New mortgage rules have been making the headlines recently, and we’ve had a lot of questions from past and future clients asking how these rules will change their home value and investments. Lets first look at what has changed, and then how this might impact your home’s value.
- Mortgage applicants will have to qualify at a higher rate. This month, the Mortgage Qualifying Rate (MQR) will be applied to ALL loan applicants - it used to be applied to only high-ratio loans. Even if the loan rate is 2.29% (current 5 year fixed rates), any Government insured mortgage will require that you qualify for the loan at a higher rate (currently 4.64%). This ensures that the applicant will be able to carry their mortgage in a higher interest rate environment. Effectively, this new rule will mean that the average applicant will qualify for a smaller mortgage amount than before, or will have a higher rate because they will need insurance that isn’t effectively backed by the Government.
- The Government will no longer insure low-ratio mortgages for refinancing, rental, properties over $1m, 35 year amortizations…the list goes on. Low ratio mortgages (those with 20% or more equity in their home) used to have more lenient rules than high ratio mortgages for obtaining portfolio insurance. Because these mortgages will not qualify for Government back-stopped portfolio insurance, the cost to insure these mortgages will increase. That cost will be passed on to the consumer as increased interest rates.
What do these changes mean to the average home buyer in Toronto? Well, for most purchasers, it will likely mean that they will either qualify for a smaller mortgage amount, be paying a higher mortgage interest rate, or both. Then again, there are many lenders today that will waive the additional interest rate and insure the mortgage themselves. If that stops tomorrow, would a potential buyer be discouraged from purchasing a home by a 2.59% versus a 2.39% mortgage? In my opinion, the difference is so small that the answer is no – on a $1 million mortgage, that would amount to an extra $100 per month. That isn’t a market-breaking change.
So, why are so many real estate insiders shouting so loudly about these changes? We believe that these changes are good and will help the market in the long term; they protect the consumer and the bank by qualifying at a higher rate, and protect the taxpayer by moving some of the risk of mortgage insurance away from the public purse. For our clients that actually live in their houses, we think that these are great changes. While fairly insignificant, they do help to put a bit of a break on a rampant market. A 20% rise in Toronto's real estate prices is unsustainable, and no market is immune to corrections. For our clients that invest in residential real estate, we’ve already spoken about this market and what the risks are. We're all for these changes, and believe they will lead to a healthier market in the long term.
The Economist Intelligence Unit has ranked Toronto as 4th Most Livable City in the world. "Most Livable' is defined as 'which locations around the world provide the best or the worst living conditions'.
Why does this matter? I was asked by a client the other day why he should choose to live in Toronto. His family was lucky enough to have a choice of cities to live in, as he had a technology business that could be run from pretty much anywhere in North America. His preference, at the beginning of the week, was for a home in Miami. After spending the week with im and his family, and reviewing communities, transportation, schools, safety, business, and a number of other factors, they decided to move to Toronto.
Those of us lucky enough to be living in Toronto often take our city for granted, hearing disruptive news in other cities but seldom counting our blessings for the city we live in.
We all want to leave a better world for our kids, and curbing emissions would be an obvious start. From the news, it seems like there are many options for having a so-called ‘green home’…what can we, as average home owners, do to protect the environment without breaking the bank? I spoke with several ‘green home’ builders, and at the end of the day, the easy answer comes down to common sense. Turn off the lights, insulate your home as best you can, and be reasonable with the thermostat. Having said that, there are new technologies that will *hopefully* change the way homes are being built and retro-fitted.
With all of the new solar and battery technology, lets start with the electrical side of things. Lighting has a much larger impact than most people would think, and is probably one of the easier starting points. Having just 30 halogen lights (60W) on for 6 hours a day can cost around $100 / month, and takes 330 kWh per month to run. LED lighting cuts those numbers by 75%, and some of the more recent designs look fantastic…a relatively easy place to start! To put these numbers in perspective, only A/C has a higher energy footprint (assuming you use natural gas for heating). Something to consider – one lightbulb, left on for one year and powered by a conventional coal fired generator, would cause the following pollution: 5 pounds of sulfur dioxide, 5.1 pounds of nitrogen oxide, and 1852 pounds of carbon dioxide. Yikes!!!
