This week we see condo sales numbers near an all-time high, particularly in the suburbs of Toronto. A demand for rental housing by domestic and international students during the school year has been recognised by BMO, and the Ontario Ministry of Finance shows us the current and future growth of senior populations. We also have great news for sellers with interest rates dipping, and mortgage rates reaching a new all-time low!
To learn more, read on:
Urbanation released their quarterly report citing strong growth and increasing sales in the Greater Toronto Area. Due to cheaper borrowing, record-breaking numbers were seen with the second-highest sales in Q2 since 2017. Sales specifically within the suburbs doubled from last year, but did experience a decline in the core city, suggestively due to an increase in costs and purpose-built rentals.
Whilst there has been an increase in costs overall, borrowing costs have been record-low, population inflows have reached a high, and the job market is presenting as healthy. One other important driver to note has been the planning approval of virtually every project launched for pre-sale in the second quarter, reducing cancellation risks.
Great news for sellers arises through a new report from BMO, forecasting a price boom as interest rates dip. Thanks to this new all-time low for mortgage rates in Canada (which have been significantly decreasing since July 2017), Toronto is attracting all kinds of wealthy investors (both foreign and domestic) who are looking for a high growth area to purchase their next property. The Bank of Canada’s posted rate, which is used in the mortgage stress test, has also come down, to 5.19 per cent, from 5.39 per cent.
Doug Porter, chief economist at Bank of Montreal detailed “When you’re looking at a market that becomes driven by wealth, and wealth from outside the city limits, then there isn’t necessarily a limit to house prices”.
Developers have been overlooking the demand for rental housing by students living away from home during the school year, but still technically living with their parents. As the Canada Census does not distinguish this group, Canada Mortgage and Housing Corp’s (CMHC) data is undercounting the students demand for rental supply. Based on the latest student data from immigration, there are almost 600,000 international students living in Canada, which is an annual increase of 16%.
Tal told Huffpost Canada that it is “reasonable to assume” that urban centres with large universities would be most impacted by this. An additional note is that international students do not have a house base in Canada with their parents. Consequently, the demand for housing is even more intense than that with domestic students.
A new CMHC report predicts tighter housing supply for younger generations in Toronto over the next decade, due to the growing cohort of older, wealthy baby boomers. Home ownership and employment for this generation has consistently increased and will continue to increase, converting into less supply for younger generations.
According to the Ontario Ministry of Finance, the senior population growth is estimated to be approximately 4% over the next decade. Sitting at 14% in 2016, this will result in a total of 18% by 2026.
Bloomberg recently conducted an interview with president of the Daniels Corp Mitchell Cohen, one of Canada’s most renowned developers in the Regent Park transformation. The 70-acre Regent Park has been transformed over the last 15 years, with over $1 billion of investment from Daniels and the City of Toronto. He first invested in two phases with the City, and continued to purchase land in the third phase, and presently working with Tridel and Capital Developments on the final two.
Townhouses originally sold for $500,000 are now selling for as much as $1.5 million, showing that the risk has most definitely paid off. Cohen suggests that governments are going to have to nudge more companies into action to tackle the growing affordability crisis, but “developers are creative, they will find a way to work within the system”.
We are selling River and Fifth and The Wyatt in Regent Park right now: