A recent global happiness survey conducted by the World Happiness Report has shown that Canadians now rank 15 on a country by country scale. This is a 5 place drop from Canada’s previous rank of 10.
On an absolute and relative level, the conclusion is simple: Canadians are not happy.
You might argue that Canadians are happier than people in Moldova or India, and you’re probably right. The thing is, people don’t measure satisfaction based on how bad things could be. They compare their standing against others around them. And against their own experiences.
The whole world has gone through lockdowns, Covid deaths and massive lifestyle changes. So if everything were equal, you’d expect the rankings to remain constant. Clearly, Canada is going through something other countries aren’t. The right will blame the left. Left the right. There’s so much subjectivity in these kinds of surveys that who’s to really know.
One thing is clear though. The countries with the happiest citizens are socialist paradises: Finland, Denmark, Switzerland, Iceland and Netherlands. These are countries that take care of their people. Indeed, 9 of the top 10 countries were European.
The anomaly was New Zealand – probably the most European country outside of the EU. Canada used to fit that description.
So what went wrong? The most objective answer I can provide is economic. A growing proportion of Canadians can’t afford one of the most basic of Maslow’s needs: Shelter.
Rents and home prices across Canadian regions with the most jobs are higher than almost anywhere else in the world, in relation to median incomes. Moreover, the unaffordability gap is widening. Every day, housing prices are rising faster than most individuals’ ability to save for a down payment.
It used to be that a nuclear family could live quite well off a single blue collar wage. Today, many Canadians are abandoning the idea of ever having kids – they have nowhere to put them.
I’m not saying these Canadians are living on the street. They’re living with parents and sharing apartments. But they’re doing so way longer than previous generations. With the light at the end of the tunnel shrinking, this dependency on the kindness of others to meet a basic physiological requirement is stressful, and unusual for most Canadians throughout modern history.
When basic physiological needs – like shelter – are not met, people are unable to pursue safety, belongingness, esteem, and self-actualization. They are unable to develop as humans, therefore limiting their capacity for happiness.
I recently hired two people to join my team, which is domiciled in Toronto. Both of my new employees live miles and miles away from the GTA. One jetted to Montreal when the pandemic started, and honestly I don’t know if he’s coming back.
Who can blame them? These are well-paid individuals, but who can afford to live in Hog Town? Certainly not people in the early stages of their career.
And those that do live in the GTA require a premium to make it all work. Wage growth overall has fallen behind housing price increases, but those in demand can hold out for higher wages. Want a highly-skilled Toronto employee? Then better be prepared to pay Toronto wages! Of course, it doesn’t work that way for all. Low-skilled workers are sharing apartments and living with their parents, as Toronto is now a city that is only accessible to the wealthy.
It’s a sad state of affairs. But one to which employers must adapt.
Highly skilled people are moving further and further away from the Big Smoke, simply because – even with decent wages – they can’t afford to live in Toronto.
If Toronto is to remain a business hub, three things must happen: 1) housing stock must increase to dampen housing price appreciation, 2) demand from speculators and money launderers must be squashed, 3) regional transit must improve to allow suburban dwellers to quickly commute to the city, 4) companies must embrace remote working beyond the pandemic, 5) companies must decentralize head office work by setting up offices across a wider region and 6) companies must raise wages to attract talent that is leaving for cheaper cities.
Hiring skilled employees is a highly competitive marketplace. If a prospect has multiple options, they will go with the company that is more flexible and willing to let them work from a location that doesn’t put them in debt for several lifetimes or pays them a premium for coming into a Toronto office.
Many companies are dealing with this problem by shoving their heads in the sand. Executives don’t realize how big this issues is because they tend to hire more senior employees earning $150,000+ salaries who have been on the property ladder for 10+ years.
