Toronto Real Estate Blog

Financial Post

Canadian home prices rose 0.4% between December and January, the same growth rate for the third consecutive month, according to a Statistics Canada report Thursday.

The index saw the biggest increases in St. John’s at 1.7%, Winnipeg at 0.7%, and Toronto and Oshawa at 0.6%. Ottawa–Gatineau, Saskatoon and Calgary all registered 0.5% increases, according to the federal agency.

The largest monthly decrease in new housing prices was recorded in St. Catharines–Niagara, which fell by 0.4%. Home prices in Charlottetown fell 0.2% and in New Brunswick, Saint John, Fredericton and Moncton each registered a decline of 0.2%.

Nationwide, home prices were up 0.1% on an annual basis in January, compared with a 0.9% decline in December 2009.

“This was the first year-over-year increase since December 2008, mostly as a result of price decreases in Western Canada that were less pronounced this January than in previous months,” Statistics Canada said in the report.

————————————————————————————————————

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

————————————————————————————————————

Forest Hill, Bridle Path hottest spots for real estate worth $1 million-plus as February sales, prices soar

Tony Wong – Toronto Star

In her search for a new home, Jean Rideout budgeted what she thought was an “ample” figure – $1 million. But the Toronto woman quickly found there was a yawning disconnect between her idea of what an upscale property should be and what she would eventually find in the city’s better neighbourhoods.

“I didn’t expect a palace. But you’re not even getting parking in some areas for that price. I guess a million dollars doesn’t go as far as it used to,” Rideout, an executive with a telecommunications company, said with a laugh.

A heated Toronto real estate market is lifting sales of luxury homes as the economy starts to improve and move-up buyers regain confidence, says a report by Coldwell Banker Terrequity Realty released Wednesday.

The top-performing area with sale prices in excess of $1 million in 2009 was Forest Hill, where 280 homes changed hands at an average price of $1.42 million.

The Bridle Path area was in second place, with 221 sales and an average price of $2.1 million.

Oakville, west of Toronto, came in third with 174 properties sold with an average value of $1.67 million.

Rideout concentrated her search in the Beach and Bloor West Village neighbourhoods of Toronto, areas far less toney than the Bridle Path or Forest Hill. But multiple offers and bidding wars have made the journey a frustrating one.

“We’re not looking for perfection, but it’s silly when so many people are lined up bidding for what is really a very modest home for a very high price,” said Rideout.

Analysts say the spring market looks like it will remain heated, as both first-time buyers and move-up buyers like Rideout enter the market before interest rates rise in the second half of the year.

Existing home sales in the Toronto area were up by 77% in February compared with the same time last year, according to figures released Wednesday by the Toronto Real Estate Board.

The board said 7,291 homes changed hands last month from 4,120 homes in February of 2009.

The average price of a home was also up by 19% to $431,509.

“Increases in existing home sales and average price were noted across the GTA in lowrise and higrise home types,” said TREB president Tom Lebour.

“This suggests that first-time, move-up and downsizing buyers are all active in the existing home marketplace.”

Comparisons with the first half of last year are slightly misleading because that was the bottom of the market, caution analysts.

The Canada Mortgage and Housing Corp. released a forecast this week that the market will remain hot for the first half of the year, before trending down in the second half and into 2011.

One bright spot for buyers is that listings improved by a significant 24% in February compared with last year.

“Annual growth in new listings is expected to continue,” said Jason Mercer, TREB’s senior manager of market analysis.

“New listings growth will start to outstrip sales growth as we move through 2010,” he said.

“As the market becomes better supplied, we will see more sustainable single-digit rates of growth.”

Homes are still being snapped up because of a lack of supply. The average home is on the market for 22 days before being sold, compared with 45 days last year.

