2018 Should Be Your Year to Buy
Last week I took my daughter to her uncle’s place in Mississauga for 8:00 am from our home in Lawrence Park for “Take Your Kid to Work Day”. I drove back to my office in Leaside and then returned to get her at the end of the work day and we went home. That day, I spent 6 hours in the car. It comes down to a supply issue. The number of people who want to live in the city is going up much faster than the number of homes available.
CIBC released a fascinating report Tuesday by CIBC Senior Economist Benjamin Tal where he talks about supply issues in both Vancouver and Toronto driving up prices again after a short-term lull. He notes both Provinces’ attempts to slow things down without addressing the fundamental issues facing the market but feels the temporary relief will be coming to an end.
He expects the new stress test qualifications (requiring all uninsured borrowers to qualify against the Bank of Canada’s five-year benchmark rate) to impact mortgage origination by as much as 15% despite the fact that there will be much less change in demand.
He feels the main issue facing Toronto is land supply. Land prices are now at a record high of 55% of total sale price.
As you know, Canadians are living longer, and the elderly are choosing more and more to stay in their homes, releasing only 4,000 homes annually over the next decade.
There is a government quota goal to bring 450,000 new immigrants annually into Canada and these numbers don’t even take non-permanent residents into account.
As well, more and more kids are choosing to live at home. All of these buyers are “insurance against long-lasting significant price decline”.
The impacts of higher interest rates and regulatory changes will be balanced the market more short term but those changes won’t last because of low supply issues and increasing population. “At this point we do not see any real relief. In fact, the opposite is the case. Without significant changes to land and rental policies alongside a dramatic change to housing preference among buyers, (Toronto) will become even less affordable”.
He believes buyers will eventually have to come to terms with the fact that they won’t be able to afford their dream detached home. “Not everyone is going to be able to live in a house,” and adds “If you look at the long term trajectory, and where prices will be say 10 years from now, I think they will be increasingly more and more unaffordable to the average Canadian”.
If you are thinking of buying but waiting for prices to drop, I urge you to consider looking for something in the next 12 months. Come on out with me, I always know of some great overlooked opportunities and I don’t want you to miss the boat!