Canada's Condominium Magazine
The real estate industry is known for having its ups and downs, and the CREA has adjusted its 2018 forecast based on recent trends. As we head into a new year, we often wonder what lies in store for us. The new year is a time for leaving the past behind us and looking forward to new beginnings. So, what does the future hold for the real estate industry? Experts weigh in with their predictions for upcoming trends.
CREA’s revised forecast explains the reason for its revised forecasts: “Ontario home sales have rebounded from the depths reached in the summer, but remain well below the peak reached earlier this year.”
Condominiums Will Increase in Popularity
Real estate expert Karyn Filiatrault recently gave an interview, where in she listed some of her predictions for the coming year. Among these was a rise in condo popularity. According to Filiatrault, people are flocking toward condominiums for a variety of reasons. These include baby boomers who are downsizing and choosing a low-maintenance lifestyle, families that have been priced out of the market, and millennials who love the “live, work, play” lifestyle that comes with living in close proximity to everything in the city.
In November, Toronto’s condo costs soared 17 per cent, compared to a 5.1 per cent drop in house values. The price gap between housing types is too wide for houses to become a bargain, however, which means that condos will continue to dominate. According to the Toronto Real Estate Board, the average detached home was valued at $1.2 million, compared to $555,396 for the average condo.
Aside from condos, however, CREA sees a decline in Ontario of 9.6% over 2017 — year-over-year decline but month-over-month will likely show increases. Prices are also expected to decline up to 2.2% — except in the condo markets.
CREA’s market forecast (press release) says: “New mortgage rules and further interest rate increases are expected to further hold sales in check in Greater Vancouver and Greater Toronto. As a result, the average price is forecast to hold steady in British Columbia in 2018, while declining by 2.2% in Ontario.”
Borrowing Will Not Be Easy
Thanks in part to new restrictions, borrowers will find it difficult to obtain any necessary loans beginning this year. According to CanWise Financial mortgage broker Mike Bricknell, “those currently within a mortgage term and coming up to a refinance or renewal will now have to tolerate a rate that’s two per cent higher. If those borrowers have made a down payment on the smaller side – as in, they’re very close to their 80 per cent equity threshold – they may not be able to bear such a substantial rate hike. This would also be problematic for young couples seeking their first homes, who traditionally make smaller down payments when breaking into the market.”
Furthermore, the new rules ban co-lending arrangements, leaving applicants who rely on them in the dark. “For those who don’t fit within the ‘big bank’ criteria,” says Bricknell, “it can be very difficult to obtain this kind of financing. Restricting this type of loan will reduce these borrowers’ options, sending them instead to the dark, private loan market, where super-high rates and fees are the norm. In these situations, repayments tend to be interest-only and can make it even more difficult for those in challenging financial situations to dig themselves out.”
The Primary Focus Will Shift to Flippers
As experts debate over the impact of foreign buyers on the housing market, another group comes into the spotlight as the possible “impetus” behind price growth. This group includes domestic investors and flippers, who purchase inventory and resell them for a higher price. No data is currently available, as flipping often occurs before the initial sale closes, though the Canada Revenue Agency is working to obtain that information in order to crack down on any potential tax evasion. The agency is currently demanding sales records for 2,800 Toronto-based developers.