Susan MacLeod

Whats Up February 2018?

05 February 2018
Susan MacLeod

Whats happening in 2018!

In a Nut Shell:

  • The average selling price for 2017 as a whole was $822,681 – up 12.7 per cent compared to 2016
  • Detached homes– usually the most expensive properties, experienced the slowest growth as many buyers looked to less expensive options.
  • Condominiums experienced double-digit growth, as condos were the big sellers because of their affordability.

Much of the craziness in 2017 was brought about by government policy decisions. The Ontario Fair Housing Plan, which included a foreign buyer tax among other things had a noticeable psychological impact on the marketplace even though research showed that foreign home buying was not a major driver of sales in the GTA. Less than 5% were the latest available statistics. Government policy could continue to influence consumer behaviour, as changes to federal mortgage lending guidelines come into effect.This includes the stress test and mortgage rate increases discussed below. Read more.

In 2017, the Bank of Canada increased interest rates by 0.5%.

Some of the the big banks further increased their rates at the beginning of 2018.

There are good indications that there will be a few more, quarter-point interest rate hikes this year.

What do higher interest rates mean? Its hard to say for sure, but a toronto Start article doesn’t think it will change much. “The .25 per cent increase would mean an additional $52 a month or $624 per year on payments of a $400,000, 5-year variable rate loan amortized over 25 years, according to Ratehub Inc.

Tip :  If you’re thinking of buying, get pre-approved for a mortgage now.The rates will be going up so get yourself locked in at todays rate.

The Stress Test and What is does.

 

In October 2017, Canada’s bank regulator, announced changes for how Lenders qualify buyers. Effective January 1, 2018, the minimum qualifying rate will be equal to the greater of the Bank of Canada’s five-year benchmark rate (currently 4.89 per cent) or their contractual rate plus 2 percentage points. Depending on the bank, some Buyers who were granted firm mortgage approvals by December 31, were given an extensions until March to find a home.

What does that mean: Say you has 20% down, a fixed five year term and a 25 year amortization . Last year you could afford to buy a home for about $726,000.but this year,$570,000.

What will happen.

Buyers may be looking for less expensive homes.

Some may seek out secondary lenders who charge higher rates but don’t have the same stress test regulations.

We will see a more balanced market and more modest price increases in homes than we saw at the beginning of 2017.What was is it? 25% for the year before. Crazy! Some are prediction a more moderate increase in property values of 5% this year.We will have to wait and see. Read More

The fair housing plan in 2018

In 2017 the provincial government created a whole lot of changes to make it appear they were trying to slow down the Toronto real estate market. Long term this remains to be seen.There were rules effecting Landlords and Tenants, a Non Resident Speculation Tax and others rules aimed at various other areas of the construction side of things.

What was the immediate result of these changes?

Fewer rental units available: With the rent controls and other regulations imposed on Landlords, homeowners rethought those plans to rent out basement apartments and are keeping the space for themselves or family members, and many builders cancelled plans to build rental buildings.

In some cases, properties lingered longer than usual than previously and the massive price growth from the previous year became a modest price grown year over year.

Now What?

It turns out foreign Buyers were not having as big an effect on the market as initially suspected.

By the end of 1017 Buyers regained their confidence in the market and came back to Buy. This past January Buyers have really regained confidence and are taking advantage of those mortgage extensions I mentioned above. For now bidding wars are still happening. It actually a great time to sell. After March,Things may change when all Buyers will be subjected to the new Mortgage stress tests and rate increases.

Airbnb Rentals 

Newly-passed short-term rental accommodation rules begin on July 1, 2018, to deal with the influx of Airbnb rentals in the city.

• Torontonians will only be able to rent out their primary residence (vs second properties)

• Hosts can rent out three rooms of their occupied home for an unlimited number of days, or rent out their whole home for no more than 180 nights per year

• Secondary suites (i.e. basement apartments) can’t be rented out by owners (but can by tenants, which I don’t get)

• Hosts will pay the city a $50 annual fee

• Short-term booking agencies will pay a $5,000 license fee plus $1 a night per booking.

• New requirements for rules and policies about disruptive guests and noise

While fewer dedicated short-term rental properties may increase the supply of rentals, don’t expect this change to have much of an impact on rental prices in the city.

I would be very surprised if real estate is not one of the popular topics this year as there is an election coming. Along with more changes in order to make it look like something is being done. I expect interest rates to go up. Condos will still be super hot.The market will be more balanced with slower annual growth than we have seen over the last few years.But there will be growth.

Is real estate still a good investment .Yes

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