Susan MacLeod

November/December Market Update and Financing Changes

13 December 2016
Susan MacLeod

The new mortgage rules have been in place for a few weeks now and they have pretty much everyone scratching their head trying to figure it all out. The reality is that it will take a few months for the dust to settle…

In the middle of all this uncertainty the Toronto market is still red hot! 

65% of houses sold over-asking in central Toronto in November

The average house sold for 104.1% of the asking price in central Toronto

Prices across Toronto increased 23% in November vs last year (that’s $144,000 more in November 2016 than November 2015).

Townhouses were on fire, increasing 24% year-over-year. 

Click here:  To see what your condo or house is worth depending on where you live.This is a great little tool for an overview

…..In the meantime, if you are planning on buying a home, talk to a mortgage broker early in the process. If you have bought already, we recommend you make a return trip  to the bank to make sure everything is still in order. Right now it is hard to determine if the measures put in place are designed to slow the Toronto real estate market or serve as a precautionary approach to protect the bank’s exposure to higher debt levels. Our thinking is that overly stringent lending practices saved our collective Canadian bacon during the US housing meltdown of 2008 so this round of mortgage rule changes, although painful at first, will go a long way towards a healthier housing market. It’s been a crazy month, between all of the government intervention and another jaw dropping Toronto November market. In case you’ve missed it. Here is what has been happening……………

  • New qualification rules for Buyers with less than 20% down payments and  who are insured by CMHC. (Yikes! Buyers have essentially  lost 25% of their purchasing power)

  • The removal of the capital gains tax exemption for non-resident Buyers.

  • Across-the-board interest rate hikes by all of the major banks.

  • Rental financing is night-and-day different from 4 years ago when you could buy an investment property with nothing down and get the best interest rates in the market. To mortgage a small ( one-to-four unit, non-owner occupied) rental property, you now need to put down 30%, and even then, you don’t always get the lowest rate.

  • Increased interest rates for people looking to refinance (Nov 30/2016)

  • Something new. Banks are now offering varied interest rates based on a Buyer’s circumstances; interest rates might now vary based on the size of the downpayment, the purpose of the purchase (personal use vs investment), credit scores, type of property and employment type.

  • New funding rules for lenders that have resulted in the exit or near-exit of a number of providers from the mortgage business.

  • New CRA reporting rules for the primary residence capital gains exemption.

Currently, any financial gain from selling your primary residence is tax-free and does not have to be reported as income. As of this tax year, the capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency (or you can be fined.)

The changes are happening so fast that no one seems to know if people who signed agreements prior to the announcement on January 1st are affected or not.

                                                             ….and now Some good news!! For First Time Buyers !!

The provincial government announced an additional $2,000 rebate for first-time Buyers in Ontario, bringing the total available rebate to $4,000. First-time Buyers won’t pay any Ontario land transfer tax on the first $368,000 of purchase. In Toronto, we still have to pay the Toronto Land Transfer Tax, and there’s a rebate for first-timers on part of that too.

The rate of Ontario land transfer tax paid on properties over $2 million will increase from 2 to 2.5% for the amount over $2 million.

These changes to land transfer tax take effect January 1, 2017.

Last year at this time, many buyers decided to sit out the market over most of December only to pay the price in the new year. Losing out on multiple offers takes its toll (it’s called buyer fatigue) but our advice is to keep up the pressure until the new year... chances are you will be happy you did. Last year prices shot up by double digits and have kept that pace all year long. While there are fewer homes on the market, the ones that are available could have negotiating room. Meanwhile, the condo market continues to thrive as frustrated home buyers consider the condo alternative. The condo market has continued the crazy upswing it’s been on for the last few months. Bidding wars are now the norm in condos (even in some buildings that were struggling to sell just last year). Condo prices up 15% year-over-year.  

illustration is courtesy of Gify.com

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