If we were building our dream home from scratch, or extensively renovating an existing home, we could incorporate solar power with a battery system. Ideally, we’d have a flat roof with a solar array. This solar array is connected to a battery bank, which, along with various bits of electronic magic, automatically switches your home from solar to battery to grid power, depending on the time of day and your energy needs. Obviously, the solar array will collect power and charge the batteries during the day when the sun is shining. Electricity is most expensive when the ‘grid’ demand is greatest, so we want to operate the house on solar electricity during the day and the stored battery energy into the evening. If your daily household consumption of electricity is greater than the amount collected by the solar array, you’ll use the cheaper evening electricity rates to supplement the battery charge. These systems don’t come cheap – the whole kit with installation costs about $40k. There are, however, leasing options that bring the cost of solar systems to ‘near zero’…that is, the solar installation would be marginally more expensive than the standard electrical installation. Here's an example.
Electricity rates in Ontario are going nowhere but up (increases of another 40% are talked about), and the cost of solar panels is predicted to fall by 50%. There will be a lot more interest in your home’s electricity in the coming years!
The May 2015 real estate numbers are in from the Toronto Real Estate Board, and we're not at all surprised to find that market conditions are tighter than ever this spring, particularly in high-demand market segments.
After several months of increases in both sales and prices, May saw a return to the pattern that drives price increases the most in the detached segment: a dip in sales for detached homes, driven in large part by a relative lack of listings. Fewer homes to purchase plus more buyers wanting to purchase equals a major price increase: detached homes in the GTA year-over-year were 14% more expensive on average than last May, with an almost 20% increase in the City of Toronto itself.
Other segments weren't left out, however. Every single market segment, including condos, saw a year-over-year increase: condos posted a very respectable 5.5% overall rise in average price for the GTA.
TREB Director of Market Analysis Jason Mercer puts it best: “Tight market conditions, especially for singles, semis and town homes in the GTA, have resulted in strong price growth regardless of the price metric being considered. With no relief so far on the listings front, expect similar rates of price growth as we move through the remainder of 2015. At this point, a number of months where listings growth outstrips sales growth would be required to satisfy pent-up demand."
There are lots and lots of reasons to move to Toronto, of course. Our city is full of life: it's cultured, educated, economically healthy, clean and bright, friendly, and downright fun to live in. We have some of the best urban green space in the world. And, as we discussed last month, Toronto is one of the top up-and-coming technological hubs in North America.
Did you know, though, that Toronto is also one of the most important centres for medical discovery in the world?Sure, it's comforting to know that if you get sick, "Hospital Row" downtown is right nearby. But College and University isn't just for patient care: it's also one of the world's biggest powerhouses of medical research. Here's what's happening there:
The Peter Gilgan Centre for Research and Learning has helped SickKids lead the global way in child health. With a brand-new 21-storey complex, the Gilgan Centre has given SickKids a learning environment for trainees and established doctors alike that is unparalleled. It contains state-of-the-art simulation environments for training fellows and students on new medical techniques, and is the home of AboutKidsHealth, an incredibly ambitious web-based public-education project that aims to bring the expertise of SickKids professionals to anyone who cares about child health.
Princess Margaret Hospital is leading the way to a cure for cancer. Princess Margaret announced in October that it is embarking on the largest expansion of research space in its history, as part of the hospital's $1 billion, 5-year campaign to support research into personalized cancer medicine. This type of cancer-fighting strategy is at the vanguard of cancer treatment: from using the patient's own genetic information to figure out which chemotherapy regimen works best, to cutting-edge treatments involving infusions of the patient's own lab-grown stem cells, Princess Margaret's project is one of the things that puts it in the top 5 cancer research centres in the world.
The University of Toronto is one of the world's top research universities for medical breakthroughs. Sure, "pablum" is now the word for something bland and boring, but don't let that fool you: the invention of Pablum freeze-dried complete baby food in the 1930s by University of Toronto scientists saved the lives of countless malnourished babies. And if you're diabetic, you probably owe your life to Banting and Best, U of T scientists who discovered that the administration of insulin can control diabetic symptoms and allow sufferers to live full, normal lives. More recently, U of T professor Tony Pawson discovered the mechanism by which cells communicate - including cancer cells - which allowed for the development of improved medications to treat certain types of cancer. And U of T nutrition professor David Jenkins created the glycemic index, which helps diabetics and people suffering from hypoglycemia to control their blood sugar levels.
Just another several reasons why Toronto is the best city in the world - and attracts the best scientific professionals in the world, too.
Hot Docs: April 23 - May 3, 2015
The annual Hot Docs film festival returns to Toronto to celebrate documentary films, with screenings of 210 films, showcasing work by established filmmakers and up-and-coming talent.