For middle-managers and supervisors in the trenches, the prospect of hiring a junior-level employee for $55,000 is laughable. Anyone willing and able to accept that salary either lives with their parents or lives 100 miles away. And when a business is able to hire someone at this level – knowing the housing situation at hand – that person will quickly seek to move up the ranks. That means far less loyalty from junior employees than what companies might have seen in the past.
Due to the housing bubble, the war on talent in Toronto has evolved dramatically over the past year or two. Businesses that ignore the problem will lose talent. Businesses that embrace the challenge will become attractive places to work.
Many of these locations previously had lineups 9-5, Monday to Friday (or at least during the peak times [morning and mid-afternoon]). What does it say about the long-term viability of downtown commercial real estate when dozens of Starbucks locations are willing to abandon prime locations?
Is Starbucks closing all these Toronto locations because it realizes office occupancy won’t recover for at least several months?
Or because it believes office occupancy will never fully recover?
Hard to say.
Still, one could argue that Starbucks had too many locations to begin with. However, the company is not known for being reckless with its real estate footprint. I would think this retreat is not caused by simple redundancy. Rather, I assume Starbucks believes the strategic long-term viability of its downtown presence has changed.
When we’re past Covid-19, life might look very different. And not just because your local coffee joint is gone.
Below is the full list of Toronto Starbucks locations that are closing imminently:
Bathurst and Fleet (600 Fleet St.)
Bay and Elm (686 Bay St.)
Bay and Grosvenor (37 Grosvenor St.)
Bloor and Bathurst (494 Bloor St. West)
Bloor and Gladstone (1090 Bloor St. West)
Church and Gerrard (66 Gerrard St. East)
Davisville and Yonge (1909 Yonge St.)
Dufferin Mall (900 Dufferin St.)
First Canadian Place (Sat)
Front and Jarvis (81 Front St. East)
Hillcrest Mall (9350 Yonge St.)
King and Peter (370 King St. West)
King and Sherbourne (251 King Street E.)
PATH Concourse, Royal Bank Plaza – closing Sunday
PATH Concourse, Richmond Adelaide Centre – Closing Sunday
Promenade Mall (1 Promenade Cir.)
Queen and Ossington (2 Ossington Ave.)
Queens Quay and Lower Jarvis (132 Queens Quay E.)
Scotia Plaza (40 King Street West) – closing Saturday
St Clair and Bathurst (504 St. Clair Ave. West)
Wellington and John (224 Wellington St. West)
Wellington and Simcoe, RBC (155 Wellington St. W) – Closing Saturday
Wellington and University (55 University Ave.)
Yonge and Wellesley (8 Wellesley St. East)
Yonge and College (450 Yonge St.) – Closing Sunday
In aggregate, Toronto real estate continues to break price records. However, if you dig into the data it is clear that there are wide disparities within the market.
Source: TREB
Month to month price changes and listing/sale data for Toronto real estate shows some market softening.
Source: Listing.ca
When broken down by property size and type, it is clear that the most weakness within Toronto’s real estate market exists within the condo sector.
Source: ZoloSource: Zolo
Prices are rising faster outside of Toronto-proper. The change in average price is strongest in Oakville and Oshawa. Toronto detached prices rose 11.2% year-over year, while Toronto condos saw the weakest price growth.
Generally, lower-priced Toronto real estate is taking longer to sell while properties in the $750K-$2.5M range are selling much faster than before. This is likely because condos are a big portion of the lower-priced segment.
Source: Zolo
Again, the chart below demonstrates the big oversupply of condos in Toronto.
If you own your home (i.e. mortgage free) and over age 60, you’ve likely seen ads for reverse mortgages. A 30 second ad can make a reverse mortgage appealing, however you must consider the true cost.
Note: For reference I’ve posted a couple ads below:
Essentially, a reverse mortgage is a loan (using your house as security) on which you don’t have to make re-payments. Instead, any interest accrued on the loan simply gets added to the principal. While the thought of not making payments can sound enticing, a reverse mortgage can be one of the more expensive ways to access money in retirement.
