Category: News

Recent data from the Bank of Canada shows that investors accounted for 30% of home purchases in Canada in the first quarter of 2023, up from 28% a year earlier[1]. This highlights the growing role of investors in Canada’s housing market.

Key Facts About Investor Activity

• Investors are defined by the central bank as buyers who take out a mortgage to purchase a property while still carrying a mortgage on another property. This signals they are purchasing the additional property as an investment rather than a primary residence[1].

• The share of first-time home buyers shrank to 43% in early 2023, down from 48% in early 2020, indicating investors are displacing some first-time buyers[1].

• Investors tend to prefer condominiums. They made up 41.9% of condo buyers in Ontario in early 2023[3].

• Overall, investors own 20% of homes in Canada and 40% of condos[3]. Their share is even higher in some provinces like Nova Scotia (31.5%) [7].

What’s Driving Investor Activity?

Several factors have motivated investors to buy more properties in Canada:

• Strong home price appreciation during the pandemic, with prices in cities like Toronto rising over 40% from early 2020 to early 2022[6]. This attracted investors hoping to profit from further gains.

• Low interest rates made mortgages very affordable, enabling investors to leverage their buying power[23].

• Limited housing supply, especially in major cities like Toronto and Vancouver, presented investors with a scarce asset with high demand.

• Strong rental demand, especially for condos, provided investors with potential income streams.

Concerns Around Growing Investor Activity

While investors provide needed rental housing supply, experts warn their growing presence in Canada’s market is problematic:

• Investors tend to amplify house price cycles, overheating markets further during boom periods[7].

• They compete directly with first-time home buyers, making affordability worse[1][7].

• Heavy investor ownership can lead to issues like vacant homes if purchased strictly as investments[20].

• It can shift housing from a social good towards an investment asset[15].

Policy Responses

Canadian policymakers have introduced some measures to cool investor activity:

• The federal government banned foreign buyers from purchasing homes for two years starting in 2023[11].

• British Columbia and Ontario have imposed special taxes on foreign buyers[20].

• Economists argue rising interest rates may be the most effective curb on investors by eroding affordability[23].

The growing investor role has added complexity to Canada’s housing situation. While they provide needed rental housing, policymakers are concerned investors are displacing first-time home buyers and amplifying price volatility. Their impact merits ongoing monitoring and potential policy responses.

Sources

[1] Globe & Mail
[2] Norada Real Estate[3] Financial Post[4] Santander Trade
[5] RedFlagDeals[6] WOWA[7] Statistics Canada
[8] Bennett Jones
[9] Reddit[10] CREA[11] Statistics Canada[12] CNN[13] Ground News[14] PwC Canada[15] CBC[16] Le Monde[17] Knowledia
[18] Remax
[19] Nesto[20] Al Jazeera[21] BNN Bloomberg[22] RBC
[23] Bloomberg[24] RBC[25] Fortune

Citations:
[1] https://news.ycombinator.com/item?id=37445732
[2] https://www.noradarealestate.com/blog/canada-housing-market/
[3] https://financialpost.com/real-estate/housing-market-investors-own-big-chunk
[4] https://santandertrade.com/en/portal/establish-overseas/canada/foreign-investment
[5] https://forums.redflagdeals.com/investors-account-30-per-cent-home-buying-canada-data-show-2639559/
[6] https://wowa.ca/reports/canada-housing-market
[7] https://www150.statcan.gc.ca/n1/pub/46-28-0001/2023001/article/00002-eng.htm

The saying when it comes to the temperature across Canada is “if you don’t like the weather, just wait five minutes.” This old cliché accurately represents some of our largest cities where things can move from pouring rain to bright sunshine almost in the blink of an eye. The same is often true of the real estate market across the country, where it often feels like things can change just as quickly.

While the days are warm and the sun is shining bright now, fall is inevitably around the corner. For buyers and sellers in Mississauga waiting for the right time to make their next move with Arora Realty, a new season can bring new market conditions and new opportunities. Yet in real estate, it’s nearly impossible to predict anything with 100% accuracy.

We spoke with Ryan Biln, an economist with the Canadian Real Estate Association (CREA), to get his thoughts on what’s to come in the last quarter of 2023 that may impact the Mississauga market.

