FALL REAL ESTATE ROUNDTABLE
Our panel of experts share their predictions and insights as we head into the fall market and touch upon everything from the return of bidding wars to the growth of rent strikes
Why experts Danielle Bryk and Brad Lamb are bullish on the fall housing market
POST: What are your predictions for Toronto’s real estate market come fall?
BRAD LAMB: Prices have risen fast, and there is currently some price resistance. In the current economic environment, I foresee these increases being more easily absorbed. In strong economies, it’s hard not to see prices rising.
TIM HUDAK: Any time you see more and more people chasing fewer and fewer homes, the cost of home ownership is going to in- crease. Sure, you may have short-term fluctuations, but you just cannot argue with the basic economics over the medium and long term. We have more people coming to the Greater Toronto and Hamilton Area (GTHA) housing market as a result of millennials getting promoted and starting families; a stronger economy relative to the rest of Canada; enhanced immigration; historically relatively low mortgage rates; and a wealthy boomer generation helping their kids get into the market, via the Bank of Mom and Dad.
JANICE RENNIE: The real estate market continues to experience demand pressure under $2,000,000, with not enough supply and multiple offers. The difference I am seeing now is that buyers are putting more reasonable ceilings on their purchases as to how much over the asking they will pay (note, still going over the asking, though), and sellers seem to be the side with unreasonable expectations. The result is either sales at more reasonable prices or sellers taking the property off the market, relisting at higher price and then not selling.
BARRY COHEN: While I believe that TREB statistics released for the remainder of the year will show marked improvement over 2017, certain segments of the market will perform better than others. We are seeing good demand for affordably priced single detached homes close to the city core, but neighbourhoods further afield and in the 905 area code are still struggling. The average price of a detached home in the GTA is down about 11 per cent overall.
Upscale homes over the $2 million price point remain well off last year’s pace. However, July was somewhat of a turning point, with sales posting a year-over-year increase of 21 per cent. As stability returns to the market, home buying activity at this price point and higher is expected to climb.
The stress test for mortgages that was implemented this past January dampened the market. How much of an impact has it had, and is it time to revisit?
LAMB: The stress test is bad for young people and punishes them unfairly. This is a terrible requirement that must be reversed. In light of the higher rate environment, this test is becoming redundant.
HUDAK: Eight months later, it’s clear the stress test is a case study in government regulatory overkill. We all want to incentivize responsible and sustainable borrowing, but governments should take a more thoughtful approach. Estimates suggest that the stress test prevented 50,000 to 100,000 people from across Canada from buying a home. Think for a moment who those people are: young families, new Canadians and entrepreneurs. The rate of home ownership is actually in decline, down from 69 per cent in 2011 despite record low interest rates.
When did the public decide that we wanted to make homes harder to buy for the aspiring middle class?
All levels of government need to pump the brakes on regulatory interventions and start looking out for the middle class and the hard-working people who want to join it. The stress test is too arbitrary, too harsh and needs to be replaced with a more balanced approach.
What are the two biggest impacts Doug Ford and the new Ontario provincial leadership could and should have on the Toronto and area real estate market?
LAMB: Reverse the madness initiated by the previous administration.
COHEN: New provincial leadership certainly has a different take on business, and real estate is expected to benefit from the change. Doug Ford’s pre-election platform included revisiting the legitimacy of the foreign tax, which has sparked an upswing in buyers returning to the market. However, given past performance of government overall, it’s un-
likely that they will repeal the tax in its entirety.
HUDAK: Focusing on affordable home ownership by reducing costs, delays and runaway red tape that drives up prices and limits choices. This includes prehistoric zoning rules that limit the building of missing middle housing.
And lowering the tax burden. To his credit, while on Toronto City Council, Doug Ford opposed the Toronto Municipal Land Transfer Tax (MLTT). As a provincial party leader, he has opposed spreading the tax outside of Toronto. It is encouraging that Premier Ford has a bias toward lowering the punishing taxes on home ownership rather than increasing them. While the fiscal challenges may limit broad-based housing tax relief, the premier could focus on an impactful break for first-time homebuyers of modest means trying to get into the market.
POST: More people are making the decision to stay put and get more out of their current space. What home design trends have you seen that support this?
DANIELLE BRYK: I’m seeing more people staying in their current homes and renovating as opposed to moving. This often means making the most of your space rather upgrading to a larger one. People are tapping into every available inch they have, whether that means adding an extension to their home or simply implementing small space living philosophies. In this latter sense, spaces need to be designed to accommodate multiple functions. For example, a kitchen table may also have to act as the family desk or the home office. Storage needs always seem to be the biggest challenge — no matter what the size of the building. I think there is a mind set that needs to be adopted where we just have less “stuff.”
