elitere | Apr. 22, 2021
Well, there is no doubt that the residential real estate market has been on fire the last 12 months.
The average residential home price has shot up from about $568,000 to $765,000 – an increase of about 35%. The single detached segment of the market is responsible for most of the heaving lifting as the average price for a single detached home went from $657,000 to $900,000 in 12 months representing a lift of about 37% – and that is after the average price retreated by $10,000 as we saw a healthy uptick in home supply hit the market. No doubt the supply was a direct result of those who own homes listing to take advantage of the hundreds of thousands in new wealth. We saw some Sellers opt to move up to a new home while others have decided to rent or move into an investment property they own.
The pandemic has caused the population of Southern Ontario to spread. And with this movement prices have been influenced by those moving from higher priced areas to lower priced areas where their understanding of value has seeped into the prices being paid in the new location. This thinking combined with demand in areas with limited supply of homes available has caused prices to find new equilibrium. This price discovery has moved prices considerably in a short period of time and it is only natural for supply to increase, demand to slightly fall and prices to move down. Without this natural slowdown prices would move in a parabolic fashion to the moon. I am in no way making any predictions as that is a fool’s errand at this point, but it does seem like there will be a point where stuff just costs too much?
Recently we have had a lot of questions about the budget. I think everyone wonders how the Government keeps handing out money without needing a source other than a printer. The budget didn’t really do anything in terms of taxation. Personal and corporate tax rates are staying where they are – even as we expect a $500 Billion total deficit in Ontario by 2023/24. For now, questions about the Capital Gains Tax inclusion rate can be laid to rest though.
There has also been buzzing about mortgage stress tests changing to make it tougher to get a mortgage. There is a proposal to change the qualifying rate to 5.25% for uninsured mortgages rather than using the posted rate currently at 4.79%. This change affects those Buyers or those refinancing that have more than 20% down and will affect purchasing power by about 4-5%. What are the consequences? It will likely pull demand forward as Buyers make purchases before any change and given the demand for homes, even when the change is implemented, the number of people that are affected will likely be so diluted that it won’t affect the overall price averages. Time will tell.
If you are thinking of making a move, or if you have any questions about the market, please reach out. We’d love to hear from you.
