Toronto Real Estate Blog

Eagerly awaited, the Victoria Lofts at 152 Annette Street will be a 38-unit conversion of an historic turn-of-the-century church and Sunday school to authentic Toronto lofts.

This Saturday is an exclusive broker preview – all the more important as there are only 9 units left starting at $319,900. Email laurin@jeffreyteam.com or phone 416-388-1960 to arrange with us for your appointment.

A true west Toronto landmark, the church is located on Annette Street at Medland Street in the residential neighbourhood of High Park. Victoria Lofts is close to shops, great restaurants, schools and a library, within walking distance of High Park, the Bloor subway line and the Bloor West shopping district.

The transformation will preserve and maintain the integrity of this elegant building. The soaring ceilings and original architectural detailing will combine with contemporary design to create these one-of-a-kind loft residences.

This is your rare opportunity to live in a unique space that blends historic elegance and modern design in a central Toronto urban neighbourhood.

Residences are one and two stories, ranging from approximately 600 to 1,800 square feet. Most of the units will have private outdoor space and parking is also available.

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Contact the Jeffrey Team for more information – 416-388-1960

Engine behind the country’s housing boom has been increasingly leveraged first-time buyers

By Tavia Grant – Globe and Mail

Canada may not have the sizable subprime market of the U.S., but the engine behind the country’s real estate boom has been increasingly leveraged first-time buyers.

Legions of first-timers are adding years of extra mortgage payments so they can buy a house, or putting little or no money into a down payment, a recent survey revealed yesterday. Nearly two-thirds of buyers in major centres now favour extended amortization periods of up to 40 years, while putting little or no money down was prevalent in 38% of regional markets surveyed across Canada.

The country’s real estate industry has played down any similarities to the U.S. when it comes to subprime borrowers. But as new segments of the Canadian population enter the market, the findings raise questions about what’s been driving soaring house prices in recent years.

“The reason we think the real estate market has been staying hotter much longer than anyone anticipated was because of these newer amortization mortgages,” said Craig Alexander at Toronto-Dominion Bank.

“Because it really does change the affordability equation,” Mr. Alexander said.

Canada’s real estate market has for years defied predictions of a slowdown. From 2002 to 2007, average real estate prices rose at about 10% a year nationally, Mr. Alexander figures. A willingness to buy now and pay later explains much of the recent heat. Longer amortization mortgages “have had a very profound impact on the Canadian real estate market since they were introduced” in 2006, he added.

Buying a house has become increasingly accessible. The flip side, though, is that more home buyers are now susceptible should the real estate or labour markets weaken, or if interest rates change direction.

“We’re more vulnerable than we were in the past, and I think that’s just a factor of financial and mortgage innovation,” said Adrienne Warren at Bank of Nova Scotia. “At the same time, it’s a trade-off – more people are getting into home ownership earlier.”

Like other economists, she doesn’t see a major downturn in Canada’s real estate market. “I don’t think there’s a huge risk here… these are new products and we don’t have a track record yet, but I wouldn’t be surprised if you see people paying down their debt far sooner than these 40-year amortization would suggest.”

New home buyers are subject to the same credit criteria as any other buyer, she adds, a key factor that differentiates Canadian mortgage lending from U.S.-style subprime loans. It is this new type of financing that is driving the market.

“Innovative financing has become key to home ownership in today’s environment,” yesterday’s report said. “Entry-level purchasers are adjusting their expectations by sacrificing size, location, and even long-term financial freedom to overcome challenges such as rising prices and serious supply issues.”

Policy changes help explain why so many people have been entering the market. Ottawa extended the maximum amortization period to up to 40 years from 25 years in 2006. In the same year, Canada Mortgage and Housing Corp. began providing insurance to lenders for interest-only mortgages.

Mr. Alexander figures that as many as 70% of first-time buyers are opting for longer amortizations. “It’s a double-edged sword. It brings down your monthly payments. But it will actually double the amount of interest you pay over the lifetime of the loan.”

The result is that people could pay tens of thousands more for their home when they could be saving for retirement or paying for their children’s education, an independent financial adviser said. “I don’t approve of it at all,” said John DeGoey of Burgeonvest Securities in Toronto. “There are very, very few people who make the payments work in 40 years who could not, with a modest alteration of their lifestyle, make the payments in 25 years.” Instead, many people are setting themselves back “massively” by still paying mortgages in the last 15 years of their working life.

“It’s not just the young people and the first-time buyers that are coming to the banks asking for it. It might very well be the banks actively trying to foist it upon the first-time buyers,” he added.

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Contact the Jeffrey Team for more information – 416-388-1960

By Lori McLeod – Globe and Mail

The biggest housing boom in more than 50 years appears to be out of steam as sales tumbled in all major cities this winter and listings surged in Western Canada.