————————————————————————————————————

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

————————————————————————————————————

By Sharon Aschaiek Special to the Toronto Sun

When it comes to compact spaces like Toronto condos, striking the right balance between fashionable and functional decor can be a tricky feat. Toronto-based interior designer Andrea Kantelberg says it’s entirely possible to achieve a trendy yet timeless look that’s comfortable, stylish and reflects your personality — and will hold its value.

“Your home decor should feel cohesive and welcoming and act as an effective backdrop to your personal possessions,” says the principal of Kantelberg Design, which specializes in high-rise residential, hotels and luxury homes.

Reduce and recycle

Living in a small space like a condo requires scaling back on possessions to minimize clutter, Kantelberg says.

“You need to have space around pieces for them to breathe. Without that space, a home will never have a feeling of luxury or style,” Kantelberg says.

Hold onto the furniture and accessories you still love and that continue to “feed your spirit,” she says, and ditch or donate what you don’t need.

Furniture that fits

Kantelberg says that while lean, modular furniture works well in condos in Toronto, owners on a budget can find ways to work with what they already have.

“You can augment oversized furniture like a king-size bed or giant sofa with smaller pieces to create more space,” she says. If you are purchasing new furniture, she says, go for clean, classic lines, and buy the best quality you can afford, knowing it’s a long-term investment.

Storage is supreme

“As a general rule, keep things off the floor to achieve an uncluttered look,” Kantelberg says.

Use an organizer or built-in shelving to maximize storage space in your closets, she says.

You can also make great use of wall shelving and furniture pieces with storage capacity, such as ottomans, to create a clean, unfettered look, she says.

“But perhaps don’t store stuff under your bed — I’m a big believer in clutter affecting the way we feel, and sleeping on top of all our stuff doesn’t feel right,” she says.

Cohesive colour

Create a cohesive, seamless look and feel by carrying similar tones of your colour scheme throughout your place, Kantelberg says.

Choose a paint colour that reflects your personality and will complement your furniture, she says, and take risks in small ways — use patterned wall paper in your powder room or coloured wallpaper behind your bookshelf.

“Truly stylish people have to take risks, but it’s better to do it in small bites,” she says.

Flooring that lasts

Gray or neutral no-gloss wooden flooring continues to be de rigeur, Kantelberg says, because it’s durable, easy to maintain and great looking.

“Unlike high-gloss hardwood, where you can see every little scratch, you don’t have to worry about maintaining it and keeping it perfect,” she says. “And its worn quality adds a little bit of depth and personality to a space.”

More cost-effective but also stylish is laminate flooring, she says, which also requires little upkeep.

Layer your lights

Use a mix of lighting formats, Kantelberg says, and customize lights according to the way you use them, and the mood you want to create, in each space.

“You don’t need a light fixture hanging in the middle of each room. Somebody came up with this idea 70 years ago, and it’s still there,” she says.

While kitchens and bathrooms may require good-quality overhead lighting, she says, go for a floor lamp in your living room, task lighting on your desk and a table lamp beside your bed.

Earth-minded design

“When you’re buying a product, think about how it got there — was it on a truck, plane or boat? It’s better to purchase from a local manufacturer,” she says.

Other eco-smart decor options include buying vintage, to reuses objects and add originality to your space; low-flow faucets and toilets; energy-efficient lights and appliances; a smaller fridge, to minimize harmful hydrofluorocarbon emissions; and chemical-free paint.

“These are all things that are really easy to do that don’t actually cost extra money,” says Kantelberg, “so it’s possible for your home decor to positively affect the planet.”

————————————————————————————————————

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

————————————————————————————————————

Dana Flavelle & Les Whittington – Yourhome.ca

Thousands of would-be homeowners – particularly young, first-time buyers – will find it harder to acquire their dream house under federal mortgage changes meant to cool the red-hot real estate market.

“It’s going to push the borderline first-time home buyers out of the real estate market,” predicted Derek Holt, vice-president, economics, of Scotia Capital.

The new rules, which go into effect April 19, mean borrowers must have higher incomes or larger down payments, or opt for cheaper properties, finance officials explained.

