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TREB 2018 OUTLOOK FOR TORONTO RESIDENTIAL REAL ESTATE INVESTORS AND PROPERTY MANAGERS

TREB 2018 Outlook for Toronto Residential Real Estate Investors and Property Managers

TREB 2018 Outlook for Toronto Residential Real Estate Investors and Property Managers

2017 was a booming year for real estate in Toronto – however 2018 does not promise the same “sunny days”. As forecast by the latest TREB report, Toronto Residential Real Estate Investing and Toronto Property Management will have strong opportunities through the first half of 2018, which will potentially be slow for potential homeowners. The last two quarters are looking much better for permanent buyers, as well as for investors and property management.

The TREB report indicates that the survey conducted by Ipsos, in November 2017 shows, 26 percent of the survey takers are planning to buy a home in the next twelve months. A full 25 percent of them were worried about being able to qualify for a mortgage, as  74 percent of potential buyers use one.

The most sought after type of purchase is the detached home, but due to the higher interest rates and the new stress test, many feel they will not qualify. A number of them will be correct. Who will benefit from this? Both the Toronto Residential Real Estate Investor and the Toronto Residential Property Management groups. More people will be looking to rent.

 

INFOGRAPH WRITING TREB 2018 OUTLOOK FOR TORONTO RESIDENTIAL REAL ESTATE INESTORS AND PROPERTY MANAGERS

Here are some of the reasons why.

Interest Rates and the New Stress Test

Two of the most significant factors for the 2018 buying market are the higher interest rates and the new stress test.

In the last two quarters of 2017, the Bank of Canada increased the lending rate. The expectation in 2018 is that it will continue to rise. Two years ago, the pre-approval interest rate was calculated at 2.00 to 2.99%. In the fall of 2017, this had moved up a full percentage point to, 3.00 to 3.99%. This change and the newly mandated stress test for potential homebuyers will have a market of more people unable to qualify to purchase.

The OSFI – Office of the Superintendent of Financial Institutions, announced this new stress test in October 2017. The result was an increase in home purchases during the last quarter to avoid this. January 1st, it came into effect and “requires that any borrower with a down payment of over 20 percent, is negotiating a mortgage with a regulated financial institution  must qualify at the top of their contracted rate, plus an additional 2 percent.” This is equivalent to qualifying for a fixed five-year term, or around 5.14 percent.

Once more for the Toronto Residential Real Estate Investor, it opens up the possibilities of more tenants for your rental homes, as the potential buyers will not qualify for a mortgage. For Toronto Residential Property Management groups it supports the need for more available units, as those unable to get a mortgage, still want to live in a nice, well-maintained property.

Immigration in Toronto and the GTA

The GTA with the city of Toronto as the lead is the most ethnically diverse area of Canada, with substantial numbers of newcomers arriving almost daily. This is due to this area being recognized as one of the most welcoming for different cultures, as well as the fact that many newcomers have friends and family who already call the GTA home. At present, the Canadian government is planning to increase immigration numbers throughout 2018 up to 2020. With more people coming into the area and calling it home, there will be more need for available properties. This will benefit the Toronto Residential Real Estate investors and Property Management, as everyone needs a place to reside. If they cannot afford to buy, they will need and want to rent.

The economic outlook for 2018 is positive. The TREB report supports the view that the unemployment rate will be very low, wages will increase and there will be more consumer confidence. The desire to buy large items will be bolstered. For Toronto Residential Real Estate Investors, this positive outlook will support putting more dollars into the house and condo market. Toronto Residential Property Management groups will also do well for the same reasons.

Supply and Demand

Of the residential properties sold in 2018, TREB’s survey estimates that only 1 percent will be left vacant as investment properties. Eighty four percent plan to buy and live in their purchased dwelling and the other 15 percent will be purchased to rent. For the Toronto Residential Real Estate Investor it demonstrates the potential for financial prosperity. There will be a need for places for renters to live, especially those who were thinking of buying but are not presently able to.

In 2018, the TREB report forecasts that there will be about 85,000 to 95,000 sales, which is close to the 92,394 units sold in 2017. The Toronto area will see less detached home purchases and more condo/condo apartment sales. The report also predicts that sale units will be on the market up to three months after being available for sale. This will benefit both the Toronto Residential Real Estate Investor and Toronto Property Management Groups, as potential buyers still need somewhere to call their residence.

Most new buyers want to get a detached home. In the GTA, this group is a huge 54 percent, whereas in the city of Toronto that drops to 39 percent. The big attraction in Toronto is going to be the condo market. In the GTA 22 percent of buyers are seeking this kind of unit, but it jumps to 27 percent in Toronto. For Toronto Residential Real Estate Investors this means whatever condo units you can purchase will be in your financial favour. The same benefit will apply to Toronto Residential Property Management groups, as the hip urban address is a condo.

The outlook that the TREB report stated for 2018 has been supported by the January 2018 review. Detached homes, semi-detached and townhomes sales were down, as was the cost of a detached home. The average price was not in the predicted $800,000s, but in the mid to upper $700,000s. The condo prices did increase, although sales were also down. As these stats support the TREB report Toronto Residential Real Estate Investors and Toronto Property Management will be best served by heeding the forecast and being open to more people looking to rent.

 

Sources:

Toronto Real Estate Board.” Looking Ahead to 2018”. Market Year in Review & Outlook 2018. Pages 22-27. Online.

https://www.cp24.com/news/january-home-sales-in-gta-down-22-per-cent-from-year-ago-1.3791272

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