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3 Signs the Toronto Housing Market Could Cool Down and The Easiest Way you Can Get Involved

November 8, 2021

Unless you’re living under a rock, one of the hottest topics besides the Global Pandemic is the Canadian housing market. 

Home prices have been skyrocketing around the world, and the gains in Canada have been remarkable. The average home price as of October 2021 is $686,656, which is up 14% from the same time last year. 

This market doesn’t show any signs of slowing down since housing demand remains high, housing supply remains low, and immigration is starting to rebound. But how long can this demand last? 

Here are 5 Critical Things to Consider

Mortgage rates are going to rise. 

Canada’s five-year government bond yield has quadrupled over the past 12 months. The yield is up from 0.34% to 1.24%. This yield is the benchmark for all mortgage rates. Canadian banks and mortgage lenders may have to raise lending rates if this trend on government bond yields continues. 

The ultra-low mortgage rates that has been offered throughout the pandemic will be coming to an end after the Bank of Canada last week ended its bond-buying stimulus program.

Buyers will have a more difficult time qualifying.

Higher mortgage rates mean fewer buyers will qualify for the homes they are shopping for. Moreover, with an already overvalued price, the average home in Toronto costs ten times the average family’s annual salary.  

Some prospective buyers are giving up on owning a house right now, and the declining home sales in recent months are a sign of this. 

Inflation in Canada has risen its fastest in 18 years as of September 2021. 

The annual inflation rate hit 4.4%, up from 4.1% in August, its highest level since February 2003.

The costs of transport, housing and food have been increasing sharply.

A combination of surging consumer demand, global supply chain issues, product shortages, and rising oil prices are driving up the cost of living from pandemic-era lows.

Continued inflation could affect the housing market in 2022. 

As average families are being squeezed from every angle, and salaries are only expected to rise at about 2%, this may reduce demand for multi-million-dollar properties. 

So what’s the solution for investors and buyers?

Buying a preconstruction project is historically a great option.

Investors, whose previously bought newly constructed units came up for occupancy last year, still saw a handsome appreciation in their property values, according to a new joint report from market research firm Urbanation and CIBC Economics.

The study showed that the average preconstruction unit that sold for $415,175 three to five years ago was worth 40 percent more last year — $595,614.

Despite a 13 percent drop in condo rents last year, 63 percent of those new-construction investors managed a positive cash flow on their units.

For the last 15 years, investors and buyers have benefited from buying pre-construction condos. 

The long-term historical performance proves the benefits.

The average preconstruction price in Ontario is between $400,000 and $500,000. Your down payments and salary qualifications will be much lower than a resale home. This makes a preconstruction condo or townhouse an excellent option to get into Toronto and the rest of Ontario’s housing market. 

Once you build equity from your purchase, you can sell it, take your equity, purchase another larger property, or reinvest in another unit. 

For more information on the latest pre-construction projects.

Give Sunny Sharma, Toronto Real Estate Broker a call at 416-566-2850 

With over 29 years of extensive real estate experience, Sunny Sharma is an internationally accredited realtor and widely respected Commercial Board member of the Toronto Real Estate Board. CCIM President Central Canada 2017 & 2018. Ranked #13 Producer by Production in all of Canada for CENTURY 21 for 2020.

Or Contact Kathleen Xie at 416 587 8381

For over 18 years, Kathleen has been dedicating herself to helping hundreds of families buy and sell their homes at the best price. Her skill and professionalism have made Kathleen one of the top producers with the Toronto Real Estate Board. Fluent in Mandarin, Cantonese and English, and with a track record for negotiating transactions efficiently and effectively, Kathleen dedicates herself to helping families buy and sell their homes at the best possible price and has built a solid reputation with the Chinese community, the fastest growing real estate market in the GTA. Call Kathleen at 416 587 8381 

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