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Condos in Toronto

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Toronto Real Estate

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Tag Archives: carrying costs

Toronto real estate to flatline in 2013

Susan Pigg – Toronto Star

Toronto house prices are expected to flatline rather than fall in 2013 — gains should average just 1% — with the “cyclical correction” that has taken hold since spring likely to be more short-lived than severe, according to a new report from Royal LePage.

Comment: Actually they predict a 1% price increase NATIONALLY, not in Toronto. Same as Remax, 1% average NATIONAL price gains. I think Toronto might see something that low, but more likely in the 3-5% range. Depends what happens with condos and what the market as a whole does in the spring.

“Very modest home price appreciation will be the norm for the next two years,” the realty company says in a national housing market survey released Tuesday, noting that further declines in Vancouver house prices, and the softening in Toronto’s condo market in particular, will have a “significant dampening effect” on Canadian average house prices in 2013.

Comment: Modest appreciation, but appreciation to be sure. Certainly not the stupid 25% drop that some have predicted. The same drop that has yet to materialize…

However, fears of a “sharp or drawn out collapse are unwarranted,” it notes, adding that prices have simply outpaced wages for the last three years “and the market requires time to adjust.”

Comment: But prices and wages do not correlate, they never have. Wages and monthly costs are what matter. In 2010 the average price was $431,276 with mortgage rates around 4% – for a monthly cost of $1,833. In 2012 the average price was $497,298 with a mortgage rate of around 3% for a payment of $1,901 – $68 more per month, about 1.2% per year. Wages increased around 2% annually during the same time. So no, there is no real disparity between wages and monthly carrying costs.

“The silver lining in every real estate market correction is that there is a balance shift,” says Royal LePage president Phil Soper in a statement. ” … Canadian home buyers will see momentum shift in their favour this spring.

“They should be met with more choice — and stable prices.”

Comment: But once buyers sense it is their market, they will come out droves – which will create competition and will likely push prices back up again.

First-time homebuyers, who realtors and housing experts feared have been virtually locked out of the market by tighter mortgage lending rules imposed by Ottawa, “are adjusting to the new requirements by opting for cheaper homes or saving longer,” says the survey.

Comment: And it is the saving longer that is going to be telling. Do they come back in the spring and summer, after 9 months or a year of extra saving? That is what will truly tell us the state of the Toronto real estate market – and the national housing market as well.

While bidding wars and bully bids dominated the busy spring market in 2012, come summer realtors began to see “a disconnect” between buyers and sellers: Buyers have been holding off, anticipating a slump in prices, while sellers have dug in their heels, determined to wait and see if spring 2013 brings some heat back to the cooling market.

Comment: And as long as the sellers hold out, the buyers have nothing, no bargaining position.

The lack of enough houses for sale in Toronto last year to meet demand helped boost the price of a two-storey home by 6.2%, to an average of $668,133 year-over-year by the fourth quarter of 2012. A detached bungalow climbed 4.9%, to $558,345, during the same one-year period.

Comment: And the gold standard 2-storey detached is flirting with $900,000!

Toronto condos averaged year-over-year gains of 2.6%, ending 2012 at an average $356,865.

“The pipeline of buyers in Toronto seeking single-family homes will remain strong throughout 2013,” according to Gino Romanese, a senior vice president with Royal LePage.

The condo sector is likely to soften further, with the exception of older, bigger condos in desirable Toronto neighbourhoods that, says Romanese, “will likely outperform newer units that target investors and young professionals.”

Royal Bank CEO Gord Nixon told a banking conference Tuesday that the real estate slowdown is having an impact on mortgage lending but that the market is likely to remain solid, according to Canadian Press.

Nixon said RBC has little exposure to the condominium market, while Bank of Montreal CEO Bill Downe told the conference the bank pulled back on condo construction funding in the wake of the U.S. housing meltdown in 2007 and 2008.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.

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