Drivers and Challenges Impacting 2021 Real Estate Market in Canada

 Economic conditions will continue to improve over the course of 2021, albeit with a temporary blip downwards for GDP and employment growth in the first quarter as we work our way through the remainder of the necessary public health measures, including lockdowns and stay-at-home orders.

In the second half of 2021, once vaccine uptake is more widespread and case counts recede, expect the sectors most impacted by COVID-19, including hospitality and entertainment related sectors, to improve.

Very low borrowing costs will be sustained throughout 2021 to support continued economic recovery. Because of this, negotiated mortgage rates will remain low throughout the year as well. It is possible that mediumand longer-term fixed rates could start edging upward later in 2021 as recovery takes hold and underlying Government of Canada bond yields trend upwards anticipating rate hikes from the Bank of Canada in 2022 and beyond.

Looking longer term, immigration and net growth in non-permanent residents will trend to record levels once the pandemic has subsided with global uptake of the various vaccines. The GTA will continue to be the single-greatest metropolitan beneficiary of immigration into Canada, as the substantial federal government immigration targets take effect.

Population growth will be especially important for the condominium market.

Newcomers looking to purchase their first home or rent a condominium apartment from an investor, will see both condo ownership demand and rental demand pick up substantially, thereby helping to absorb any excess inventory of units available for sale.

The key challenge to the housing market over the next year and beyond will be a familiar one: lack of supply. Policymakers at all levels of government have acknowledged the need for a greater supply of housing and a greater diversity of housing types.

TRREB looks forward to continuing their work with policymakers to find solutions to bring more housing online

A Quick Glance at TRREB’s In-Depth Report

 2020 Market Year in Review :

The first quarter of 2020 started off strong until the pandemic hit in mid-March followed by the province-wide shutdown, which resulted in historical low market activity. However, sales growth quickly rebounded in the latter half of the year, which is a testament to the resilience and flexibility of the regional economy and population. For 2020 as a whole, 95,151 sales were reported through TRREB’s MLS® System, an increase of 8.4% year over year, whereas new listings were up only by  2.6%. The disconnect between new listings and sales accelerated the growth of price. The overall average selling price increased by 13.5% to $929,699 in 2020. Outlook for 2021 Home ownership will remain strong in 2021. Looking ahead, total home sales are expected to range between 100,000 and 110,000. In addition, the overall average selling price for all home types and areas combined will eclipse the $1,000,000 mark for the first time. 

Renting in the GTA :

Despite the economic uncertainty resulting from COVID-19, the demand for rental accommodation remained very strong in the GTA in 2020. However, the number of condominium apartments listed for rent at one point during 2020 almost doubled compared to 2019. Increased supply resulted in more negotiating power for prospective tenants, as well as a decline in average rents for condominium apartments. But looking forward, as economic growth continues to strengthen and population growth starts to accelerate, based on immigration and non-permanent migration, demand for rental units in the GTA will remain strong and potentially accelerate. 

Industrial, Office and Retail Sectors: 

 A shift in commercial market activity was experienced in 2020. Altus Group found that lockdown restrictions and gathering limitations due to COVID-19 posed challenges to the office and retail sectors, which saw year-to-date volumes drop by 61% and 20 %, respectively. However, pent-up demand drove activity in multi-family and residential land markets, and demand for logistics space to keep up with e-commerce sales led to strong investor preference for industrial assets. Investors are cautiously optimistic that 2021 will see a recovery in the second half of the year, driven by continued growth in industrial and multi-family assets, and economic improvement as a result of the vaccine.

Climbing New Home Sales:

 Altus Group also reported a solid year for new home sales. The market saw overall sales grow by 5% to almost 38,000 homes, which is above the 10-year average and the best year reported since 2017. Demand occurred across the built-form spectrum, including detached, semi-detached and row townhouse units, with both townhouse and detached sales almost doubling last year’s volumes. However, strong sales have eroded supply and have put upward pressure on prices. Sales growth was strongest in the 905 regions, with more single-family homes sold in York Region in 2020 than in the entire GTA in 2018. Looking ahead, single-family new home sales are expected to remain active, but will be impacted by declining inventories and rising prices. 