Federal Finance Minister Jim Flaherty unveiled the new measures Tuesday as part of a larger package that also took aim at “reckless real estate speculation” and excessive refinancing, which he likened to using your home “as an ATM machine.”

But the centrepiece of the announcement is one that requires lenders to use tougher criteria when assessing borrowers’ ability to carry a loan.

The rule applies only to insured loans, extended to borrowers with less than 20% as a down payment. Nearly all first-time buyers fall into this group, according to industry data.

Currently, lenders test a borrower’s ability to repay using the three-year mortgage rate as a yardstick, even if the homebuyer is planning to opt for a short term at a lower rate. The three-year rate is now around 4%.

On Tuesday, Flaherty announced that lenders must now use the five-year fixed rate as their stress test as of April 19. The five-year rate at most banks is currently about 5%.

That’s more than double the cheapest rate, which is 2.25% on an open variable mortgage that floats with the market.

Comment: Actually, the best 5-year variable rates are 1.95%. And will the banks make you qualify on their posted 5-year rate, or the discounted rate that people actually get? That one percent difference is huge.

In practical terms, the new rule raises the bar for home ownership, even though it doesn’t raise the borrowers’ out-of-pocket expense. Borrowers can still opt for lower rates and shorter terms but must meet the higher standard, at least on paper.

For example, a borrower earning $59,626 a year could afford a $377,000 mortgage under the old rules.

After April 19, that borrower would need to be earning $68,838 to qualify for the same loan, according to TD Canada Trust.

The move comes in response to rising household debt levels and fears Canada’s record low interest rates could fuel a “bubble” followed by a U.S.-style real estate crash. While denying housing prices are dangerously overinflated, Flaherty said the real estate boom is fostering risky investment habits, rampant speculation and other excesses.

“Our government is acting to help prevent Canadian households from getting overextended and acting to help prevent some lenders from facilitating it,” Flaherty said.

The government also announced real estate speculators would have to come up with a 20% down payment, up from the current 5% minimum.

Comment: And how do they plan to enforce this? How can you prove someone is buying as an investment? New condo builders already charge a 20-25% down payment, so it would affect only resales. But there is no way to police it.

Flaherty also reduced the amount people can borrow against their homes to 90% of its value from 95%.

Banks and mortgage brokers, who feared the government might opt for more stringent measures, applauded the announcement, saying it would have a minimal effect on consumers or the housing market.

The difference between a five-year rate and three-year rate is only one percentage point, noted Tim Hockey, president and chief executive officer of TD Canada Trust.

“The measures seem to be quite balanced,” Hockey said.

And while they’re likely to have a “cooling effect,” he said buyers will still be in the market but more realistic about what they can afford.

Some economists, however, said it might have an unintended short-term consequence if more buyers rush in to clinch their deals ahead of the April 19 deadline.

“You’ll get a very hot spring market and a sudden softening in the back half of the year,” Holt predicted.

Doug Porter, deputy chief economist at BMO Nesbitt Burns, said it is more a case of short-term pain for long-term gain. He compared it to the Bank of Canada raising its trend-setting rate by a quarter of a percentage point.

Will Dunning, chief economist with the Canadian Association of Accredited Mortgage Planners, said his research shows that consumers are already acting cautiously and borrowing less than they could afford.

Heather Paterson, a senior mortgage broker with Invis, the country’s largest independent mortgage brokerage, said she has had several emails and phone calls from concerned clients. But only one client, who buys to invest, will be directly affected by the higher minimum down payment rule, she said.

The higher minimum applies only to properties that will not be owner-occupied, she noted. People buying cottages and second homes for their own use, or duplexes they plan to live in, can still buy with 5% down, she said.

Peter Aceto, president and chief executive officer of ING Direct Canada, said the measures are bound to have some dampening effect on the real estate market. But the rules affect mainly people who were going to be hurt anyway once rates started to climb, he said.

