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Real Estate Forecast for 2018: What to Expect!

Real Estate Forecast for 2018: What to Expect!

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Real Estate Forecast for 2018: What to Expect

As we head into a new year, the most common question we receive is, “What’s the outlook for GTA’s real estate in 2018?”

 

It’s not just potential buyers and sellers who care; current homeowners also want reassurance about the value of their investment. No one knows exactly what 2018 will bring, but we’ve outlined expert predictions on where the market is headed and how government interventions are expected to impact the Canadian housing market in the year ahead.

HOUSING PRICES WILL REMAIN HIGH IN URBAN CENTRES

Although the Toronto real estate market did experience a slowdown in 2017, housing affordability will remain a major issue in both Toronto and Vancouver in 2018. According to the Royal Bank of Canada’s most recent Housing Trends and Affordability Report, as of Q2 2017 it cost more than 75 percent (Toronto) and 80 percent (Vancouver) of median household income to cover the average cost of owning a home.1

In an effort to stabilize prices, both the Ontario and British Columbia governments enacted a 15 percent tax on foreign investments in housing. However, according to the PricewaterhouseCoopers report on Emerging Trends in Real Estate: Canada and the United States 2018, “Industry players are skeptical that recent tax moves … to curtail foreign investment will have a long term cooling impact on housing affordability in Toronto and Vancouver.”2

In its Canadian Regional Housing Outlook, TD Economics predicts ”The decline in sales activity in both Vancouver and Toronto has helped to redistribute the balance of power from a pure seller’s market, back towards buyers, as evidenced by the sales-to-listing ratios. But, first-time homebuyers sitting on the sidelines waiting for higher interest rates to trigger a market crash may be holding their breath for a while. Prices are likely to only reset back to levels that existed prior to a year of exorbitant gains.”3

The high cost of living has forced a growing number of millennials to seek alternatives to traditional housing. The 2016 census found 47.4 percent of young adults in Toronto and 38.6 percent in Vancouver live with a parent. PricewaterhouseCoopers predicts a rise in multi-generational and multi-family homes, a move towards larger condominiums to suit growing families, and a flight from urban cores as new public transit projects make commuting more feasible.2

What does it mean for you? If you’re a current homeowner, you can expect your investment to hold its value and continue to appreciate over the long term. And if you’re considering selling this year, contact us to request a free Comparative Market Analysis to find out how much you can expect your home to sell for under current market conditions.

If you’re a potential buyer who has been waiting for real estate prices to drop, don’t expect a fallout any time soon. Governmental bodies have taken steps to slow down skyrocketing prices, which has helped to balance the market. Now is a great time to buy. And if traditional housing options don’t fit your budget, we can help you find alternatives to meet your needs.

GOVERNMENT INTERVENTIONS WILL HELP TO STABILIZE THE MARKET

Skyrocketing real estate prices have caused Canadians to take on a growing amount of debt. The federal Parliamentary Budget Office (PBO) reports that the average household indebtedness is up to 174 percent of disposable income, and they predict it will reach 180 percent by the end of 2018. Coupled with rising interest rates, the share of income that will go towards debt payments is expected to reach historic proportions.4

Regulators at the Office of the Superintendent of Financial Institutions (OSFI) have attempted to curb the potential fallout with interventions, the latest of which went into effect on January 1. These new regulations raise the requirements for mortgage borrowers with down payments of 20 percent or more. They are now required to qualify for a mortgage at an interest rate two percentage points higher than their current rate to ensure they can manage payments when interest rates do inevitably rise.

A similar “stress test” was enacted in 2016 for borrowers who put down less than 20 percent, but that regulation impacted a much smaller percentage of buyers.

According to Jeremy Rudin, the head of OSFI, “We clearly see the potential risks caused by high household indebtedness across Canada, and by high real estate prices in some markets. We are not waiting to see those risks crystallize in rising arrears and defaults before we act.”5

All federally regulated financial institutions will be obligated to utilize these requirements for both new mortgages and mortgage renewal applications of borrowers applying to switch lenders. It is not mandatory to apply the test at mortgage renewal for existing borrowers. Since credit unions are regulated provincially, they are not required to follow the new OSFI rules, although some may choose to out of prudency.

What does it mean for you? With new rules in effect, if you’re a buyer, your purchasing power may be impacted. If you’re concerned you may not be able to meet these requirements, securing your mortgage through a credit union may be an option. We are following this issue closely. Give us a call so we can discuss how these new rules will affect your home search.

