Reference; written by Natalka Falcomer; July 31, 2018
Real estate pundits point to the average sale price to conclude whether the market is crashing or hyper-inflating. Some go as far as to use the average sale price as an indicator of a recession or a healthy economy. The problem is that averages don’t tell much of a story.
For example, Canada has experienced five recessions of varying degrees between 1972 and 2018, yet the average sale price never dipped below the previous year, except between 1995 to 1996.
The odd thing is that there was no recession in 1995 to 1996, but there were recessions in the mid 1970s, early ’80s, early ’90s and 2008; yet, the average sale price didn’t dramatically crash during these times. Rather, it increased. To put it another way, if you relied upon “the average”, you’d be led to believe that: (a) we never had a recession until 1995; (b) recessions last only a year and (c) you’ll always make a profit house flipping if you simply just wait a year.
If you bought a home right before the 1974 crash, the early 80s or 90s crash, you know this is not the case. You also know that house flipping isn’t always a guaranteed success – costs in maintaining the property, construction, changing zoning bylaws and even changes in demographic tastes can certainly make a flip a financial disaster.
When you peel back the layers of the “average” provided, you discover a more complex story. Averages mislead when a distribution is heavily stacked at one end, with a small number of unusual outliers weighing the average in their favour. It also misleads if you don’t know the story behind how that number came to be.
Consider the example provided by New York Times guest columnist Stephanie Coontz, When numbers mislead: “In 2011…the average income of the 7,878 households in Steubenville, Ohio, was $46,341. But if just two people, Warren Buffett and Oprah Winfrey, relocated to that city, the average household income in Steubenville would rise 62 per cent overnight, to $75,263 per household.”
The same logic can be applied to our housing market. Take, for example, the GTA’s average sale price to date in 2018 ($805,230) versus 2017 ($862,149). Some people conclude that the average price has decreased because we are in the throes of a housing crash. Nobody wants to buy. And, if they buy, they’re buying it for less than what they would’ve paid for the same property last year because there’s no demand and because last year’s prices were completely unsubstantiated.
Any millennial trying to buy a condo in South Riverdale, Mount Pleasant or Little Italy, however, would beg to differ. Condos in these areas saw an increase in sale price and most condos have sold above asking. Dig deeper and you find an even more complex story.
Those who want to buy larger homes in Toronto – young families or couples – cannot afford the millions that such homes command. And those who can afford it already live in those homes and aren’t interested in buying another multi-million-dollar home.
This more affluent (and older) demographic doesn’t want to sell because they know that demand for their properties isn’t as great as it was in our anomalous record setting-market of 2017 (the multi-million-dollar homes are still selling, it’s just taking slightly longer than it did during the hype of the market; nonetheless, our market turnover is still much faster than in other high-demand markets such as London and Paris). And for those who are looking to downsize, they’re not necessarily selling their primary home. Rather, they’re holding onto their primary homes and buying a cheaper and smaller second home, putting more pressure on the same market in which the millennials are competing for some territory (literally). This has the obvious outcome of creating more competition in the cheaper market than in the multi-million-dollar market. The average is skewed because it is heavily stacked with lots of smaller rather than larger price points.
Purchasing power has further eroded not because of an economic crash or lack of demand, but because of changes in the law. Young families or young couples – the backbone of house purchases – were most affected by the changes in mortgage rules. This means that, due to bad luck, today’s buyers can afford less than they could’ve afforded last year. In turn, people are buying cheaper and smaller homes even if it isn’t the best fit for their lifestyle (large bedrooms for each child, play room). Again, it’s not that demand is down or that prices are plummeting, it’s that the type of demand has shifted because who is buying has changed and how much they can spend has changed.
Digging beyond the average shows that this is a supply problem, not a demand problem. Perhaps our government is focused too much on the average and should re-shift its focus from curtailing demand to increasing supply.
Since this space was small (approximately 8x5), I had to figure out a plan that would accomodate most importantly, a bigger shower. So I decided on a smaller vanity, a repositioned toilet and the removal of the closet.
