Recently, someone asked me how the market was doing? I thought for a second and responded with, “It’s good… for someone.”

A positive spin can be put on market news regardless of the direction in which the pendulum is currently swinging. Our hope for you, dear reader, is that you walk away from this report with a better (as unbiased as possible) understanding of the Toronto real estate market and the outside forces currently affecting it.

Rate wars in full swing

We’ve been seeing it happen for months. The Bank of Canada has been dropping their overnight lending rate again and again, hitting a rock-bottom 0.25% at the end of March and it hasn’t budged since. The lower overnight rates have meant that lenders have considerably more wiggle room in their negotiations; And in the months following we have, in turn, watched the major banks and smaller lenders alike fall over each other to compete for business, ultimately resulting in mortgage rates that have dropped to unprecedented all time lows. 

Our parents’ and grandparents’ eyes are popping out of their heads right now. 

Here are two standout situations we’ve personally witnessed recently:

Client 1: Was offered a rate of 1.99%. They took that to TD, who in turn offered them 1.89%. Finally, they took that rate to a third lender, who offered them an astonishing 1.85%!

Client 2: Was offered a rate of 1.81% with $2500 cash incentive, making their effective rate 1.74%.

AirBNB is Dead

Renters rejoice! AirBNB is dead (long live AirBNB). The City of Toronto has taken control of the competitive rental market, implementing some pretty groundbreaking rules for short-term rental operators. 

For anyone not completely up on their real estate terminology, a short-term rental is anything rented out for fewer than 28 days at a time. 

In addition to only being permitted to rent out your primary residence, other new rules being implemented include: a maximum 180 nights a year allowed when renting out your entire residence, up to 3 rooms in your home can be rented for an unlimited number of nights, operators need to register their property with the city (registration opened on September 10th and must be completed by the end of the year for any units currently in operation), a city-issued registration number must be included in the listing, and a new 4% (Municipal Accommodation Tax [MAT]) tax will be collected and remitted quarterly starting January 1, 2021.

Major John Tory was quoted as saying, “This is good news for Toronto residents and a step in the right direction when it comes to regulating short-term rentals and maintaining the peace and quiet of our neighbourhoods.  This system will provide crucial oversight of operators and ensure that they are held accountable and only operate within their principal residences,” and while it has had a calming effect on the rental market, not everyone is happy about the change. 

These rule changes, without a doubt mean the end of AirBNB businesses within our city and there is concern that the condo market will start seeing some blow back, as a result. We’ve already seen a flood of new inventory in the condo market, but more on that later.

A tale of two markets

When discussing the market this month, it’s not enough to share the average home price in the GTA and move on– a new all-time high of 951K*, by the way– we have to dive a little deeper, because upon closer inspection we start to see that beneath the headline-worthy averages, there is a story or two very different markets. 

On the freehold side, sale prices and inventory levels continue to shock and amaze Torontonians and agents alike. And a quick look at the year-over-year changes in sale price by home type makes it abundantly clear that freehold homes are leading the charge on price increases in the city. Detached homes in the GTA sold for an astonishing 19.9% more than this time last year, compared to a (still respectable) 9.5% increase in condo prices year-over-year.

We worry though that ballooning condo inventory will start to drive pricing down in this corner of the market. Let’s take a look at the inventory levels of semis in Riverdale (E01) and condos in the downtown core (C01). From the chart below, we see that the ratio of sales to listings has remained relatively stable in E01 between February and August of this year, keeping the average sale stable. Notice the number of new condo listings in C01 this month. It’s almost quadrupled! We can see that the number of sales remained steady, so the demand is still there, but the rising inventory spells trouble for anyone looking to sell a condo in the immediate future. 

We’ve said this in months past. COVID has driven people out of the core. People are craving more space and moving out of the city, tenants are moving back home, universities are hosting lectures online and campuses are at 25% capacity. Pair this with low immigration and the recent changes to AirBNB it’s a recipe for a (temporarily) quiet core. 

There’s no need to fret if you’re a condo owner. Prices may drop in some areas and some buildings. But, Toronto is still a world class city and once immigration picks up and people get back to “normal life” prices will start to stabilize. And anyone needing to sell sooner, can rest easy knowing that high quality layouts and good buildings will still sell for their full value.

* all home types, all of GTA, August 2020.

Reno Woes

With everyone stuck at home and desirable properties harder to come by, it’s tougher than ever to find contractors and designers to renovate your home. Ask anyone who hoped to install a pool this summer. Companies are booked up until next spring. And the contractors themselves are having inventory issues. There are shortages of lumber, tiles, and cabinets, etc. 

If you’re thinking about starting a reno, good luck. Lead times are not going to be your friend. But, if you’re determined to renovate. Do your homework before signing on the dotted line. It was already hard enough to find a good contractor and the stakes are higher now. 

Here are our five tips for choosing a good contractor:

• Ask for references. Ask your friends, family and neighbours who they’ve worked with, and if you can’t find anyone that way, ask the contractor to speak to some past clients to get an idea of what to expect if you choose to work together
• See examples of past work. Most trades will have a portfolio of past work. It could be hosted on their website or as simple as an instagram feed. Either way, be sure to get photo evidence of past success stories.
• Get things in writing. Make sure that you get a written contract before handing over any money (or demo starts) and READ all the fine print. If anything looks iffy, ASK about it. Don’t just sign their contract. Get them to sign yours. When payments are due, what milestones will be defined and detail what the finished product entails. 
• Always get 3 quotes. No matter how good the first guy seems, make sure to interview a few people. Some contractors overcharge when they don’t want to take a job and some contractors undercharge and can’t deliver on what they promise. If it seems too good to be true, it probably is.
•  If someone seems sketchy they probably are, and at the end of the day, you have to trust this person to work in your home– sometimes when you aren’t there. We wouldn’t give our keys to just anyone. Would you?

If you’re looking for advice on finding a contractor, starting a renovation, or navigating this wild market. We’re here to help.