month that multi-family housing sales increased by more than 10 per cent.
Single-family home prices rose 5 per cent to an average of $320,000, with plexes up 5 per cent to an average of $482,500.
New Ontario Condo Tribunal Now Online
The Condominium Authority Tribunal (CAT), a new online entity designed to streamline the condo owner dispute process and make it more affordable, is now up and running as part of the Protecting Condominium Owners Act (COA) that went into effect on November 1.
Rather than force owners to engage in an often pricey and arduous court or mediation battle, the online tribunal offers a three-phase escalation system, with direct access to mediators and adjudicators starting at $25. While it currently only handles issues relating to condo records, its services are anticipated to expand in the future.
Said COA Chair Tom Wright in an interview with the Toronto Star, “Typically these dispute would require someone taking the matter to the courts, often a costly and lengthy avenue. Sometimes a mediator would be brought in, but that would require the agreement of all parties and, again, it could be costly. The fact that a condo corporation would have to pay means the owners are footing the bill.”
In addition to the new dispute tribunal, the COA also ushered in a slew of new regulations to better protect Ontario’s 1.6 million condo residents, such as mandated training for new board members and managers, processes for meeting notices, voting procedures, reserve funds, as well as disclosures for awarded vendor contracts.
New Home Construction Remains Steady in October
The pace of new home construction starts picked up again last month after experiencing a downturn in September, reports the Canada Mortgage and Housing Corporation. The Crown Agency reveals ground was broken on 216,770 new units in October, compared to 215,153 the month prior.
“The trend in housing starts essentially held steady in October following a decrease in September,” said Bob Dugan, CMHC’s chief economist. “Nevertheless, new home construction remains very strong in 2017 as the seasonally adjusted number of starts has been above 200,000 units in nine of ten months of the year.”
In Toronto, where the resale market has slowed considerably since the summer months, new construction remains robust but has softened slightly, which the CMHC attributes to the timing of preconstruction sales.
“Total housing starts in the CMA trended lower in October 2017, with the most pronounced declines occurring in single-detached home and apartment starts,” the October report states. “Lower trending single-detached home starts are reflective of fewer sales of pre-construction units through 2016 and spring of 2017. Sales of pre-construction condominium apartment units have been brisk over the past couple of years and these units continue to start construction with varying levels of intensity each month.”