Don’t believe everything you read, except this, or course! For example, you have no doubt seen reports of Toronto Real Estate prices rising 17% in the month of December alone, or year-to-date transaction numbers increasing by 16% and of multiple offers becoming the norm instead of the exception. While all these statements are true, in reality, they are not a cause for alarm – “A bubble, a bubble!” – or rejoicing – “Another Boom!”
It is important to remember that the Canadian Real Estate recession was generally considered to have started in October 2008. In that month alone, the Toronto Real Estate Board reported that GTA sales were down a whopping 35% and prices declined 13% over the same period in 2007. However, due to our stringent mortgage regulations, we did not experience the virtual destruction of the market that sent our neighbours to the south reeling. We did experience a very short-lived, but deep decline over a six-month period. Hence, the beginning of 2009 began slowly but thankfully, ended with what some would consider a full recovery. The robust price growth that we have experienced in the latter half of 2009 was a direct result of a diminished listing inventory, couple with an increased demand due to the low interest rates.
So, what does our crystal ball say about 2010? “A greater supply of listings in 2010 will see home prices grow at a sustainable pace,” says Jason Mercer, Senior Manager of Market Analysis for the Toronto Real Estate Board. This is very good news for us all, no bursting bubble and a less frantic pace.
What should we watch out for??
- Brace for higher interest rates. However, the Bank of Canada has decided to keep its benchmark lending rate at a record low of 0.25% and reaffirmed their plan to keep it there through the middle of the year depending on the inflation outlook – “Bank of Canada Sticks to Low Interest Rates”, Globe and Mail, January 19, 2010
- Anticipate an HST flurry as this new economic plan comes into effect July 1, 2010. This extra 8% tax will have a very detrimental impact on our industry and will be an additional cost on all legal, moving, commission and renovation costs, not to mention extra tax on all condominium fees.
- Possible changes in financial tools. This includes both limiting the amortization period of mortgages from 35 to 25 years and increasing the minimum down payment to approximately 10%. By altering these financial options, many first time buyers will no longer have access to the booming real estate market.
For some good news…The Canadian Association of Accredited Mortgage Professionals conducted a study examining 40,000 loans issued in 2009. Jim Murphy, the association’s president, said that the publics choice of “longer fixed terms and borrowing less than the maximum goes contrary to the perception that Canadians are taking on too much debt to take advantage of low interest rates”. * They found that 86% of new mortgages issued were fixed term – this is good news for our supposed “bubble”! Keep this in mind…
My recommendation? Buy now, buy often! If you are considering a real estate move, whether buying or selling, the sooner the better! Don’t forget to contact me first to discuss your real estate portfolio.
*“Canadians Playing it Safe with Mortgages, report finds”, Globe and Mail, January 14, 2010
