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Real Estate, Ontario Real Estate, Real Estate Crisis

The Simple Story Behind The Ontario Real Estate Market Crisis

May 09, 2018

How the Ontario Real Estate Market Crisis Escalated and What's Next?

Like you, I've been paying attention to the current state of Ontario's Real Estate Market (specifically GTA and the Golden Horseshoe). I’ve been watching the impact on buyers and sellers in the market and seeing the housing crisis escalate for years now. I was interested in an Ontario Fair Housing Plan when it was announced, as I was convinced that an intervention can provide solutions. But after looking at all 16 initiatives within the plan, I’m not sold that this bureaucratic and tediously lengthy plan will solve the housing issues around the GTA. Instead of relying on anecdotal evidence- I prefer to rely on data. But, data doesn't exist in a vacuum, and it's the story behind it that helps us understand what’s really happening.

The Tale of Ontario's Real Estate Market is Short and Sweet.

Over the last few years, stories of bidding wars have flooded news channels. Real estate has been a go-to topic of conversation for folks in all types of fields of work. The issue of housing affects us all- after all, we all need a place to live, right? Although many perceive the current state of the market with a negative sentiment, there are positive attributes to it. Realtor “self-esteem” and success is catatonic. Every decent realtor can post updates on their social media channels of how we sold homes quickly and well over asking price. The most recent and extreme example is a townhome in Toronto that sold 1 million dollars over asking price after just a few days on the market. With so much noise and chatter, there is little reference to the actual cause of the escalating prices of homes in Toronto and the rest of the GTA. Why has it become so unaffordable and what’s to come in the future?

 

There’s an array of opinions:

  • Many have and will continue to say we are in a bubble and it’s about to burst. Drawing on the similarities between today's market and the recession (aka real estate bubble) from the early 90s, they justify a crash is imminent. Yes, if the stock market crashed and mortgage rates climbed to double-digits then the real estate market would be in trouble, but does that mean we should sit and wait for it to happen?
  • Some will say that the debt to income rates are unmanageable, resulting in an economic downturn similar to what happened in the US in 2007. Although there is some truth to this sentiment, I think that the Bank of Canada has done an excellent job mitigating risk through stringent regulations after the “subprime mortgage financial crisis” south of the border.
  • Then there is the foreign speculator, who buys real estate and let’s it sit vacant, because why wouldn’t they leave thousands of dollars of rent money on the table every month?
  • Another token of blame is thrust on the wealthy tourist. These folks don’t live in Toronto primarily but maintain a home here for weekly or monthly leisure purposes- similar to how many Canadians own real estate in Florida. 
  •  
  • Then there is the building industry, who has repeatedly said, to deaf ears, that the current state of the market is simply a matter of supply and demand. It seems like a go-to punchline for every builder or developer in an effort to influence government to make the building process simpler in order to keep up with demand. It seems like a logical theory from the experts, the people who build the homes our population needs to live. But is there any merit to this? 
  • Some blame is hoisted on the investor, the flipper, and the speculator who buys real estate as an investment instrument either for short term or long term gains. And in a market as viable as we have seen in recent years, they make good money off of it. This eliminates low-cost housing and continues to drive the prices of homes up.

I am sure there are many more theories around this topic, but like sweets too much data is not healthy for anyone. Without getting lost in all the details of every single opinion and data, we can start looking at a few meaningful stats that haven’t been discussed much in the media. The Current State Let's start with our primary assumption: it's not just your perception. Real Estate prices have been escalating. Quickly. Resale prices grew 16% across all home types in 2016 across the GTA (based on all TREB transactions). That’s significant, yet not as huge as the jump in March 2017 which saw prices increase 33.2% from the year before. Source: http://www.trebhome.com/market_news/market_watch/historic_stats/pdf/Historic_1703.pdf http://www.trebhome.com/market_news/market_watch/2017/mw1703.pdf 

 

Average low rise new home price index has essentially doubled from 2014 -2017, while new condos saw an average price jump of approximately $100,000 from March 2016 to March 2017

 

Whichever way you look at it, the prices in the GTA and surrounding areas have been on a rollercoaster that only goes up. The question everyone is wondering remains: when will it all come back down? Or will it? We will be providing an updated analysis on the Ontario and Golden Horseshoe housing market every month in our monthly market reports.

 

Robert Jendrzejczak (SA)

As the Founder of New Street, Robert is passionate about optimizing the customer experience. He is a stickler for real-world business results. Rob has developed deep insights into the market and an insider perspective of what homebuyers are looking for these days. When he’s not helping New Street clients, he’s probably catching a run while purposefully ignoring the stop signs. Follow robertj.ca on Instagram.