Flaherty decided against raising the minimum 5% down payment or shortening the maximum 35-year amortization period on insured loans but said all options remain open.

————————————————————————————————————

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

————————————————————————————————————

Tony Wong – Toronto Star

Frank Lee is looking to buy a condominium in Toronto as an investment. He’s hoping to purchase something downtown and close to the subway. But his $300,000 budget means many first-time buyers and other investors are looking at the same properties.

“The market is tight in terms of product, because the interest rates are so low, everyone is looking,” Lee said. “You see people out there who are leveraged up to their eyeballs.”

On Tuesday, federal Finance Minister Jim Flaherty introduced tighter mortgage rules in Canada to slow the heated housing market before it becomes a bubble. Real estate industry insiders generally applauded the moves that will make it harder for investors to speculate in real estate while beefing up financing requirements for borrowers.

“The changes reflect reasonable public policy,” said Phil Soper, president and CEO of Royal LePage. “Our government has taken the opposite tack to what has happened in the United States, where they have tried to attract the maximum number of people to make financial commitments regardless of ability to pay.”

Jim Wong, a veteran mortgage broker with the Royal Bank of Canada, said he typically counsels borrowers to make sure they can afford a bigger mortgage down the road, in case interest rates go up.

“Circumstances can change, so you have to be prepared for the worst, and that you have some kind of cushion,” said Wong.

Realtors say a rule requiring investors to make bigger down payments will likely have an immediate impact on the Toronto real estate market, as it forces some speculators out.

The Toronto condominium market has been particularly vulnerable to buyers trying to make a quick buck. Estimates range as high as 40% as the number of suites sold in some downtown buildings to investors.

Comment: Remember, that is only an estimate. And we do not know whose estimate it is.

“Speculators want to put as little down as possible, so this will hurt,” said RBC’s Wong. “They might put 5% down and try to flip it. This is aimed at the guy who is buying three or four units at a time.”

Lee, an investor who works in the financial services industry, is looking for a longer-term investment he can rent. He welcomes the new rules because he believes they will sideline marginal players, allowing solid investors to come to the fore with less competition.

“You have a lot of investors out there who are leveraging, but they’re not doing it wisely,” Lee said. “You also have some people using their homes like it’s a piggy bank, and none of that is good for the market.”

Jim Ritchie, senior vice-president of condo developer Tridel, said his company typically requires 15% down on new units with another 10% on possession.

“We’re not crazy about people overextending themselves, we want our customers to be able to close on our properties,” said Ritchie.

Natalie Gierman, a researcher and policy analyst at a Toronto non-profit, said she has been saving for a home for two years.

Like Lee, she is looking for something downtown for about $300,000. But so far it has been a frustrating search because of so many competing buyers in the market.

“There is nothing out there, and everything affordable gets snapped up,” she said.

The first-time buyer also suffered sticker shock when she realized the $300,000 properties she was looking at ranged in size from minuscule to small, at 400 to 600 square feet. Cheap money fuelled by low interest rates has kept home prices buoyant.

Gierman, who describes herself as a conservative purchaser, said she will likely take a five-year fixed rate at 3.79%, though she could take a variable rate at 2%.

“There is a real temptation in North America for some people to stretch themselves, so the new rules are a good thing,” said Darren Ford of Keller Williams Real Estate.

Ford said he expects that the new rules will affect his sales in the short run.

“As a realtor I would prefer stability. I didn’t make as much money last year, but I was still able to make a living. That’s preferable to having the ups and downs.”

Gregory Klump, chief economist at the Canadian Real Estate Association, said the rules will have a “marginal” impact on home sales.

“We are pleased the government did not overreact,” said Klump. Ottawa had been rumoured to be considering bumping up down payment requirements for all borrowers and reducing amortization rates.

“That would have had a deep and damaging impact, especially when our forecasts are calling for a slower market in the second half of this year and a decrease in sales next year.”

————————————————————————————————————

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

————————————————————————————————————