People get reverse mortgages to access the equity in their homes to pay off debt (including a pre-existing mortgage), cover medical expenses or make home modifications. Many use a reverse mortgage – as opposed to other forms of debt – because they don’t have to make payments until they (or their estate) sell their house. This frees up cash-flow. Homeowners are still expected to maintain the property and pay all property taxes and insurance costs, or risk foreclosure.
Before using a reverse mortgage, people must be aware of the total costs. I believe there are usually better alternatives.
First of all, the interest rates on reverse mortgages tend to be higher than conventional mortgages. Home Equity Bank sells the CHIP Reverse Mortgage and provides a bar chart that compares loan rates below. Based on the information they provide, the interest rate on reverse mortgages tends to be about double that of conventional mortgages, but cheaper than unsecured loans, credit cards, etc.
I frequently say reverse mortgages are expensive, but I’ll admit they’re still cheaper than some alternative forms of borrowing. However, there is more to the total cost than the interest rate alone.
Since you’re not making interest or principal payments on the loan, interest expenses get added to the principal. This is what really drives the cost of a reverse mortgage.
Effectively, as the mortgage compounds you pay interest on interest. In other words, the amount you owe grows at an exponential rate over time. The table below – again provided by Home Equity Bank – shows how a $150,000 loan becomes $204,939 in only five years at a 6.34% mortgage rate.
If we extend that scenario to ten years, the total amount owed becomes $282,299. That’s almost double the amount of cash originally received when the loan was originated.
The CHIP Reverse Mortgage allows homeowners to access up to 55% of the value of their house. So let’s imagine you’re sitting on a fully paid-off houses in Toronto worth $909,090. Using a CHIP reverse mortgage you can borrow $500,000. As you can see in the graphic below, in ten years, you owe $940,996 – more than the value of your home when you took out the loan.
Of course, during the decade the value of your home might also rise, in which case you would still have positive equity. Regardless, in the end you’re paying $1.82 back for every dollar you borrowed. As you can see, the cost of a reverse mortgage is almost equal to the amount of the original loan.
Some borrowers might not be bothered by this – in the end it’s not their loan to repay. At death, the estate will sell the house, repay the reverse mortgage and whatever’s left over will go to the deceased person’s heirs.
However, the family unit might not want to sacrifice a million-dollar asset in exchange for $500,000, while praying the house appreciates in value over time so there’s something left over. Despite the experience in Canada over the past couple decades, housing prices don’t always rise – just ask someone who owned a Toronto home in the 1990s.
A fully paid-off house represents your lifetime of sacrifice and effort. To swap it for half its value and hope to get something in the end is a waste and a gamble, in my opinion. While history has shown that real estate prices keep up with inflation, this should not be the expectation when getting a reverse mortgage. In my opinion, any form of borrowing should be made under the most conservative assumptions.
If you or anyone you know is considering a reverse mortgage, PLEASE be aware of the true costs. Get the family together and consider whether it makes more sense for other family members to help cover retirement expenses to help preserve ownership of the house within the family. If you must borrow, consider using a more conventional loan that gets repaid over time. This will help avoid the costs of compounding.
If there are no other alternatives consider selling the house.
In this case you’d get $909,090 today. (For simplicity’s sake, I’m not considering transaction costs of either selling or entering the mortgage.) The $500,000 could be used to fund retirement costs. The remaining $409,090 could be invested and withdrawn to pay for an apartment. If your investments earned 5% and you withdrew $2,000 per month for an apartment you’d still have $361,917 after ten years. Would you have this much in equity in your house in ten years? Maybe. Maybe not. The thing is the liability is a sure thing, the asset price is not. Of course, the value of the portfolio isn’t a sure thing either. However, it is liquid and that has value.
Finally, I think it could be a great idea to use the $409,090 to purchase a larger house so you can live with the rest of your family. The money then remains in the family (as opposed to paying rent to an outsider) and everyone is together.
Buying a home costs a lot of time, effort and money. Unfortunately, many things can go wrong.