Sales of existing homes cooled in almost all major markets – including Toronto, Calgary and Vancouver – in the first quarter of 2008, according to figures released yesterday by the Canadian Real Estate Association.

At the same time, a glut of sellers entered the markets in the West, sending new listings to their highest level on record.

The first-quarter data prompted one prominent Bay Street economist to declare the end of the most robust housing cycle of the post war era.

“Canada’s six-year real estate boom is officially over. Aside from a few choice prairie locales, sales are melting faster than this year’s snowpack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said in a research note.

In the first three months of the year, 75,467 resale units changed hands, a 13% drop from the first quarter of 2007, according to CREA.

Sales fell 18.7% in March from a year earlier, the largest year-to-year decline in unadjusted home sales since January, 1998, when activity dropped 28% from the year before. These figures have not been seasonally adjusted.

In contrast to the weakening sales, new listings soared to a record 154,217 units in the January-March period.

Nasty winter weather in cities, including the country’s largest real estate market, Toronto, almost certainly hurt sales in the first three months, Mr. Porter said in an interview. However double-digit declines in “more markets than you can shake a stick at” suggest a trend with deeper roots, he said.

What will go down as a “real estate boom for the history books” actually started nearly 10 years ago, according to a recent presentation by Adrienne Warren, senior economist at the Bank of Nova Scotia.

It’s a cycle that has blasted past expectations in both its length and scope, leaving almost no Canadian market untouched and fuelled by everything from soaring demand in Vancouver to Newfoundland’s offshore oil sector.

Underpinned by strong economic conditions, including historically low unemployment and interest rates, average inflation-adjusted home prices have soared by 65% in the period from 1998 to 2007. This easily tops the 32% to 56% appreciation of the past three housing booms of the 1960s, 1970s and 1980s, each of which lasted for five or six years.

On a seasonally adjusted basis, existing home sales in Canada’s major markets in the first quarter of 2008 declined by 7.1%, compared with the previous quarter, and by 10.6% from the same period the previous year, to 81,747 units. In March, 2008, seasonally adjusted sales rose by 0.9% month-over-month from a three-year low in February and fell by 12.1% from March, 2007, to 26,799 units.

The current slowdown would probably have started 12 months earlier were it not for a wave of buyers entering the market by way of longer amortization mortgages that became available in 2007, said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.

Bad weather and weakness in Toronto have made him cautious about how much weight to put on the first-quarter numbers, Mr. Alexander said. “Having said that, I think it’s inevitable to say the Toronto real estate market cannot continue to deliver the strength that we’ve had since 2002,” he added.

Despite the softening market, home prices have continued to rise, although at a slower pace. The average price of a Canadian resale home rose by 5.5% year-over-year in the first quarter to $327,620, the smallest increase since the fourth quarter of 2001 and half as big as last year’s 11% rise.

Like many other industry watchers, both Mr. Porter and Mr. Alexander are still expecting moderate home-price gains this year. An environment of low, and falling, interest rates is the major difference between the Canadian economy now compared with past cycles in which residential real estate prices have dropped, Mr. Alexander said.

TD Bank expects the Bank of Canada to cut its key rate by 1.5 percentage points over its next three meetings. Lower short-term rates, combined with low unemployment and rising personal incomes, should reduce the risk of a boom-bust housing cycle this time around, he said.

“There’s a window of opportunity for the market to cool down and affordability to improve before the next rate tightening cycle, and if that happens… we shouldn’t see a pullback in home prices,” Mr. Alexander said.

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Contact the Jeffrey Team for more information – 416-388-1960

CBC News

Canadian banks have begun to lower fixed mortgage rates to their lowest levels since last spring.

RBC Royal Bank announced Thursday that it would chop most of its mortgage rates by a fifth of a percentage point, effective Friday. TD Canada Trust, BMO Bank of Montreal, Scotiabank and CIBC followed later with similar cuts.

The posted rate for a five-year closed mortgage drops to 6.99%. That’s the first time the posted rate for the popular five-year term has been below seven per cent since last May.

The posted rates for a one-year closed mortgage falls to 6.95% at some banks and 6.90% at others.

Banks will generally chop at least one percentage point off their posted rates — especially for their longer-term fixed mortgages.

Other mortgage lenders, such as virtual banks and some credit unions, promise to beat the best rates offered by the major banks.

The Bank of Canada has cut its key overnight lending rate by a full percentage point since early December as it tries to keep the Canadian economy from following the U.S. into recession.

That’s led to a similar one percentage point drop in variable rate mortgages and other floating rate loans tied to the banks’ prime rate.

But fixed mortgage rates have been much slower to drop. Since the start of December, the posted five-year fixed mortgage rate has fallen by two-fifths of a percentage point, counting Thursday’s rate drop.