The Mortgage Industry and the Deferral:

Cliff The federal government’s response to the pandemic included the mortgage deferral program, which led 768,000 homeowners to defer their mortgage in 2020. While there were predictions of a “deferral cliff,” there has been no evidence of widespread mortgage delinquencies. Instead, Mortgage Professionals Canada found there was a rebound in activity, and similar to Realtors, mortgage brokers also had a busy year. Even in December, a time we would usually see a seasonal slowdown, activity was still strong with record-high real estate transactions. Healthy activity in the real estate sector with the continuation of low interest rates is expected in 2021. 

Bridging the Gap:

 Between Detached Homes and High-Rises As a result of municipal zoning restrictions, the majority of our urban areas lack a variety of housing – they are mostly occupied by low density single-family homes. Urban Strategies Inc. found that increasing the amount and variety of housing, or in other words, addressing the “missing middle,” in those areas could significantly, and quickly, alleviate the tight housing supply. Allowing secondary units in all Toronto neighbourhoods could result in the rapid addition of 300,000–400,000 units. Increasing the missing middle can stabilize the population in these areas and also help sustain social and retail amenities. The Urban Strategies report demonstrates excellent examples of efficient and aesthetically pleasing missing middle types of development in both urban and suburban settings. 

A Call for Action:

While some things changed, many did not. Housing affordability and tight housing supply, in addition to the variety of supply, continue to remain key issues across our communities. We also heard from consumers, and we know that demand is stronger than ever. With that said, TRREB will continue to call on policymakers to make a stronger commitment to turn the GTA’s housing challenges into long-term solutions

2021 Buying Intentions and Housing Market Outlook:

Ipsos Home Buyers Survey Results In November/December 2020, Ipsos polled GTA consumers on their home buying intentions in 2021. While COVID-19 presented a period of uncertainty, the pandemic does not appear to have dampened home buying intentions. The share of survey respondents who indicated they were likely (combined very likely and somewhat likely responses) to purchase a home to live in over the next year was 30% – in line with the 29 per cent share reported in the fall 2019 and 2018 surveys. Home buying intentions were highest in Peel Region and Toronto – over 30%

Concluding Thoughts on Market Outlook:

 1. As frontline health care workers became the first recipients of vaccines across the globe in December, raising optimism of an end to the pandemic in the coming months, we expect to see continued healthy activity in the real estate sector into 2021. 

2.The governor of the Bank of Canada has reassured Canadians that their overnight rate will likely remain at the effective lower bound until 2023, and continue with their quantitative easing through debt purchasing to ensure continued low interest rates in the credit markets. 

3.While bond yields will increase slightly with market optimism about a return to normal, the fiscal policy of the Bank of Canada and federal government will ensure mortgage rates will also remain near historic lows through much of the coming year and possibly beyond.

 4.With the mortgage deferral programs also appearing to have wound down without large foreclosures required, the mortgage market will remain strong, with our banks and lenders well positioned to continue to extend credit at very low rates. 

5. And as immigration returns and with the federal government’s increased targets for newcomers, demand should remain strong through 2021.

2021 Housing Market Outlook :

The latest Ipsos Home Buyers survey results suggest that home buying intentions for 2021 remain strong from a historic perspective. With this in mind, the following are key points summarizing TRREB’s housing market outlook over the next year: 

1 Combined home sales reported through TRREB’s MLS® System for the GTA, south Simcoe County and Orangeville are expected to range between 100,000 and 110,000 in 2021, with a point forecast of 105,000 transactions.

 2 The pace of new condo apartment listings will start to ebb, especially in the second half of 2021. With single family listings remaining constrained, expect total new listings to range between 155,000 and 165,000, with a point forecast of 160,000. 

3 The overall average selling price for all home types and areas combined will eclipse the $1,000,000 mark for the first time on a calendar year basis. TRREB’s point forecast is $1,025,000, representing a year-over-year increase of 10%.

