With the end of summer now upon us, the much anticipated Real Estate fall market in Toronto is in full swing. With market activity having significantly increased after the Labour Day long weekend, there are several factors aligning both locally and globally, which may coincide to influence the market dynamics for the remainder of the year.
Although we briefly mention them below, be sure to read the reports and forecasts recently released by RBC and TD Bank, that address both the housing trends and stock market. Kindly contact us if you´d be interested in receiving them.
These are the top factors that in our opinion may have or will continue to have, a short term impact in our local housing market:
1. Low Interest Rates:
As Canada continues to struggle with low oil prices and a slow performing economy, mortgage rates continue to be at rock bottom. Historic levels are at their lowest following the second rate cuts experienced last July. This will continue to be the most significant overall factor and catalyst of the housing market's upward price trend. For reference, current variable rates are being offered at just below 1.99%.
2. Limited Low Rise Housing Inventory:
Toronto continues to experience a so-called two-tier market, where both the house and condo segments dictate different patterns of behaviour. The condo market continues to have a steady supply of new inventory, with a somewhat straightforward pricing structure. The low rise freehold market's flip side stands out with a significantly limited amount of houses available. Their prices are mostly driven by the market's short supply and high demand.
With a strong buyer appetite, given the enhanced affordability provided by lower interest rates, the last stretch of this year's Real Estate market may prove to be highly competed for buyers wanting to secure a home in the freehold segment.
3. Weaker Canadian Dollar:
The current exchange rate between the Canadian and American dollars is giving foreign buyers and investors an extra incentive to buy locally. With the American dollar providing an extra 30 cents on top of each Canadian dollar, our housing inventory presents itself to many foreign buyers at a discount.
4. Devaluation of China's Yuan:
Early in August, China's central bank started a three day devaluation spree of its currency, the yuan. Losing more than 2% of its value, the ripples of this action have prompted a significant shock to the global financial markets. As reported by The Economist in an article earlier this year, "a falling yuan might spur the outflow of capital in China". With Vancouver's and Toronto's real estate markets being heavily influenced by Chinese buyers, this expected capital migration could likely find refuge here.
5. Volatile Global Stock Markets:
As China seeks to stabilize its economy after a recent devaluation of the yuan, shockwaves have been felt through the global stock markets. While the local Chinese stock market has been affected, Wall Street reported losses for 6 straight days in late August, "its longest losing stretch for more than 3 years" reported an article from The Guardian.
As investors carefully watch their investments perform, many with a lower risk tolerance, may likely consider the traditionally safer investments in the brick and mortar segment.
6. CMHC Policy Revisions on Rental Income:
Effective September 28, 2015, CMHC will be considering 100% of the rental income used for buyer qualifications. This will help bolster a buyer's ability to purchase properties with an income component (basement apartment, duplex, triplex, Etc.) and may ultimately put additional upward pressure in the sales of this segment of the housing market.
For full details, please visit the following link:
CMHC´s Changes to Rental Income Policies for Borrower Qualification Purposes.
We believe that an informed buyer or seller, or for that matter a settled homeowner, will all be able to make better decisions based on tangible facts. This is a sensible way of keeping the pulse on what's happening in our local real estate market.
If you feel that someone you know can benefit from reading this brief analysis we've put together for you, by all means, forward it to them. We will be happy to assist with any questions you or anyone close to you may have, in order to better plan for future Real Estate related decisions.
All the best to you!
Jose Castillo & Claudia Pardo
Real Estate Sales Representatives - ABR®, SRES®
RE/MAX Hallmark Realty Ltd.
m 647.994.0034 | 416.465.7850 o
m 647.995.5440 | 416.463.7850 f
785 Queen St E, Toronto ON M4M 1H5, Canada
PS: Our business is mainly based on referrals from our existing and past clients. If you know someone who could appreciate the level of service we provide, please call us with their name and business number. We'll be happy to follow up and take great care of them.
Jose & Claudia
RE/MAX agents since 2001, avid negotiators and passionate for what we do. Buying, selling or renting your home with us has never been easier!