If you’re considering selling your home this year, these regulations could alter the type of buyer who will be willing and able to purchase your home. We have expertise in this area and know how to market your home to a changing demographic.

5 YEAR MORTGAGES WILL MAKE A COMEBACK

Expect interest rates to rise in 2018. Bank of Canada has indicated that borrowers should expect to see rate increases this year … and notably, nearly half of Canadian mortgage holders are set to renew their mortgages in the next 12 months. Combined with the new, more stringent “stress test” requirements, a greater number of homeowners will be opting for five-year-fixed rate mortgages over the historically popular variable rate mortgages.6

According to LowerRates.ca, “Since January 2014, 56% of Canadian borrowers who applied for a mortgage through LowestRates.ca have gone variable, compared with 43% of those who got a five-year fixed. But this past August, there was a shift, where the five-year-fixed rate mortgage saw a sharp increase in applicants, with 59% of users on the LowestRates.ca site opting for this option versus only 39% opting for the variable mortgage.”7

What does it mean for you? If you’re in the market to buy, act now. Rising interest rates will decrease your purchasing power, so act quickly before interest rates go up. Give us a call today to get your home search started.

And if you’re a current homeowner who is set to renew your mortgage, you may want to consider locking in a five-year-fixed rate. Contact us if you would like assistance navigating your options.

 

 

2018 ACTION PLAN

If you plan to BUY this year:

 

1.    Get pre-approved for a mortgage. If you plan to finance part of your home purchase, getting pre-approved for a mortgage will give you a jump-start on the paperwork and provide an advantage over other buyers in a competitive market. The added bonus: you will find out how much you can afford to borrow and budget accordingly.

2.    Create your wish list. How many bedrooms and bathrooms do you need? How far are you willing to commute to work? What’s most important to you in a home? We can set up a customized search that meets your criteria to help you find the perfect home for you.

3.    Come to our office. The buying process can be tricky. We’d love to guide you through it. We can help you find a home that fits your needs and budget, all at no cost to you. Give us a call to schedule an appointment today!

 

If you plan to SELL this year:

 

1.    Call us for a FREE Comparative Market Analysis. A CMA not only gives you the current market value of your home, it’ll also show how your home compares to others in the area. This will help us determine which repairs and upgrades may be required to get top dollar for your property … and it will help us price your home correctly once you’re ready to list.

2.    Prep your home for the market. Most buyers want a home they can move into right away, without having to make extensive repairs and upgrades. We can help you determine which ones are worth the time and expense to deliver maximum results.

3.    Start decluttering. Help your buyers see themselves in your home by packing up personal items and things you don’t use regularly and storing them in an attic or storage locker. This will make your home appear larger, make it easier to stage … and get you one step closer to moving when the time comes!

 

WE’RE HERE TO HELP

 

While national real estate numbers and predictions can provide a “big-picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market, and the local issues that are likely to drive home values in your particular neighbourhood. If you have specific questions, or would like more information about where we see real estate headed in our area, please give us a call! We’d love to discuss how issues here at home are likely to impact your desire to buy or a sell a home this year. Please visit our website SnapHomes.ca for latest MLS listing and pre-construction Homes & Condos.

Can’t find what you are looking for? Contact us for Exclusive list of Pre construction Homes and Condos and our pocket listings for Land!
Sources:

1.     Royal Bank of Canada’s Housing Trends and Affordability Report –
http://www.rbc.com/newsroom/_assets-custom/pdf/20170929-ha.pdf

2.     PricewaterhouseCoopers Emerging Trends in Real Estate 2018  –
https://www.pwc.com/ca/en/real-estate/assets/Real_Estate_ETRE_2018_PDF.pdf

3.     TD Economics Canadian Regional Housing Outlook –
https://economics.td.com/canadian-regional-housing-outlook-aug-2017

4.     Office of the Parliamentary Budget Officer –
http://www.pbo-dpb.gc.ca/en/blog/news/HH_Vulnerability

5.     Financial Post
http://business.financialpost.com/personal-finance/stricter-osfi-rules-on-mortgage-lending-will-do-more-harm-than-good-fraser-institute

6.     Bank of Canada Financial System Review November 2018  –
https://www.bankofcanada.ca/wp-content/uploads/2017/11/fsr-november2017.pdf

7.     Maclean’s  –
http://www.macleans.ca/economy/money-economy/canadians-rushing-to-lock-down-five-year-fixed-rate-mortgages/

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FSBO Website

Great Article by Michel Friedman posted on REM website

Years ago, when our industry was managed by the provincial ministry, I was broker of record of my own company and I contemplated starting my own real estate for sale by owner (FSBO) website.