This year’s lineup of films include Mavis!, about the life and career of gospel singer Mavis Staples, Out To Win which follows LGBT pro athletes, Around the World in 50 Concerts, where the Dutch Royal Concertgebouw Orchestra travels the globe to play on six continents, and opening night film Tig, which follows comedian Tig Notaro over the course of a year as she balances her stand up career and a recent cancer diagnosis.
Canadian Music Week: May 1-10, 2015
Canada’s biggest new music festival brings together hundreds of bands at more than 60 venues across the city. This festival features a mix of new and experienced performers from around the country and the world including A Day as Wolves, Big Lonely, John Mellencamp, Kiesza, The Love Junkies, Billy Talent, Cloud Nothings, Daniel Lanois and Zoobombs.)
Much Ado about Nothing at the Tarragon Theatre: April 22 - May 31, 2015
Much Ado About Nothing is a play by William Shakespeare adapted and directed by Richard Rose with choreography by Nova Bhattacharya. Set in the predominantly South Asian city of Brampton, Ontario, the courtship of Beatrice and Benedick takes on local flavors and cultural ideals as it evolves from antipathy, to acquaintance, to love. Rose complements the 415-year-old text’s clever dialogue with fiery Bollywood and Bharata Natyam dancing to bring out the Bard’s elaborate use of gossip in this homegrown performance.
It wouldn't have seemed possible if we hadn't seen it ourselves, but the April numbers are in: the spring 2015 Toronto real estate market is hotter than it's ever been before, with a double-digit year-over-year increase in sales. We've never seen a market quite this competitive.
Sales were up 11% in total for March 2015, with new listings up by exactly half, or 5.5%. Again, we see the law of supply and demand at work: homes are being purchased more quickly than they're coming onto the market, leading to fierce competition among buyers - especially for the hottest properties in the hottest neighbourhoods, where over a dozen offers are sometimes registered - and stratospheric prices.
Obviously, this is a boon for sellers; however, buyers can rest assured that, at least for the foreseeable future, their investment will only continue to grow. Unlike Calgary, whose softening market is caused largely by a drop in oil prices, Toronto's economy is not only strong but stable and diversified.
Another factor to remember about the current market is the incredible growth of the luxury segment. Sales of homes over $2 million were up by 45% in the first quarter of 2015 as compared with the first quarter of 2014; this major increase suggests to us that money is flowing into Toronto, not out of it. If you're thinking of listing your luxury home, now could be the best time.
Now that the snow is melted and you can stand to leave your house without your Canada Goose jacket, everyone's thoughts turn to spring cleaning. When compared with the sunny, wide-open outdoors, our indoor spaces suddenly seem dark and cluttered with the detritus of the winter.
Spring cleaning takes on a different character, though, when you're readying your house for sale - or deciding whether or not to move. Here are our tips for spring cleaning with a view towards selling your home.
1. Be ruthless. We're big fans of Marie Kondo - or "KonMari" - and her mission to help people beautify their lives by tidying up. You can have a look at her website for more details of her method. The guiding principle of her work is this: "keep only the things that bring you joy."
Take this seriously. Go through your closet: if you have clothes that fit fine but you don't love, get rid of them. Take a safari through your basement storage room: if you haven't looked at stuff in years, toss it. Be truthful with yourself about what you own that doesn't add to your life and what you own that does, and keep only the things you love and that bring you joy. Your space won't just be less cluttered; it'll be happier, too.
2. Get the professionals in. Decluttering is only the beginning: under all that extraneous stuff, you're likely to find some dust bunnies. And even if you're a very tidy person, it's always nice to have everything cleaned at once, by people whose job it is to keep your space beautiful.
This is your opportunity to air out the curtains and rugs, move all the furniture and clean up, polish the silver, make small essential repairs like recaulking, and generally freshen your space. And our guess is that you're too busy to do all of it at once, which is why a professional is a good idea.
3. Stage your home. This is sometimes a fun exercise even if you're not necessarily planning to sell, but if you are, it's essential. A skilled home stager - and we work with several, and are happy to refer one - will make sure everything is perfectly situated to sell.
They'll put all the pillows in the right places (and bring extra matching ones if necessary); they'll match the rugs to the couches and even bring the perfect flowers to brighten up every room. One of a stager's most important jobs is to accessorize properly; even if you use your own furniture, they have a knack for putting the perfect piece of art or table centrepiece that will tie the whole room together.
1. It's a tech hub - and it just keeps getting techier.
Move over, Silicon Valley: you've got a northern competitor. Toronto is one of the world's fastest-growing technology hubs, with a thriving startup culture and major companies competing for office space downtown.
