REDISCOVER REAL ESTATE

Canadian housing bubble ripe for popping?

The “toxic” housing bubble that has been developing in Canada’s most in-demand cities is ready to pop, according to a finance mogul who has been hailed as the “Canadian Warren Buffett”.

In an annual missive to shareholders, Fairfax Financial Holdings Ltd. founder and CEO Prem Watsa said that the current situation in the Canadian real estate sector has eerily similarities to the condition of the U.S. economy prior to the subprime mortgage crisis that devastated the American finance system nearly a decade ago.
 
“Canadians have accessed their increasing real estate wealth through lines of credit easily available from the banks,” Watsa wrote in the letter, as quoted by Gaurav S. Iyer in his analysis for Profit Confidential.
 
“Sound familiar? This is exactly what happened in the United States before the financial crisis in 2008/2009,” Watsa noted, adding that the current rash of Canadian home owners overvaluing their wealth would lead to significant delinquencies (due to over-borrowing) later down the line.
 
The latest numbers bear our Watsa’s observations: Average home prices in Vancouver are 11 times higher than the average household income, while Toronto residential properties sell for 10 times that average.
 
More optimistic industry players would be wise not to simply dismiss as a Watsa garden-variety doomsayer, as the renowned executive has a record of proven forecasts—including the junk bond collapse, the Chinese real estate bubble, and the current slowdown in Western nations—to  back up his predictions of a meltdown in the near future.

Source: Canadian Real Estate Wealth

Thought this market was done? Think again...

Investors may have written off this busy housing market, but new data suggests those who put their money in it will likely earn major profits.

The Toronto condo market – which many argue has been over-built – recorded a drop in inventory and an increase in demand in the first quarter of this year.

According to Urbanation’s Q1 market results, a total of 5,615 condo units were sold in the GTA during the first quarter, up 32% year-over-year and just shy of the first quarter record of 5,680 set in 2012.

“The inventory shortage experienced for low-rise housing has spread into the high-rise segment," Shaun Hildebrand,
Urbanation’s Senior Vice President. "More and more buyers priced out of the single-family home market are looking for alternatives in the condo market, providing a clear opportunity for new development.”
 
Increased demand and a supply shortage forced unsold inventory to drop 16% year-over-year to 15,587 units. The decrease was even more pronounced in the city of Toronto, which saw its unsold inventory fall by 22%.

Supply also tightened, with 86% of units in development being sold; pre-construction projects were 70% sold; recently completed buildings were 96% sold.

There was also good news for investors looking to sell.

Resale activity increased by 21% year-over-year and total listings declined by 5%.

“In a sign that price pressures are starting to build, projects under construction increased their asking prices for unsold units by 8% from last year to $618 psf, including a 14% jump in the former City of Toronto,” Urbanation said in a release.

Source: Canadian Real Estate Wealth

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Record home sales for the GTA in April!

In the Greater Toronto Area last month 12,085 homes changed hands, the highest number of transactions recorded through the Toronto Real Estate Board’s multiple listing service in the month of April.

The sales represent a 7.4 per cent increase over the level of activity recorded during the same month in 2015, and gains were spread out across a variety of housing types.

“Demand remained strong for all types of ownership housing,” says Mark McLean, TREB’s president, in a statement.

Sales of detached homes were up 7.2 per cent compared to last April, while townhouse sales rose 3.1 per cent and condo transactions surged 15 per cent.

Semi-detached sales inched 2.1 per cent lower, but they were pulled down by a 10.8 per cent drop in activity in the 416.

Throughout the rest of the GTA, where available housing inventory is more abundant, semi-detached transactions ticked up 2.8 per cent.

In April, the average selling price of a home was $739,082, up 16.2 per cent from 12 months earlier, when it was $636,094.

Jason Mercer, TREB’s market analysis director, expects prices to continue to climb this season.

“As we move into the busiest time of the year, in terms of sales volume, strong competition between buyers will continue to push home prices higher,” says Mercer in a statement.

The average price of a detached home in Toronto proper last month was $1,257,958, which is 18.9 per cent higher than it was one year ago.

In the rest of the GTA, a detached home ran buyers $881,413 on average last month.

Toronto condo apartments cost an average of $436,545 in April, up 7 per cent from the same time in 2015. Over that same period in the rest of the GTA, the price climbed 7.8 per cent to $343,439.

There were 6,155 new Toronto listings added to TREB’s MLS in April, down from the 7,144 added during that period last year.

Meantime, the rest of the GTA saw 10,097 properties listed, shy of the 10,894 added to the MLS last April.

A greater supply of listings would certainly be welcome, but we would need to see a number of consecutive months in which listings growth outpaced sales growth before market conditions become more balanced.

Looking to buy, sell or refinance? Know your options. I can help! Direct line: 416-219-6662