I recently came across a Reddit thread in which people shared their tips for home buyers and new homeowners.
Here are some of the best tips:
Doing a bit of maintenance every year is extremely important, regardless of what type of home you buy, and do your research before you hire any contractors for any maintenance/reno work, so that you will at least have a basic understanding of what they are supposed to be doing, because they will cut corners and/or miss things, and you have to watch them like hawks and let them know that you know what they are supposed to be doing. Always get quotes before you start any work and never give them a downpayment as any reliable contractor will not need one.
Also take pictures of the work area before and after they arrive, for insurance purposes and in-case they damage anything so that you have it documented. Also, never lie to your insurance company or ‘forget’ to tell them something as that is automatically used to void any claims you may have/had.
If there is any non-tile flooring in the house, and not carpet, ask the seller what type it is and see if you can still buy any spares. Flooring manufacturers intentionally stop making models a few years after inception so that when boards crack or get stained or chipped or whatever, you have to replace the entire floor to keep everything matching, so if you have floor that is vinyl or laminate or engineered wood or whatever, see if you can still buy spares; trust me, you will really prefer the small investment now to replacing the entire floor later on.
Ask other owners in the building (if it’s a condo) if the building has problems with leaks, and with condensation, as they are really expensive to deal with and are driving up building and unit insurance rates (at least in Ontario), and if the building has a problem with condensation then it can cost you thousands of dollars to repair if your unit is deemed to have been the cause of it.
The home inspector should catch this, but check that all of the circuit breakers actually do what their labels say that they do, as if they don’t, this is a bright red warning sign of a bad wiring job, and probably means that they did a bad job in other ways too, which won’t just be expensive, but could be a fire hazard as well. If you can, try a few of the outlets too, to make sure that they are working (often they aren’t, or only one will work at a time if they are stacked), and to see if they get hot quickly, as this is another sign of a bad wiring job, but again, the home inspector should definitely check this.
If it is a condo, read all of the Condo board’s documentation, as different buildings have different definitions of what is considered ‘commons’ responsibility’ and what is considered the unit owners responsibility, and that especially goes for pipes/plumbing. The condo documents should clearly state where your responsibility starts and ends, and you need to know this because if something goes wrong (burst pipe that leaks into the unit below), they absolutely will not tell you that actually on page 48 it states that toilet pipes inside the walls are actually common elements and not your responsibility, they’ll just bill you and hope you don’t catch it.
Don’t make an unconditional offer that you can’t or won’t honor. If the seller accepts it, and then you pull out, and the owner sells the property to someone else for below the price you were offering, they can and will sue you for the difference, and most likely will win. If you do include conditions, make sure that they protect you and are reasonable for the other party to fulfill, and expect that they will be fulfilled, otherwise you can get into an ugly dispute with them if you then want to try and back out on account of the conditions not having been fulfilled.
Don’t buy a fixer upper unless you have the cash and time to fix it up before you move in. You will just live in a constant Reno house for years.
Get the sewer line scoped. Find the inspector yourself not through the realtor – check wiring, electrical boxes/panel, crawl space insulation/vapour barrier. Make sure you test each light switch to know what it does and that it is working. If it has fireplace make sure it is WETT inspected, up to code etc.
Remember that the most costly expenses are to the things that you can’t typically see… wiring, plumbing, sewer lines etc. Be sure to run the hot and cold water lines independently in each room then go to the basement and listen. You may hear something out of the normal; hammering, drips etc. Same goes for running the washing machine and checking that the sump pump operates (if it has one)… it can all be a bit overwhelming at times, but it will help you better understand what might be an issue that you’ll need to address in the future… and be prepared to negotiate. The furnace in the house we bought was 20 years old, so we negotiated a percentage to replace based on typical life span, same for the sewer line… your diligence might lose you the house depending on market conditions, but will save you a whole lot of hurt down the road… and remember, three quotes for any work that you need to have done… and make decisions based on level of detail provided in the quotes and checking references/reviews… it is YOUR money and you CHOOSE how to best spend it and you can only do that with information/data… emotions are not your friend 🙂
Get the inspector to actually go up on the roof to inspect it. Ours just looked from the ground and missed that the flashing was not done properly. We had the surprise of a leaking roof when we replaced the windows before moving in and had to redo the roof there and then. I tell you, its not fun having to find an extra 10k when you put all your free money in downpayment, closing costs and planned pre-move-in repairs/renos. Many inspectors are older and refuse to go up on roofs. Find the thorough ones.