Looking Ahead :

 Forecasting activity during a pandemic is challenging – leaving uncertainty around the impact from the pandemic on the housing market in 2021. While demand for housing in the GTA is expected to be robust, a softening rental market, restrictions on short-term rentals and sharply rising resale inventories for condominium apartments are expected to dampen demand. Single-family new home sales are expected to remain more active but will be impacted by declining inventories and rising prices. Townhouse units are expected to remain in high demand, given the relative affordability compared to apartment units, but overall sales volumes are expected to dip given the lack of supply. 

GTA REALTORS® RELEASE JANUARY 2021 STATS

 • January 2021 home sales amounted to 6,928 – up by more than 50 % compared to January 2020. This strong start to 2021 included sales growth across all major segments including condominium apartments, both in the City of Toronto and surrounding GTA regions.

• New listings were also up on a year-over-year basis in January, but not by the same annual rate as sales. This means market conditions tightened compared to January 2020, resulting in the continuation of double-digit growth in the MLS®Home Price Index and the average selling price.

• The average selling price for January 2021 was up by 15.5 % to $967,885 year-over-year. The MLS® HPI Composite Benchmark was up by 11.9 % over the same period.

• Price growth was driven by the low-rise market segments, while the average condo apartment price was down in Toronto. However, if we continue to see condo sales growth outstrip condo listings growth, we could start to see renewed growth in condo prices later this year.

WHAT YOUR CREDIT MEANS IN CANADA

“We live in a country where you can’t do much without having credit, and if you’re being responsible about it and not overextending yourself, then it’s always a good thing to have,”

Your credit file is created when you first borrow money or apply for credit. On a regular basis, companies that lend money or issue credit cards to you, including banks, finance companies, credit unions, retailers, send specific factual information related to the financial transactions they have with you to credit reporting agencies.

Credit report

A credit report is a "snapshot" of your credit history. It is one of the main tools lenders use to decide whether or not to give you credit.

Credit Score

Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. The credit-reporting agencies Equifax and Trans Union use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay.

Our credit score affects us in a variety of ways these days that we may not be aware of. It affects mortgage rates, insurance rates, and can even affect our ability to get a job.

In order to reach or maintain a healthy score we have to do three things: limit delinquency of payment, limit utilization of credit, and maintain a healthy mix of credit. Considering the largest portion of our credit score is made up of our payment history and the simple exercise of paying your bills on time, a simple solution is to set up automatic bill payments.

It might happens that paying your credit card balance in full every month might actually leave you with a lower score versus someone who never misses a payment, but always carries a balance.

If your score isn’t perfect, don’t sweat it. Having no debt is better than a high credit score. But if your debt situation is out of control, or if your identity has been compromised, checking into your file is the first step in setting things right.

Credit Rating

Experts say establishing a solid credit rating is key to building life-long financial stability and not throwing away money on high interest payments.

Some credit-reporting agencies report the lenders' rating of each of your credit history items on a scale of 1 to 9. A rating of "1" means you pay your bills within 30 days of the due date. A rating of "9" means that you never pay your bills at all or that you have made a consumer debt repayment proposal to the lender.

 A letter will also appear in front of the number:

·         "I" means you were given credit on an installment basis, such as for a car loan, where you borrow money once and repay it in fixed amounts, on a regular basis, for a specific period of time until the loan is paid off.

·         "O" means you have open credit such as a line of credit, where you borrow money, as needed, up to a certain limit and the total balance is due at the end of each period. This category may also include student loans, for which the money may not be owing until you are out of school.

·         "R" means you have "revolving" credit, where you make regular payments in varying amounts depending on the balance of your account, and can then borrow more money up to your credit limit. Credit cards are a good example of "revolving" credit.

"R" Ratings :

The most common ratings are "R" ratings. These are known as North American Standard Account Ratings and are the most frequently used. The "R" indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9. The R ratings are a coding system that translates "on time", " one month late", "two months late", etc., into two-digit codes.

R7: Making regular payments through a special arrangement to settle your debts.

R8: Repossession (voluntary or involuntary return of merchandise).

R9: Bad debt; placed for collection; moved without giving a new address or bankruptcy.