Interest Rates Keep Surprising Us

According to Biln, the market is stronger than what economists might have expected given the frequent hikes in interest rates since spring 2022. At the start of the year, the Bank of Canada had signaled a freeze in rate hikes, which led buyers to take advantage of potentially great deals. However, with two more hikes since that time, the Mississauga market was cooler in the summer than it might have been otherwise.

However, Biln noted the cooler temperatures on the market may not be over just yet. “With uncertainty about whether we’ll see another hike at the September [Bank of Canada] meeting, we may see this slowdown continuing into the second half of the year,” noted Biln.

CREA has already adjusted its forecast for the rest of 2023 to account for what may ultimately be a cool down. The CREA Housing Market Report released on August 15, 2023, showed the Aggregate Composite MLS® Home Price Index (HPI) is just 1.5% below what it was a calendar year ago. This is the smallest decline the Canadian market has seen since October 2022, which could indicate year-over-year comparisons could return to positive territory as we close out 2023.

Who Ultimately Benefits – Buyers or Sellers?

So who’s coming out ahead in Mississauga’s confused market—buyers or sellers? In short, both sides are working to navigate a complicated landscape.

However, Biln notes CREA’s economists have seen some degree of balance restored in the market. In March, for example, listings were at a 20-year low. This summer though, in line with that ‘wait five minutes’ analogy, the number of new listings has returned to normal for this time of year, and that could mean more selection for eager Mississauga buyers ready to jump into the market with Arora Realty.

Where Are the Hot Markets?

It’s predictable to talk about the overheated real estate markets in Toronto and Vancouver as being unaffordable, with sky-high prices that well exceed the budgets of most hopeful residents. These frenzied clusters have kept expanding population circles further outside the urban centres, with new communities like Mississauga continuing to grow and expand as residents clamour for access to the downtown core, especially with many hybrid workplaces here to stay.

So what’s coming down the pipeline for fall of 2023 in Mississauga? Just like watching the weather change, local buyers and sellers may have to wait those few extra minutes. Economists across the country are paying close attention to whatever announcement comes from the Bank of Canada in September, and forecasts will be written accordingly leading into 2024. No matter what happens though, the team at Arora Realty will be ready to help you make your next move in the Mississauga market.

(Source)

We at Team Arora Realty read with interest this report on detached home sales from RE/MAX. As a leading real estate agency in Canada, we like to stay on top of market trends across the country.

I. Second Quarter Rebound Cut Short By Rate Hikes

The RE/MAX report found that housing markets in major Canadian cities like Toronto and Vancouver saw an initial rebound in buyer activity in the second quarter of 2022 after declines in the first part of the year.

• Buyer demand surged, with sales of detached homes more than doubling from Q1 to Q2 in many neighborhoods. This indicates resilient demand is still present among buyers.
• However, the increased activity was not enough to fully make up for the declines in the first quarter. On an annual basis, average detached home prices still dropped in 93% of Toronto and Vancouver neighborhoods.
• The report cites low inventory as a major factor that constrained sales activity and prevented more meaningful price recovery. The supply of homes for sale remains extremely tight.

Tip for buyers: The surge in Q2 buyer activity shows there are still motivated buyers out there ready to move quickly when the right property comes up for sale. Be prepared to act decisively when you find a home you want.

Tip for sellers: There is strong demand from qualified buyers looking to purchase as soon as possible. Price competitively and prepare your home to take advantage of this demand.

The temporary rebound highlights the fundamental resilience of buyer demand in the market. But ongoing supply shortages prevented sales from fully bouncing back. Low inventory remains a hurdle for overall market activity.

II. Value-Driven Buyers Targeting Detached Housing

The report found affordability has become a major factor influencing buyer behavior, leading more move-up buyers to target the detached housing market.

• With prices down from last year, move-up buyers saw an opportunity to upgrade to a detached home. Detached housing market share increased in Toronto and Vancouver.
• Suburban regions like York Region with significantly lower prices than Toronto saw strong demand. Detached homes there are cheaper without Toronto’s municipal land transfer tax.
• Buyers focused on finding the best value have been willing to look farther from city centers to find more affordable detached homes.

Tip for buyers: Take time to explore suburban regions just outside major city centers to find relatively affordable detached housing options.

Tip for sellers: Highlight value if selling a suburban detached home. Note proximity to city amenities but emphasize lower prices and taxes.