Visit the neighbourhood different times of the day. Do the commute to/from work to see how it is. Make sure you can put aside money for an emergency repair. Plan to replace any rental hot water heater (I have no idea why those are still a thing).
Don’t rush into furnishing your home. Many homeowners tend to go all out and buy everything they can to fill every nook and cranny. Yes it’s hard to see your new home empty or filled with old second hand furniture. Furnish as you go and start with the rooms you use on a regular basis. You WILL find deals and things that fit the rooms style or need, just be patient!
What the bank says they’re willing to lend you is NOT the same as “what you can afford”. Figure out what $ of mortgage you are willing to pay and how much downpayment you can put down, and ask your broker what that translates to in terms of house price. Also factor in insurance, upkeep, maintenance, repairs, replacements, move in costs, furnishings, etc etc. You do not want to be “house poor”. Live in a decent house, but can’t afford to pay for anything else. A few of my friends fell into this trap and regret it every single day.
If you buy an older house try to budget for a new furnace, hot water tank and attic insulation.
Always have money on the side for emergencies. After 4 years of owning my condo townhouse the condo board decided to replace all windows at owners expense, I was given 6 months to cough up $7,800.
On my next house, I was excited to not live in a condo anymore. I had bought a bungalow. 1 year after purchase the french drain was at end of life and water started seeping into my basement. The insurance company paid for 2 sides of the houses french drain replacement. I made the tough decision to pay out of pocket for the remaining 2 sides. It amounted to $11,000.
There will always be big budget unexpected expenses. Have some money on the side to be able to cover them.
Make sure you want to stay there for 5-10 years. Unless it’s extenuating market circumstances, I like the 5 year rule for housing. You’ll never make money off a sale until you’ve possessed it for 5 years.
Are you paying a fair price for home insurance in Ontario? Home insurance rates vary by city. For example, home insurance in Toronto costs about twice that in Cambridge.
With little information out there, home owners and home buyers are often left in the dark when pricing out insurance costs. The last time I had to get home insurance I had no basis for comparison. So I had to spend hours on the phone with multiple providers to get quotes.
Luckily, Zoocasa did the legwork and provides average home insurance costs by city across Ontario.
Thinking about investing in real estate? Real estate investing can be profitable if you know what you’re doing. It can also be full of headaches. Many tenants suck, so it’s a gamble. Even if all goes well, real estate investing certainly isn’t passive.
Personally, I prefer the lazy route. Plenty of well-diversified and professionally managed real estate investment trusts (REITs) are trading on the TSX with very attractive yields. In fact, the average yield on all 36 TSX-listed REITs is 7.93% (as at August 19, 2020).
Of course, there are risks. REIT yields have risen recently as many forms of real estate (office, retail, residential) are under pressure and the future is unclear. Some REITs may cut their dividend so it’s best to do your due diligence. I am not speculating on whether real estate is a good or bad investment. I’m simply saying there are options available for the lazy investor (like me) who wishes to participate in the asset class but doesn’t want to become a landlord.
Below, I’ve provided the full list of TSX-listed REITs and their yields (source).