The flare of course, for those who know me well had to be somewhat of a nature theme. I shopped around until I had well-coordinating supplies and decor. I am a big believer that you don't have to break the bank in order to have a finished product styled to match YOUR perfection.
We love the finished product and most of all, enjoying the bigger shower! Oh .. and behind the door to the right is a smaller corner storage cabinet appropriately sized for this small bathroom.
Three quotes later, all in the ballpark of $20-26K, I decided to call my high school 'carpenter' friend and plea for help. Thankfully he said YES!
We decided to stay with the diagonal design as it provides a larger perception for the area and remove some of the side planters that had been taking up extra space to widen the entry area.
Best decision on this project was adding the border, it gives the deck such a professional finished look!
Cambridge, ON - This property is Pure Elegance! It's a Stylish and Modern 3 Bdrm, 3 Bath, Upgraded "All Brick" 2-Storey Detached Home that is available In Desirable Branchton Park. Absolutely move-In ready with recent updates, patterned concrete driveway and a beautiful backyard patio oasis with a large garden shed backing onto a Park! Located nearby schools, shopping, golf, park, arena and places of worship.
The Ontario government has passed its Budget Measures Act which brings in new laws to tackle housing affordability.
The measures include a 15 per cent non-resident speculation tax targeting certain foreign buyers in the Greater Golden Horseshoe, including corporations and trusts.
The tax applies to all residential properties bought in the region from April 21 2017 but there will be rebates for those who become permanent Canadian residents within 4 years of purchase, who work in Ontario for a continuous 12 month period following purchase, and for foreign students subject to conditions.
“Our government is working to make life more affordable for everyone in Ontario,” commented Charles Sousa, Ontario’s finance minister, following the passing of the act Thursday. “This legislation will help to both address the recent price increases in our housing market.”
The lawmakers also passed legislation to reduce the cost of public transit for seniors.
TORONTO – The Ontario government has announced what it calls a comprehensive housing package aimed at cooling a red-hot real estate market. Here are the 16 proposed measures:
— A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.
— Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded.
— Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes.
— A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing.
— Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out.
— A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.
— A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.
— More flexibility for municipalities when it comes to using property tax tools to encourage development.
— The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
— An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.
— A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions.
— The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed.
— Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
— A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
— Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
— Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things.
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Banking head speaks out on Toronto real estate marketHomeBusiness News
by Bloomberg04 Apr 2017
By Doug Alexander
Governments may have to impose more measures to cool Toronto’s housing market if prices remain “overheated” after the spring buying season, said Bank of Nova Scotia’s Canadian banking head James O’Sullivan.
Toronto is the housing market of most concern in the country, with unsustainable and unhealthy price increases, O’Sullivan told reporters Tuesday after Scotiabank’s annual meeting in Toronto. He’d like to see how home sales in Canada’s most-populous metropolitan area play out between April and June before pushing for further measures.
“If at the end of that spring market Toronto still has higher volumes, strong double-digit price increases, then we think it’ll clearly be time for further action -- and we will be supportive of that action,” O’Sullivan said. “If it remains overheated, it’s time for action.”
Measures such as a speculation tax or foreign-buyers levy, such as the one British Columbia imposed last year to cool Vancouver’s housing market, should both be “on the table,” O’Sullivan said, adding that mortgage market changes by federal and provincial governments in the last couple of years have removed risks in the housing market.
Still, Toronto remains an issue: the city has seen prices up 24 percent from a year ago, sparking calls by economists at Bank of Montreal and elsewhere that the city is in a housing “ bubble.”
“Double-digit price increases are not sustainable and they’re not healthy, and this market has been going straight up for a very long time,” O’Sullivan said. “So it’s going to come to an end at some point, and it’s a question of how it ends.”
O’Sullivan said he wants a smooth correction and a soft landing, which would argue for action sooner rather than later.
“It’s in the best interest of everyone that we have a soft landing rather than a hard landing,” he said.