Tech giant and innovator Cisco, for instance, is building a $100 million innovation centre in Toronto to study and develop technology around the "internet of everything". And the city's Economic Development and Culture department released a report not long ago that indicated that 30% of the entire country's IT and technology business is located in Toronto. That's worth over $52billion annually. We're the biggest tech hub in the country - and one of the bigger ones in North America.
2. It offers an exceptional quality of life.
Let's face it: Toronto's just an incredible place to live. According to the Economist Intelligence Unit, in fact, it's the best place to live in the entire world. Toronto figures regularly in the top ten cities in the world to live in various city rankings all the time. It's a prosperous, beautiful economic centre that's nevertheless just a stone's throw - sometimes literally - from some of the best natural beauty Canada has to offer.
One of the surprising hallmarks of Toronto's quality of life? The city offers a lot for people at every stage of life and in almost every economic bracket. Unlike London, which is becoming more and more economically stratified (to the point where large sections of elite areas are becoming veritable "ghost towns" because of all the non-resident property owners), Toronto is a vibrant and diverse city full of residents who don't just want to own here, they want to live here, too.
3. It has a healthy economy.
UK Business Insider ranks Toronto as one of the Top 10 most Economically Powerful Cities Worldwide.
Speaking of economic diversity: this is one of the major reasons why Toronto isn't just a great place to live, but it's a great place to invest in real estate, too. Despite the constant headlines about rising property prices - and they are rising - incomes are rising, too. TREB Director of Market Analysis Jason Mercer has spoken many times about the fact that the average Toronto home continues to be affordable for many Toronto and GTA families, particularly as carrying costs are currently low due to low mortgage rates.
Another benefit to economic diversity? Homes across the price spectrum are selling. The most people who prosper, the more people can afford to purchase a home, and Toronto's strong economy has helped put home ownership within the reach of many buyers who would be priced out of the market in a city like London. So whether someone is purchasing a $200,000 studio condo or a $2 million detached family home, they are making an excellent investment in their life and their future.
Big news in Toronto real estate in February: according to TREB (and picked up by many of the major news outlets), the average price of a detached home in the city of Toronto topped the $1 million mark for February. This is a first in the history of the city, and it's reason to rejoice for homeowners.
One of the drivers of February's 7.8% average GTA price increase over February 2014, which includes the million-plus detached segment, has been a lack of supply of homes on the market. The year-over-year increase in transactions in February was even more marked than the price increase, at 11.3%: in short, buyers are hungry for homes and they are buying them for high prices.
“Even with the record low temperatures last month, we still saw an increase in the number of people purchasing homes in the GTA. This speaks to the importance households place on home ownership and the fact that buyers continue to view ownership housing as a quality long-term investment in which they can live,” said TREB president Paul Etherington.
Overall, the story is much the same as it's been the past several months: low supply and high demand makes for high prices. And the high demand has been driven by Toronto's status as one of the best cities in the world in which to live.
Side note - What I find really interesting is the continued divergence between single family home prices and other types of housing stock in both Toronto and Vancouver (more info from National Post here). As stated before, both cities have a lack of land that they can build detached houses on. This leads me to believe that a 'reversion to the mean' will have less effect on single family dwellings in these two cities than elsewhere. More on that in another post!
The mid-month numbers are in for February 2015 from the Toronto Real Estate Board, and it looks like everyone who called for an "early spring market" is right: despite the snowdrifts and freezing temperatures, the Toronto real estate market has never been hotter than it is now.
Three key things to notice this month:
The average selling price in the GTA is now over $600,000. The exact figure is $602,110, which represents an increase of more than 10% over the average price in mid-February 2014.
While home prices continue to rise, mortgage rates have fallen yet again. The Bank of Canada's surprise cut to the prime interest rate at the end of January, a move undertaken to foster economic growth, has had an accelerant effect on the Toronto real estate market. Banks have been racing to acquire new mortgage customers by offering rates for 5-year fixed mortgages at well under 3%. (If you need an excellent mortgage broker, we can help; just let us know.)
The imbalance between listings and sales continues to drive price growth. In the first half of February, sales increased by 14.9%, but listings increased by only 3.5%. This is yet another indicator of a sellers' market in which buyers are competing for comparatively few properties.
“With tight market conditions continuing to prevail in most parts of the Greater Toronto Area, especially where low-rise home types are concerned, it is no surprise that we continue to see strong competition between buyers leading to robust annual rates of price growth,” said Jason Mercer, TREB’s Director of Market Analysis.