(Best viewed on desktop)
Company
Ex-Dividend Date
Payable Date
Yield
Frequency
Dividend
Market Cap
PAR.UN
Partners Real Estate Investment Trust
May 23, 2019
May 22, 2019
33.333
M
0.015 CAD
25.8M
HOT.UN
American Hotel Income Properties REIT LP
Mar 30, 2020
Dec 31, 2020
33.046
M
0.038 USD
153.9M
SRT.UN
Slate Grocery REIT Unit Cl U
Aug 28, 2020
Aug 17, 2020
12.089
M
0.072 USD
387.5M
INO.UN
Inovalis Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
10.274
M
0.06875 CAD
227.8M
SOT.UN
Slate Office REIT Trust Units
Aug 28, 2020
Aug 17, 2020
10.272
M
0.0333 CAD
263.6M
TNT.UN
True North Commercial Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
10.102
M
0.0495 CAD
502.9M
MRT.UN
Morguard Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 15, 2020
9.877
M
0.04 CAD
302.0M
BTB.UN
BTB Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 15, 2020
9.554
M
0.025 CAD
197.3M
REI.UN
RioCan Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 8, 2020
9.399
M
0.12 CAD
4.9B
MR.UN
Melcor Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
9.207
M
0.03 CAD
51.0M
SRU.UN
SmartCentres Real Estate Investment Trust
Jul 30, 2020
Aug 17, 2020
9.087
M
0.1542 CAD
3.5B
APR.UN
Automotive Properties Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
8.187
M
0.067 CAD
370.2M
PLZ.UN
Plaza Retail REIT Units
Aug 28, 2020
Sep 15, 2020
7.999
M
0.02333 CAD
356.2M
NWH.UN
NorthWest Healthcare Properties Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
7.006
M
0.06667 CAD
2.0B
HR.UN
H&R Real Estate Investment Trust Units
Aug 20, 2020
Sep 4, 2020
6.832
M
0.0575 CAD
2.9B
CRR.UN
Crombie Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
6.799
M
0.07417 CAD
2.1B
DIR.UN
Dream Industrial Real Estate Investment Trust Units
Jul 30, 2020
Aug 14, 2020
6.25
M
0.05833 CAD
1.7B
AX.UN
Artis Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
6.236
M
0.045 CAD
1.2B
WIR.UN
WPT Industrial Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
5.838
M
0.0633 USD
1.4B
CHP.UN
Choice Properties Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
5.79
M
0.06167 CAD
4.0B
CRT.UN
CT Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
5.774
M
0.06693 CAD
3.2B
ACR.UN
Agellan Commercial Real Estate Investment Trust
Jan 30, 2019
Feb 15, 2019
5.712
M
0.068 CAD
468.9M
CUF.UN
Cominar Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 15, 2020
5.106
M
0.03 CAD
1.3B
D.UN
Dream Office Real Estate Investment Trust Trust Units
Jul 30, 2020
Aug 14, 2020
5.089
M
0.08333 CAD
1.1B
DRG.UN
Dream Global Real Estate Investment Trust
Aug 29, 2019
Sep 16, 2019
4.825
M
0.06667 CAD
3.2B
NVU.UN
Northview Apartment Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 15, 2020
4.691
M
0.1358 CAD
2.4B
SMU.UN
Summit Industrial Income REIT Units
Aug 28, 2020
Sep 15, 2020
4.455
M
0.045 CAD
1.7B
MRG.UN
Morguard North American Residential Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
4.439
M
0.0583 CAD
614.6M
AP.UN
Allied Properties Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
4.296
M
0.1375 CAD
4.7B
AAR.UN
Pure Industrial Real Estate Trust
Apr 27, 2018
May 15, 2018
3.857
M
0.026 CAD
2.5B
KMP.UN
Killam Apartment Real Estate Investment Trust Class A Trust Units
Aug 28, 2020
Sep 15, 2020
3.82
M
0.05667 CAD
1.8B
GRT.UN
Granite Real Estate Investment Trust Stapled Units
Aug 28, 2020
Sep 15, 2020
3.774
M
0.242 CAD
4.5B
REF.UN
Canadian Real Estate Investment Trust
Apr 27, 2018
May 3, 2018
3.641
M
0.156 CAD
3.8B
BEI.UN
Boardwalk Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 15, 2020
3.299
M
0.0834 CAD
1.5B
CAR.UN
Canadian Apartment Properties Real Estate Investment Trust Trust Units
Aug 28, 2020
Sep 15, 2020
2.986
M
0.115 CAD
7.9B
IIP.UN
InterRent Real Estate Investment Trust Units
Aug 28, 2020
Sep 15, 2020
2.409
M
0.02583 CAD
1.8B
Average Yield
7.93
Median Yield
6.04
All data is provided ‘as-is,’ ‘with all faults’ and ‘as available.’ We do not guarantee the accuracy or timeliness of information available. As at August 19, 2020. Source
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Despite the worst recession since the Great Depression, Toronto real estate is booming.