Longer-term mortgage rates reflect the cost that banks pay to borrow money in the capital markets. Analysts say the global credit crunch — triggered by the U.S. subprime mortgage crisis — has made it more expensive for Canadian banks to access funds.

A further cut in the Bank of Canada’s key lending rate is expected when the central bank makes its next scheduled announcement on April 22, so borrowers can look forward to a corresponding drop in their variable rate mortgages then.

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Contact the Jeffrey Team for more information – 416-388-1960

By Carolyn Leitch – Globe and Mail

Toronto is finally seeing some mild spring weather and real estate agents officially welcomed the spring market by throwing open the doors of houses listed for sale. Many house hunters, however, seemed to be off at the park.

It seems the enthusiasm of potential home buyers has remained cool even as the temperature outdoors heats up.

None of this is surprising to CIBC World Markets economist Benjamin Tal, who says economic indicators are pointing to a balanced market between buyers and sellers for the first time in 7 or 8 years.

“It’s the end of an era, if you wish,” says Mr. Tal. “I think that the real estate market will be more boring for the next couple of years – which may be a good thing.”

Mr. Tal says one key measure – unit sales as a share of new listings – is sitting at about 55% right now. Last year, it was about 65%.

A range of 40% to 60% is considered a balanced market, and Mr. Tal expects to see Toronto real estate sales remain in that range. In fact, the percentage will likely to fall to 50% or so, he predicts.

“We expect it to go even lower.” Still, Mr. Tal is not calling for a buyer’s market any time soon.

Instead, he foresees a market where buyers will be able to take their time, have a house inspection done, and sit back from dizzying bidding wars. Mr. Tal forecasts that prices will rise in line with inflation of about 2%.

“You won’t have a situation where people are buying in panic.”

Mr. Tal says the pent-up demand that drove the Toronto real estate market in the past 7 or 8 years has been utilized. At the same time, the Canadian economy and therefore job growth is slowing. That’s especially true in Ontario’s manufacturing sector. The woes of the U.S. economy will undoubtedly weigh on Canada too, he adds.

Mr. Tal says the climbing prices of the past years have also inevitably priced some people out of the market. “You reach a point where affordability starts to be an issue.”

Figures from the Toronto Real Estate Board show that sales in the Greater Toronto Area dropped 22% in March compared with the same month last year. The decline was even more noticeable in the city of Toronto, where sales fell 27% compared with March of 2007.

“The March figures probably point in the right direction but they are exaggerated because of the bad weather,” says Mr. Tal. He thinks April could be a little more lively.

One Toronto real estate agent, who specializes in the west end High Park and Roncesvalles neighbourhood, says he has clients who want to buy but a dearth of good-quality properties to show them.

“There’s not much inventory, but what there is, is selling. There are buyers out there.”

Still, the agent says his sense is also that bidding has been rather mild lately, with two or three offers more common than the frenzied bidding of previous seasons when there were sometimes 15 or 16 potential buyers vying for one house.

He also thinks that homeowners who are thinking of selling will likely see lots of interest for their houses because so few are on the market. “I think if you’re thinking of selling, this is the time. It’s a great time to be going to market.”

Toronto Real Estate Board president Maureen O’Neill notes that a 6% drop in listing inventory – or homes for sale – kept prices strong in March. Compared to March of last year, the average price in the GTA rose 4% to $380,338.

Will Dunning, an independent housing economist, says it’s too soon to tell how the spring Toronto real estate market will shape up. He points out that, after being buried in snow all winter, people seemed to be happy just to get outdoors.

“We’ve only had one good weekend,” says Mr. Dunning. “I think, after all this time, people may have found they had better things to do than go to open houses.”

Mr. Dunning spent a day at the Toronto Zoo and said he’s never seen it so busy. But Mr. Dunning believes potential buyers will begin to think about house hunting again soon. Employment growth is healthy, interest rates are low and consumer demand is solid, he points out.

“From that perspective, there should be pretty good demand out there.”

Mr. Dunning notes that the first quarter appeared sluggish but the reason for that is at least partly because there were so few houses on the market, he says. The economist adds that the pace of activity in the first three months of the year is not a reliable barometer of how busy April, May and June are likely to be.

“Spring is always the busiest time of year,” he says.

Looking further out into 2008, Mr. Dunning says employment growth is likely to slow and more gloomy economic news may come out of the United States. Those factors could put a damper on the fall Toronto real estate market, he says.

Still, Mr. Dunning says a good predictor of the future health of the Toronto real estate market is job creation in recent years. He notes that plenty of jobs have been created in the past three or four years and people who were hired during that time may be saving up to buy houses in 2008 and 2009.

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Contact the Jeffrey Team for more information – 416-388-1960