Here are six other things that can hurt your credit rating:

Too much credit:

“Having 10 different credit lines with low balances on them, a creditor will look at that and say, ‘This person is coming to me for an additional loan, but if they max out on all their different credit lines and credit cards, they are going to have way too much debt in comparison to what they’re making, so adding another [loan]could potentially put this person in worse position.

Never using your credit card :

 Part of your credit score is based on your payment history, so never using your card could hurt you because the creditor can’t assess the risk associated with you. “If you have no history, you’re a bit of an enigma to the creditor, But if you do have a history and you’re showing repetitive payments … you become a better risk for the creditor.”

Parking tickets:

If you don’t pay parking tickets or library fines, your municipality will eventually want to collect. “If it ends up in the hands of a collection agency, it’s going to affect your credit score,” 

Divorce: 

If you and your ex-spouse applied for a credit card or line of credit jointly, be aware that you may be responsible for any debts incurred by your ex, even if you split the debts as part of the divorce agreement.

Applying for lots of cards:If you are the type of person who applies for every credit card in every store that you’re offered, beware. A large amount of hard pulls” (inquiries on your credit for the purpose of obtaining new credit) can make you seem like a bigger risk. If you’re showing a lot of inquiries over a short period of time, Lander take it as: It could be that you’re having difficulty managing your money and something is on the horizon that you as the consumer can see but isn’t readily evident to the creditors. That’s a signal to them to say, ‘Whoa, let’s take a look at this because all of a sudden, this person is looking for more credit. If one or two or three of these [cards] start to land, they will have all this credit, but not the income to handle it.'

Renting a car: 

Car rental companies could be doing credit checks on you when you rent, which could increase the amount of “hard pulls” you’re getting. 

Debt-to-credit ratio is the second most important consideration when it comes to credit. Ideally we should be using less than 40 per cent of our available credit.If you have an open credit card that you no longer use, you don’t need to close it, especially if it doesn’t have an annual fee. Considering “a major determining factor in your score is your percentage of available credit, you want to have the highest level of available credit, while using as little of it as possible. If you have a card you no longer use, keeping it open will actual lower your credit utilization rate.Having a lower debt-to-credit ratio equals a higher overall score. The other option before you close an account is to secure an increase on available credit on the cards you are keeping open. Paying off debt should therefore be a priority, and so should having a healthy mix of credit in your name: credit card bills, utility bills, car loans, and so on.

source globe and Mail

TORONTO'S Priority Neighbourhood

What are priority neighbourhoods?

Who: Identified by city council and United Way

When: Started 2004

Why: To reduce crime, increase opportunities for young people and improve services for people in underserved areas.

How: Neighbourhoods were measured for key services, including libraries, schools, community centres, settlement and employment services, as well as for things like median household income, education levels and knowledge of English or French.

What: In total, 13 neighbourhoods were identified: Malvern, Jane-Finch, Jamestown, Kingston-Galloway, Victoria Village, Dorset Park, Eglinton East, Scarborough Village, Black Creek, Westminster-Branson, Crescent Town, Steeles-L'Amoreaux and Kennedy Park.

Under a new ranking system revealed by city staff on Monday, each of Toronto’s 140 neighbourhoods has been given an “equity score” based on 15 criteria that includes health, economics, political participation and education. A team of experts set 42.89 as a benchmark score. Communities that fall below the line are designated as a “Neighbourhood Improvement Area,” which replaces the old “Priority Neighbourhood Area.”

Black Creek scored the lowest, with 21.38. Lawrence Park north was the highest, with 92.05.

Westminster-Branson, ranked 38th overall, came in at 46.57. This north Toronto neighbourhood is one of eight that no longer qualifies as a priority investment area. Malvern, Dorset Park, L’Amoreaux, Yorkdale-Glen Park, Steele, Englemount-Lawrence and Humber Heights-Westmount round out that list.

Each was part of the city’s original neighbourhoods program, which was launched eight years ago after the so-called Summer of the Gun.

The designation meant the community of about 24,000 in Ward 10 received a new community hub and health centre development, renovated facilities and additional recreation and employment supports, among other things.