The boom isn’t occurring because of affordability. The proportion of income used to pay mortgage principal and interest, property taxes and utilities is approaching the 1989 high.
The Toronto housing market is bifurcated. Condo listings have risen dramatically, as Airbnb hosts abandon ship. Meanwhile, listings of detached homes have plummeted. Prices have reacted accordingly, with condo price appreciation lagging behind. The median detached home in Toronto has appreciated by 28.2% over the past year.
Despite the difference between listings, months of inventory for both condos and detached homes in Toronto remain very low. Toronto remains a tight housing market.
The state of the Toronto housing is also showing up in average days on market data. At all price points, home sales in Toronto are actually happening faster than in 2019.
Source: ZOLO.ca
As a result, prices have risen across all home sizes for detached homes in Toronto year-over-year.
Source: ZOLO.ca
Similarly, Toronto condo prices have risen across all sizes, but (as previously indicated) to a lesser extent.
What happened to the real estate crash everyone was predicting?
While the lockdowns did create a dip in prices across Toronto. Prices have recovered from the dip. Note, however, Toronto got a boost from a hot market going into 2020 before the lockdowns occurred (see the February price increase).
Government benefits are helping to keep the system whole.
48% of the Canadian workforce is currently receiving CERB (Canadian Emergency Relief Benefit). That equates to over 20% of the population for most provinces, with a huge proportion of beneficiaries residing in Ontario alone.
The question remains: are these benefits propping up the Canadian housing market and can they be gradually removed without creating significant housing market disruption?
People dive into home ownership with eyes half shut. Many do rough budgets and rely on their mortgage providers to tell them what they can afford. But few are prepared for the realities of home ownership.
People step into the housing market with the minimum deposit and the assumption that they’ll soon grow equity. They believe real estate prices always rise, they’ll always have a job and the sun always shines. Few plan for unexpected expenses like leaky roofs and busted appliances. Even fewer plan for unemployment.
Instead, they binge on house porn and the orthodoxy of marble finishes. This sets an extremely high bar for interior design, squeezing the final drops of their borrowing capacity to renovate otherwise perfectly functional living spaces.
All this has worked in the past as house price appreciation created equity that helped people turn their houses into ATMs.
Today, however, incomes have been gutted and about 16% of Canadian mortgages are being deferred.
New buyers entered home ownership with zero bandwidth for financial trouble. Even those who owned for a while, benefiting from the tail-end of a housing boom, have pissed away their gains by keeping up with their friends and neighbours. New cars, travel, outings. Nothing was sacrificed to pay down debts.
The people behind these mortgage deferrals are on financial life support. They effectively can no longer afford their homes and are depending on government handouts and the ‘kindness’ of creditors. While some are victims of bad timing, many of the wounds are self-induced.
Below, in a rare interview (she is retired) money maven Gail Vaz-Oxlade provides her candid, in-depth thoughts on the current housing situation. In it, she discusses with John Pasalis (President of Realosophy Realty) the following and more:
Is it time to buy a house?
When is the right time to buy a house?
How does home ownership change your life?
How do you know you’re financially ready for home ownership?
