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2016, Great Year for Sellers.
Stats from the Toronto Real Estate Board continue to show strong growth in sales and property values. In 2016 the average home value in the GTA rose by 20%. That amount includes all home types and the whole of the GTA, when we break it down the amounts show a bit of a different story. In the 416 area detached home values increased by 23.7%, yet by 25.1% in the 905 areas (see Graph 1.1 and 1.2 for average prices and percentage change). The increase in home values do differ, sometimes largely, and to provide a bit of a better understanding of the 905 areas, I have provided some stats in regards to values and year over year price change for Ajax, Mississauga and Vaughan shown in Graphs 1.3 and 1.4.
As for condos this 2016 was one of the strongest in recent years influenced by the fact that low rise home costs are so high, buyers are being pushed out of the low rise home market and turning to condos as an option to get into the housing market as a sound investment and a place to call their own. The high cost of owning a home is not only affecting the buyers market it is also impacting the rental market which has also gained ground.
In the last quarter the rental cost of a bachelor apartment increased by 12%, one bed apartments by 7.4% and 2 bed by 8% over the same quarter in 2015. The largest increase in rental cost was for 3 bed apartments which amounted to an incredible 15.9% over 2015, from $2,833 to $3,283. These stats are only including properties listed and leased with the Toronto Real Estate Board, any private leasing transactions is, for obvious reasons, not tracked by the system. Please note that a by-law implemented by the Harris government allows landlords of properties built after '91 to raise rents without any regard for the rent control rate.
The lack of supply continues to be the strongest factor in encouraging this hot real estate market. To this account, December 2016 had the lowest number of new listings posted since the turn of the millennium, according to TREB data. Other factors at play exacerbating the sellers market are, low interest rates, increased immigration and other factors... In the TREB year in review package you can find further information regarding the 2016 GTA housing market, including the commercial market, a panel discussion regarding the unequivocal link between housing supply and affordability, what to expect in 2017 and much more.
TREB year in Review 2017.
*Data source: Toronto Real Estate Board*
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Graph 1.1 - 2016 Year over Year Sold Price change by percentage
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Graph 1.2 - 2016 Average Sold Price by Home Type
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Graph 1.3 - 2016 Average Sold Price by Home Type
(Ajax, Mississauga, Vaughan)
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Graph 1.4 - 2016 Year over Year Sold Price change by percentage
(Ajax, Mississauga, Vaughan)
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New Year, New Perspective!
Wondering what your home is worth in today's market... Even in a sellers' market over-pricing can be a death penalty to any home. If you are looking for an evaluation that is honest and not clouded by commission vision, click the button and contact me!
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HOW ABOUT
BUYERS?
It looks like things are not easing up for those looking to buy.
Home prices are projected to increase by 10-16% in 2017 according to the Toronto Real Estate Board Market Year in Review and Outlook Report. As mentioned in my "2016, Great Year for Sellers" column, many first time buyers are looking to condos to get into the market and if the projection of 10-16% increase comes to fruition; the buyers of 2017 will be very happy homeowners in 2018. According to a Ipsos Home Buyer survey of the GTA, 28% of those polled are likely or very likely to buy in 2017. This indicates that although prices are very high, would be buyers are still looking to home ownership as a sound investment for the future. Will you be one?
28% polled are likely or very likely to buy in 2017.
Where do they plan on spending there dollars and what type of home are they interested in purchasing, in 2017?
Answers are in the Ipsos Home Buyer Survey, which I have graphed below
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PURCHASE PROCESS;
EMOTIONAL
ROLLER COASTER
The search and purchase process is an emotional roller coaster. In this seller's market the search process more often than not is an experience with more than one multiple offer situation. These offer situations have you in a stomach knotting, head spinning, spur of the moment decision, home inspection reviewing, process. It's not uncommon to see a home listed today, you look at it tomorrow, and a pre-emptive or "bully" offer appears and your agent is notified as you are walking through the home, or just before your visit. Now your pushed into trying to decide right at that moment if this is a house you want to compete on. Your agent scrambles to get comparables, so that you are well informed and to help you make the best decision on what to pay. However, they also tell you that if one of the other buyers have become emotionally attached to the property or are in an urgent situation the value might sky rocket and there is no way to know by how much. "What is the top you are willing to pay for this property?" that's the last question before you make the decision as to what your offer will be. Some buyers give up, others having the financial ability RISE to the occasion. You may have already been rejected from 2 or 3, at times even 7 offer situations. What about when you are the top offer and its been accepted by the seller? Well, it is not off target to say that most buyers, get a sinking feeling, that they may have overpaid. Shortly after, the relief that you have finally entered the ever escaping real estate market, the thought that you don't have to compete anymore for that seemingly perfect home(which of course is subjective), and you realise you have a place to call your own, whether its your first or your next, settles in!
Once you have been in the business and dealt with enough clients you realise that as difficult and jarring as this market is, every buyer if kept on course, by a realtor, whom knows exactly what they are looking for and why, ends up in the right home at the right time.
This is why, being open and honest, when dealing with your realtor is of utmost importance. This will ensure you receive proper guidance in your search and purchase process. Its also important to remember that your wants and needs, as well as location, amenities and home types might change as you see the properties in person and what is currently available at your price point, eg. a neighbourhood that you knew was dangerous when you were a teen or young adult may no longer be considered as such, or it may actually have pockets of homes that feel and are safer than expected.
Also, it is important to keep in mind that Photography can distort the perception of a property, in an overly positive or at times (when not using proper equipment) negative way...
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FIRST STEPS TO BUYING
If you are looking to buy in the near future, between now and 6 months, its a good idea to start with an appointment and conversation with a mortgage broker or consultant. Once, you have done that and you have a better idea as to what you will be permitted to borrow, the next step is to contact your chosen realtor and have an open conversation as to what you are looking for and expecting out of the search process. They should provide you with some information about the process and place you on an automated search, so that you can begin to get an idea as to what you can get for your budget. Most importantly they will be able to keep you up to date on what homes are actually selling for. Since we are in the time of the low listing price strategy to gain maximum exposure and multiple offer situation, the sold price will give a more accurate depiction of home prices. This is something you will never find on the public realtor.ca website and can only be provided to you by a realtor.
For first time home buyers or home buyers that will not have a large down payment please see the info about the new mortgage lending rule called the "stress test" implemented in October 2016
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NEW STRESS TEST for mortgage lending
In October of 2016 a new mortgage lending rule publicly coined the "stress test" was introduced. This stress test is designed to protect buyers that give less than 20% down payment on a home. In the event that interest rates increase, buyers would still be able to manage their mortgage costs when the renewal occured if payments were to increase due to the rate increase. The current stress test rate posted by the Bank of Canada is 4.64%. Generally, this means that most first time buyers will be approved for $100,000 less than previously calculated on the actual interest rate, currently ranging from 2.49% - 2.96% (RBC posted fixed mortgage rates as of Feb 6, 2017).
If you have any questions regarding the changes and how this may affect you, consider contacting your preferred lending authority. If you don't currently have one, I can provide some contacts to you, just click the button below to send me a message or text me
416-452-0984
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