Large, population-dense cities around the world are quite ahead of us. I see a lot of innovative multi-function furniture coming form Asia and Europe. Things like storage beds or Murphy beds — these things are an investment — they are not cheap. I often find my clients want them until they see the price tag. In some sense, if you see yourself committing to a smaller space for the long haul, it is a necessary investment.
POST: What about the trend that sees some older residents opening up their homes to younger generations instead of downsizing and hitting a condo?
On the other hand, I see a lot of seniors deciding to stay in the family home rather than downsizing. Because of the cost of real estate now, it is often more expensive for them to buy a condominium and take on the monthly maintenance fees than to stay put. One thing I hope to see is the rise of multi-generational families living together. There have been so many studies that explore the benefits of this situation. Obviously, there are financial bene- fits if a young family does not have to buy/rent/maintain a property of their own.
The younger members of the family are often in their prime earning years and can contribute financially, and there are added benefits for everyone’s well-being. Seniors benefit from the companionship and stimulation of having more people around, and the younger members of the family can help with the maintenance that is physically taxing. For families, it often helps lower child care costs, and for those children who are raised in close proximity to elders of their family, they often have lower stress levels. It’s not something that many of us in North America find appealing, but again, it could be just a matter of mind set.
POST: A midtown councillor is attempting to seriously curtail midtown development until infrastructure catches up. Is this a good idea?
LAMB: Our local government has been asleep for 30 years. How could they have missed the development taking place in front of their eyes? It’s shameful.
RENNIE: Freezing development or allowing it contingent on building the underlying infrastructure is a very good idea. The beauty of living in the centre of the city is the ease of having schools, transportation and services at your doorstep. This is especially true as more families are living in condos and yet their children can't get in to the local schools. Yes, this issue absolutely needs to be addressed, and I'm not sure how the city planning has missed this feature.
HUDAK: Well that’s pretty ridiculous, isn’t it? When it takes 10 years to get some developments through the snail-like approval process, you’d think that was slow enough already. Here’s an idea: why don’t we speed up approvals and investments in schools and infrastructure, instead, while using innovative partnerships to do so like they do in other major urban areas.
COHEN: Infrastructure is an issue throughout Toronto proper, not just Yonge and Eglinton. As the population in the GTA rises, local government is scrambling to accommodate the influx. It starts with housing and rolls out from there. Perhaps it’s time for developers to participate in the upgrade of existing infrastructure (water mains and such), the construction of new schools and amenities and contribute to transit and government to ensure that their increased tax base is reflected in the dollars supporting infrastructure.
POST: Doug Ford hinted at opening up parts of the Greenbelt to development, then backtracked and pledged that he
would not. How likely is it that we will see some kind of development in that protected area in the next four years?
LAMB: I think what he’s talking about is increasing the growth that’s allowed in the 905 but not yet released for development. A simple altering of the Places to Grow strategy will solve the issue. There is plenty of land available outside of the Greenbelt currently that is frozen to development. We don’t need to worry about annexing the Greenbelt for 20 years, if ever. RENNIE: I hope we won’t see development of the Greenbelt. I think it is an asset to the GTHA, and if it increases the density in the core so be it.
POST: What exciting new areas are catching your eye in the city this fall: Geary Avenue? the neighbourhoods such as Little Jamaica impacted by the Crosstown LRT?
COHEN: Affordable single detached housing and close proximity to transit and the core have seriously contributed to the upswing in popularity of Little Jamaica — the area along Eglinton from Marlee to Dufferin — in recent years. Like many other areas of the city undergoing gentrification, the area borders hot pocket communities — in this instance, Cedarvale to the east and Wychwood Park to the south. Young families are driving demand for the neighbourhood’s bungalows and twostorey homes on generous lot sizes. Teardown activity is also rampant, with many new, custom-built homes popping up.
BRYK: Scarborough has so many cute, family-friendly areas with great schools and neighbourhoods. I know the west end is always desirable, but I also like the east side and the developments there like Riverside, Regent Park, Leslieville.
POST: Rent strikes are now happening in Toronto, in areas such as Parkdale and Thorncliffe Park. People are getting fed up with rent increases. Could we start to see rent strikes in other, more central areas of Toronto? What can be done?
LAMB: No. Rent is a legal contract between a landlord and a tenant. Legal contracts generally stand up to court challenges.
HUDAK: I wouldn’t be surprised, and I can’t blame them. Listen, the Ontario government’s rent controls imposed in 2017 have backfired. Rents are higher than ever and availability is increasingly scarce. Sure, rent controls may give a temporary freeze for current tenants but ultimately cause limited choice and limited mobility when you want to move or when you want to enter the market. Seriously, why would a mom and pop landlord or middle-class investor get into the landlord business when returns on investment are severely capped and the red tape burden and hassle make you wonder each day why you bothered in the first place?