It's an interesting feeling, isn't it? You've just dropped off your last child at university, you come home, and the house feels so... empty. Or maybe you're starting to have trouble with the stairs in your large home and you're looking for an alternative space where you don't have to deal with knee pain every time you want to get to the bedroom. Maybe you're hoping to turn one large home into two smaller ones: one in Toronto and one in Florida, or Muskoka, or the South of France.
The verdict is in: you need to downsize. Here are two things you should think about.
Think about how much space you really need - and about the layout of the space you're looking for. As we age, we often become less mobile and less able to navigate stairs; this is why condominiums and bungalows are very popular among downsizers. Even if you're still hale and hearty right now, if you're looking for a property into which you're planning to downsize on a long-term basis, remember to think long-term for your health as well. You'll also want to consider how the space is laid out in your new home: would you prefer an open-plan condominium with lots of openness but fewer noise barriers - especially if you have out-of-town children or other loved ones who come to stay occasionally? Or would you prefer the cozier, more private feel of separate rooms and narrower spaces?
Think about the amenities you need - both in the neighbourhood and in your space. If you're used to living in a large detached home, the lack of privacy afforded by condo living can be off-putting, and it can be tempting to choose a bungalow. Remember, though, that you'll be stuck clearing your sidewalk and hauling the trash to the curb if you're in your own place, and that condos usually come with amenities like party rooms, pools, gyms and spas that may make up for having very close-by neighbours. If you're an avid gardener, though, or you put a high priority on having your own outdoor space, a bungalow or townhome may be for you - or a condo with a large private terrace.
Ultimately, if you're looking to downsize, you'll want a good real estate agent to advise you, and to find you exactly the home you need. Give us a call any time if you'd like to discuss how we can help!
Nobody likes cleaning up after the party. Nobody likes being worried about about the tipsy guy breaking the chandelier. I think we'd all secretly like to start fresh...and the owners of this Glengrove Ave house have taken things to a whole other level. Like Xiang Yu at the Battle of Julu (207 BC), the bridges are burned and there's no going back with this one.
My one regret is not being able to post the pictures from the night before, but the artwork by itself is very impressive. One can't help but wonder when (and where) they got so good with a spray can...
Can't wait to see what the new house looks like!!!
Recently, the Globe and Mail asked an important question to homeowners in Toronto: why are we so obsessed with discussing real estate prices? Writer Leah McLaren has this to say:
Real estate is the new religion of the modern middle class. People act as if they can discuss it dispassionately and without judgment, when really most of us are incapable of doing so. That’s because the choices we make so thoroughly define us. Are you a cool, edgy, downtown superdad or the sort of mom who raises chickens for fun? Do you have a padded rec room or an illegal loft? SUV or zip car?
Where you live and what sort of place you live in brands every aspect of your outward life. It isn’t only a personal choice – it’s also about unchoosing a whole bunch of other stuff, much of which some of your good friends are probably going to great lengths to defend.
While McLaren links the current fad of discussing real estate in Toronto to personal beliefs and choices about what constitutes a good life, she also lays bare the fact that much of where people live comes down to "cold hard economics." And the economics are these:
In 2012, housing costs are 43% of household income for the average family, according to RBC. In 2012, the average price of a detached home in Toronto hit $800,000. For context, in the Leaside neighbourhood that was a 262% price increase from 1996 prices. And it doesn't show signs of stopping. This year, the average price of a detached home in Toronto hit $942,066.
What's happening inToronto is, in part, just one signal in a global trend. As more people move to find work in cities, housing close to the city is skyrocketing in price. But unlike in American cities, which often have a lower-income core surrounded by higher-income suburbs, Toronto's downtown and midtown are almost entirely either gentrified already or gentrifying.
It's in these areas, particularly those "hot neighbourhoods" that started the process of gentrification five or ten years ago - like the west side of Cedarvale, the Junction and even new up-and-comers like Mimico - where a lot of the discussion happens.
When people talk about home prices, they're talking about lots of different things. There's often a combination of incredulity and relief in these conversations, along with occasional jealousy: "I can't believe it sold for that much!" coupled with "I am so glad I didn't have to pay that much for my home!" coupled with "Can you believe what they got for that house?" We've always been interested in what the Joneses are doing while we're trying to keep up with them, and this is no different.
But when all of that is stripped away, people are really talking about where the economy intersects with their lives - which means talking about the future. Where we live shapes how we live - and so when we talk about house prices, what we're talking about most of all is how we live now and how we want to live in five years, ten or twenty, and the world we want to leave to our children.
A good real estate agent will be ready, willing, and able to discuss your finances and your future with you before you go on the hunt for a home. He or she should be able to cut through all the talk to what really matters: finding you, within your budget, a home that's what you want.