All Stories By : Robert Jendrzejczak (SA)

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  New Street May 2019 Etobicoke & Toronto West Real Estate Market Report  // 📊 The average price of a home in the Toronto West area was $849,160📊 This figure was up 3% from the previous month 📊 Up 9% from last year in May 2018 ----- 📊 Sales volume was up by double-digit percentages again from last month by 16%📊 Up 27% from May 2018 ----- 📊 Toronto West had 1.9 months of supply in May 2019, lower than the GTA average of 2.5 months.📊 Homes are selling for over asking at 102% of

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  The New Street May 2019 Greater Hamilton Region Real Estate Report //   Average Prices // 📊 The average price of a home in the Hamilton-Burlington Region was $549,891 in May📊 This figure is up from the previous month of April by 4%📊&

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  The New Street May 2019 Greater Toronto Region Real Estate Report //   📊 The average price of a home in the Greater Toronto Region was $838,540 in May 2019📊 This figure is up by 2.2% from the previous month of April📊 Up 3.6% from May 2018📊 Down 3% from May 2017 (when the market was getting heated) 📊 10% jump from 3 years ago in 2016 ----- 📊 Sales volume was up from last month by 11% and up 19% from last year May📊 Down by 2% from May 2017 and 28% from May 2016  ----- 📊&

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  The New Street March 2019 Greater Hamilton Region Real Estate Report //   Average Prices // 📊 The average price of a home in the Hamilton-Burlington Region was $519,309 in March📊 This figure is consistent from the previous month of Februry 📊&

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  New Street March 2019 Etobicoke & Toronto West Real Estate Market Report  // 📊 The average price of a home in the Toronto West area was $744,439 📊 This figure is pretty much on par, up by 0.2%, from the previous month 📊 Down 2.2% from March 2018 ----- 📊 Sales volume was WAY up from last month by almost 40%📊 Down by 4.8% from March 2018 ----- 📊 Toronto West had 1.9 months of supply in March 2019, significantly lower than the GTA average of 2.7 months.📊 Homes are selling for over

  New Street March 2019 Etobicoke & Toronto West Real Estate Market Report  // 📊 The average price of a home in the Toronto West area was $744,439 📊 This figure is pretty much on par, up by 0.2%, from the previous

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March 2019 // Greater Toronto Area Real Estate Market Report
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Some good news for new homebuyers across Canada. The 2019 Federal Budget is setting aside funds to potentially aid in covering 10% of the purchase price for new buyers. Called a "shared equity mortgage". Functioning as an interest-free loan which will need

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Is money-laundering making it harder to buy a home? A shocking report by Transparency International Canada finds $28.4 billion of residential purchasers since 2008 were done through corporate entities, which may be shielding illegal or less-than-above-board buyers, raising prices for the rest of us. Find out more: https://bit.ly/2UGb4GS #RealEstate #Toronto #GTA

Is money-laundering making it harder to buy a home? A shocking report by Transparency International Canada finds $28.4 billion of residential purchasers since 2008 were done through corporate entities, which may be shielding illegal or less-than-above-board buyers, raising prices for the rest

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March 2019 // Oakville & Burlington Real Estate Market Report
March 2019 // Oakville & Burlington Real Estate Market Report April 2019
March 2019 // Oakville & Burlington Real Estate Market Report April 2019

    The New Street March 2019 Oakville Real Estate Report //   📊 The average price of a home in Oakville was $1,011,664 in March📊 This figure is up by 2.6% from the previous month of February 📊 Down 1.7% from March 2018📊 All home types saw an increase in price of around 5%, with Condo Towns and Semis leading the way, up 16% and 7.5% respectively ----- 📊 There was 284 sales in Oakville in March, up from last month by 80% and on par with last year,

    The New Street March 2019 Oakville Real Estate Report //   📊 The average price of a home in Oakville was $1,011,664 in March📊 This figure is up by 2.6% from the previous month of February 📊 Down 1.7% from March 2018📊

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February 2019 // 36 Stats // 12 Months // 3 Regions // 1 Greenbelt
February 2019 // 36 Stats // 12 Months // 3 Regions // 1 Greenbelt March 2019
February 2019 // 36 Stats // 12 Months // 3 Regions // 1 Greenbelt March 2019

  The New Street February 2019 // 36 Stats // 12 Months // 3 Regions // 1 Greenbelt // Report   📊 The average price of a home in the Toronto Region was $780,397 in February 2019📊 The average price of a home in the Hamilton Region was $517,439 in February 2019📊 The average price of a home in the Niagara Region was $454,107 in February 2019 📊 YoY The Niagara has seen the highest increase, up 15.6% from last year due to its affordability📊 Toronto & Hamilton show steady increases on both a monthly and annual basis 📊 The average price

  The New Street February 2019 // 36 Stats // 12 Months // 3 Regions // 1 Greenbelt // Report   📊 The average price of a home in the Toronto Region was $780,397 in February 2019📊 The average price of a home in the Hamilton Region was $517,439 in February 2019📊 

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