16 new areas will get extra funding, while 8 drop off the list in a new ranking system means missing out on millions of dollars worth of capital funding and resources.

Added IN Priority designation:

Beechborough-Greenbrook
Oakridge
Elms-Old Rexdale
Regent Park
Thorncliffe Park
South Parkdale
Rockcliffe-Smythe
Rustic
Morningside
Ionview
Downsview-Roding-CFB
York University Heights
Thistletown-Beaumond Heights
Keelesdale-Eglinton-West
Weston-Pellam Park
Kingsview Village-The Westway

Off the list :

Malvern
Dorset Park
Westminster-Branson
Yorkdale-Glen Park
L’Amoreaux
Steeles
Humber Heights-Westmount
Englemount-Lawrence

 SOUTH PARKDALE neighbourhood is one of 16 communities in need that didn’t meet the threshold back in 2005 but do now. A low-income area just outside the southwest downtown core, South Parkdale has high unemployment, a high occurrence of preventable hospitalizations, and a higher than average number of people drawing on social assistance.

THORNCLIFFE PARK: Thorncliffe residents score average in terms of the number of residents who graduated from high school and post-secondary institutions. The difference is that, for many of his constituents, those diplomas were earned outside of Canada and haven’t translated into well-paying careers in Canada.
Instead of single-parent homes, in Thorncliffe, “many families are crowded together in dwelling units."



source:thestar

Renovations that bring the greatest percentage return on investment:

I working with Buyer who is also contractor and we are searching for the house that need some Renovation. After looking some house I and my buyer sat and decided which improvement in the house will appreciate more in money …

"Whatever your home improvement is ... I strongly discourage designing new spaces in a fashion that's incongruous with the rest of the house's architectural vernacular."

According to Remodeling magazine's annual Cost vs. Value Report for 2014  followiing are the few :

v  Front Door :  A new front door, which on average adds 96.6 percent of the amount you spent to the value to your home. "It has to be the right front door." Keep in mind that sometimes painting the existing front door provides the same payoff.

v  Replacing old elements, such as doors, windows and siding, in general yielded a better financial return than bigger remodeling projects, such as additions.

v  The report found that kitchen projects yielded a higher return than bath projects, with a minor kitchen remodel adding 82.7 percent of the project's cost back to the home's value. Kitchens are important, because would-be buyers often overestimate how much they would cost to update. The average cost of a minor kitchen remodel -- new cabinet doors, appliances, countertops, sink, faucet, paint and hardware -- usually $18,856 nationwide, according to the Cost vs. Value report. 

But, like the front door, it's important to do the right kitchen remodel. Adding a $75,000 kitchen to a $100,000 house is unlikely to yield $75,000 in value.

 As a general rule, look to spend about 25% of the home's value for a new kitchen and 12 % to 15% for an updated bathroom.

Which improvements will pay off  what varies not only regionally, but also neighborhood by neighborhood :

v  A pool will add more value to homes in some warmer climate neighborhoods than in colder climate it is just an expanse to have it.

v  Turning attics into usable space or into bedroom  is a popular and profitable improvement.

v  Replacing windows with French doors that open to the backyard is another popular, and not very expensive, renovation project. "It makes the room feel bigger and gives you somewhere to go," 

v  For people who plan to stay in their homes, investing in those projects, as well as in more energy-efficient heating and air conditioning systems and appliances, saves money all year.

Here are the home renovations that Remodeling's Cost vs. Value study says will give you the biggest bang for your buck, as well as projects that generate the lowest return.

Renovations that bring the greatest percentage return on investment:

-- Entry door replacement: 96.6 percent

-- Deck addition (wood): 87.4 percent

-- Attic bedroom: 84.3 percent

-- Garage door replacement: 83.7 percent

-- Minor kitchen remodel: 82.7 percent

Renovations that yield the smallest return:

-- Home office remodel: 48.9 percent

-- Sunroom addition: 51.7 percent

-- Bathroom addition: 60.1 percent

-- Backup power generation: 67.5 percent

-- Master suite addition: 67.5 percent

courtsey : U.S.News & World Report LP