I quickly realized when developing my marketing strategies for that website that I may be in conflict with real estate rules and regulations, so I decided not to go ahead with the site. Years later, with popularity of the Internet, FSBO websites thrive. They are cheered by the public, they win professional marketing awards, they win provincial business awards, they sell franchises and in the latest marketing gimmick, they “associate” themselves with Realtors who “help” put properties on MLS.

I have examined a couple of popular websites that market in Ontario, I also looked at the “association” they have with “real” Realtors. And as a Realtor, I find some of the things they say and do unsettling.

Consider this: Instead of this huge website offering the help of a Realtor, think the other way – A Realtor hiring a FSBO website company to assist the Realtor to get business. That makes the FSBO company an unlicensed assistant, does it not?

So, if the FSBO website is acting as unlicensed assistant, procuring listings for a Realtor to put on MLS, how can this be allowed?

Here are some issues and concerns that I found on some FSBO websites.

Site “A”: 1. When a property is sold privately, the company puts a sold sign on the property, giving the impression that they sold the property and not the seller privately, thus misleading the public to think that they are a real estate company.

2. The website states that Realtors charge “usually five per cent or six per cent commissions” and says, “Paying five per cent or six per cent of the sale price is traditional for real estate agents.”  I held senior positions in several real estate companies in the GTA and had access to thousands of listing agreements, and I can tell you, this is not the case. Again, the site is misleading the public and scaring them off Realtors.

3. They claim on the site that they “Teach people how to sell their home” and that they are “local experts”. What credentials and education do they have to make these claims?

4. Quote from a website: “If saving money makes you sick to your stomach, we’d recommend an agent.” This is slanderous and is not tolerated in our profession, but apparently it is okay when you are dealing in real estate without a license. By the way, this company is now proud to claim that they are “associated” with “agents”.

5. As part of their assistance they state:  “Sellers will price their home similar to others…” This will be done (I am assuming) with the assistance of their “experts”. Clearly a badly executed C.M.A (no “solds” to compare) done by non-professional, unauthorized people.

6. “We can help you get on realtor.ca”. It’s clear to me that this is solicitation to list properties to sell – not allowed by non-licensed individuals or companies.

7.  The site uses expressions like “relisting costs” and “sale consultation”, giving the public the impression they are dealing with a “legitimate” licensed Realtor.

Site “B”: 1. The site claims they offer “ALL the tools and professional assistance you need to sell your home.” Really? Do they even know what all the tools are? Do they know the difference between professional assistance, which is based on a lot of education, and amateur limited knowledge and limited resources from non-licensed help?

2. They will (according to them) also provide: Ongoing support to take you through the sales process.” They will also provide “the complete set of tools to determine the right price.”

3. They claim they have 235 “sales representatives”. Are any of them licensed? Are any of them authorized and educated to help determine the right price (market value)? Is the public not being misled when they see “sales representative” beside a name, giving the impression they are dealing with a Realtor?

4. In a paragraph titled “Why choose us”, this website is bragging that so many thousands of homes are “sold through us”. Is this not trading in real estate without a license?  What if a licensed Realtor put out a statement like that if his license expired for just one day? How long before the provincial regulator issues a warning to this person about the consequences of dealing in real estate without a license?

5. A mention is made to an “association” with a “real” Realtor and that for an extra fee, your listing will appear on MLS. I have gone on this website asking for information about selling my house with the “help” of a Realtor. I found out the Realtor is in Ottawa (I live in the GTA). I did not take it any further.

Will that Realtor come to Toronto to meet sellers and  “I.D” them? View the house? Measure the house? Ask the sellers pertinent questions? Check for visible deficiencies?

My guess is no.

Is this the spirit and the intent of the due diligence laws and of provincial regulations in regards to listing a property? Am I missing something here? Have the rules changed?

Michel Friedman

Michel Friedman

Or does our real estate license not mean anything anymore to our licensing authorities?

Is the public only being protected from us (licensed Realtors)?  If you are not licensed, you are free to make the claims above? Help me out here!

Michel Friedman

Broker of Record

Orange Square Realty

Toronto

 
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Posted by on January 16, 2013 in Condominiums

 

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