It seems there are certain conversation topics Torontonians never tire of: Traffic on the DVP, how well (or badly) the Leafs / Raptors are doing this season… and then there’s the real estate market.
There’s been nary a dull moment for MLS listings in Toronto in 2018, as the market has had to absorb a considerable amount of change. A number of new policies at the federal and provincial levels introduced this year and last have presented hurdles for buyers and sellers, the results of which are trickling into every level of the market and resulting in some fairly volatile reporting.
READ: Tougher Rules And Higher Rates Fade Canadian Mortgage Risk
Here's a look at the top five Toronto housing stats that turned our heads this year.
1. 100,000 Buyers Can’t Buy a Home Due to the Stress Test
The year actually kicked off with one of its biggest real estate headlines: the implementation of the federal mortgage stress test, which came into effect on January 1st. Designed to reduce the amount of risky borrowing in Canada, the national banking regulator, the Office of the Superintendent of Financial Institutions, mandated that all borrowers of new mortgages must now qualify at a tougher rate threshold than the actual (much lower) mortgage rate given to them by their bank.
READ: Are Canadians Failing The Stress Test After The Interest Rate Hike?
Simply put, this means those applying for a mortgage must prove they can still afford their monthly payments should their rate rise by roughly 2 per cent. Not only has this reduced available mortgage size for most borrowers, but it has effectively barred a good chunk of them from the market altogether. According to association Mortgage Professional Canada’s Report on the Housing and Mortgage Market in Canada, about 100,000 Canadians have been prevented from buying a home as a result of the stress test and one third (32 per cent) have experienced “significant negative impacts” on their ability to buy a home in their preferred neighbourhood. The resulting smaller buying pool has been reflected in an overall decline in national home sales activity of 12.5 per cent year over year, and down 16.5 per cent from 2016.
2. Land Transfer Tax Revenue Comes in Almost $100 Million Short
Land Transfer Tax (LTT), which all Toronto home buyers must pay to complete their real estate transaction, may be the most reviled of all closing costs, and for good reason — a Torontonian purchasing a home at an average of $864,275 can expect to pay a total $27,521 in LTT, equivalent to 3.2 per cent of the total purchase price. That’s the highest in Canada, due to the fact that 416 buyers are the only ones in the nation to be taxed LTT at both the provincial and municipal level.
LTT is also a major cash cow for the City of Toronto, bringing in roughly $800 million in revenue last year — and no, that’s not an extra zero. However, as home sales have slowed (activity was down 13.4 per cent year over year in November in the 416 region), it has taken a deep bite out of the money raked in by city council.
READ: Best And Worst Cities For Property Taxes In Canada
In fact, revenue from LTT will miss its target this year for the first time since it was introduced in 2008. To the tune of $99.2 million. Council had hoped to bring in $818 million in 2018 to line coffers. Financial experts and council critics have long warned that Toronto’s reliance on LTT puts it in a precarious position, especially if the market were to experience a serious, prolonged correction.
Council member Gord Perks, who represents Ward 4 (Parkdale — High Park) told the Toronto Star that, “Looking ahead, we will face a stark choice between keeping taxes low to protect the interests of people who own their own homes and cutting services, or keeping services at good levels and increasing taxes.”
3. Rental Vacancy at an All-Time Low
It’s no secret that Toronto’s rental market is a proverbial jungle; there have been reports of rents doubling upon lease renewal, showings drawing crowds of hundreds, and even bidding wars on who is willing to pay the most rent. This all prompted the former provincial Liberal government to introduce rent control rules as part of their 2017 Fair Housing Plan, mandating that landlords could only increase rents by the provincial guideline (1.8 per cent for 2019).
READ: Canadian Vacancy Rates For Rentals Drop Below 10 Year Average
More than a year later, however, and the city’s rental vacancy rate is alarmingly low. According to the rental vacancy report put out by the Canada Mortgage and Housing Corporation, overall vacancy is now 1.1 per cent for all rentals in Toronto, and 0.7 per cent among privately-owned units such as condos and basement apartments, which make up the majority of the city’s stock.
Rent prices also continue to rise: The Q3 rental report from the Toronto Real Estate Board reveals one-bedroom units now fetch an average of $2,163, up 9.3 per cent from 2017, while two-bedroom units now cost $2,822 — up 8.3 per cent.
4. We’ve Reached Peak Condo
Overall home sales may be slower, but nothing can dampen the rise in popularity of condos for sale in Toronto — high-density, multi-family housing types led the market in terms of price growth this year, and reached an all-time high of $615,585 in September, a year-over-year increase of 11.7 per cent. Much of this is the result of shrinking affordability among buyers, caused by the afore-mentioned mortgage stress test.
READ: Condo Market Shares (And Prices) Peak Across The GTA
“Generally speaking, annual rates of price growth have been stronger for higher density home types in 2018, including condominium apartments, townhouses, and semi-detached houses,” stated TREB’s Director of Market Analysis Jason Mercer. “In many neighbourhoods, these home types provide more affordable homeownership options…”
5. Homeowners Still Not Cool with Cannabis
Despite it now being legal to consume and grow cannabis within the confines of your home (with the exception of Manitoba and Quebec), most Canadians feel the lows of such activity outweigh, well, the highs.
READ: What Do Buyers Really Think About Pot At Home?
A total of 64 per cent of homeowners agree that smoking cannabis inside homes will decrease their property value, according to a survey conducted by Zoocasa.com. This even applies to the legal amount. A maximum of four plants is permitted under the federal legislation. But 57 per cent still feel growing marijuana indoors will negatively impact resale value. Even more telling, 52 per cent agreed they’d reconsider buying a certain property if they learned pot had been grown on the premises.