Affordability has become the top priority for many buyers. This is driving increased demand for reasonably priced detached homes, especially in suburban areas where buyers can find deals compared to the city.

III. Sales Outperform in Select Neighborhoods

While the overall trend was downward, the report highlights some neighborhoods that bucked the price decline:

• Tight inventory conditions and sales at the luxury end boosted prices in some areas like parts of Toronto’s central core and West Vancouver.
• Even in top-performing neighborhoods, buyers still focused on finding good value. Areas perceived as undervalued or offering larger lots and homes saw strong demand.
• Affordable lifestyle markets like the Gulf Islands also saw price gains, driven by remote work trends. Limited supply placed upward pressure on pricing.

Tip for buyers: Consider looking just outside the most in-demand central luxury neighborhoods to find relatively better value.

Tip for sellers: In high-demand low-supply areas, be prepared for bidding wars and sales above asking. Price competitively but not too conservatively.

Isolated areas continue to see price gains thanks to tight inventory and luxury demand. But value remains key even in these neighborhoods, guiding buyers just outside core luxury districts.

IV. Affordability Remains Key Market Driver

The report emphasizes affordability is still the primary factor driving buyer behavior and demand trends:

• Buyers are focused on finding properties and communities that provide good value or help offset costs.
• Home features like rental units that provide rental income are popular given their ability to subsidize mortgage payments.
• Demand has increased in more affordable regions surrounding major metro areas as buyers get priced out of central cities.

Tip for buyers: Prioritize affordability and look for ways a home can save money through rental income potential or future renovation value.

Tip for sellers: Highlight any features that deliver cost savings or rental income. Also note potential value from renovations or redevelopment.

With affordability top of mind, buyers are laser-focused on finding the best deals and homes that can reduce expenses. Features that enable cost savings or rental income are highly desirable.

V. Outlook Depends on Rates and Inventory

The report concludes the outlook for housing markets depends heavily on two key factors:

• Further interest rate hikes could restrain buyer demand for the foreseeable future if implemented as expected. Higher rates reduce purchasing power.
• But if rates stabilize and affordability improves, buyer activity could pick up again as markets return to equilibrium.
• Low inventory will put a floor under prices in the interim. Short supply prevents more significant declines.

Tip for buyers: Lock in low rates now if buying soon, but don’t overextend your budget in case rates rise further.

Tip for sellers: Low inventory will support pricing. But price appropriately for current high rates and buyer budgets.

The path forward relies on interest rates and inventory levels. Higher rates will constrain demand, but current limited supply will prevent large price declines. Stability could bring buyer activity back. But the timing remains uncertain.

(Source)

Ontario is in the grips of a severe housing supply and affordability crisis that requires urgent action. Demand for homes far outpaces what is being built, leading to skyrocketing home prices and rents that are pricing many residents out of the market. This not only impacts homebuyers but also poses a major threat to economic prosperity if workers and families are forced to leave major cities due to unaffordability.

While all levels of government now acknowledge the scale of the problem, bold steps must be taken to boost housing supply rapidly. The construction industry believes it has the capacity to build substantially more new homes to meet targets, but systemic barriers are preventing them from doing so. Excessive regulations, delays in approvals, and uncompetitive tax burdens are some of the major hurdles.

According to estimates, Ontario likely needs between 1.5 to 1.85 million new homes built over the next decade to address the shortfall. However, only 96,000 homes were constructed in 2022, far below what is required. To put this in perspective, the annual pace of housing construction needs to essentially double from the historical average of 75,000 per year if supply is to catch up with demand.

With strong political will, a clear strategy, and willingness to make tough reforms, it is possible to resolve Ontario’s housing crisis. But time is running out. The situation will only worsen if urgent action is not taken now to enable the construction industry to build the hundreds of thousands of homes the province desperately needs.

Removing Barriers to Home Building

A major barrier standing in the way of substantially increasing housing construction is the extensive regulations and red tape surrounding development approvals. By some estimates, there are up to 45 different government bodies and agencies involved in approving new housing projects in Ontario. From municipal planning departments to conservation authorities and school boards, layers of bureaucracy slow down approvals to a crawl. It takes years for shovel-ready projects to get the green light, if they even do. Compared to global leaders like Singapore, which relies on only 12 bodies for approvals, Ontario’s process is outdated and inefficient. To meet bold housing targets, the whole approvals procedure needs an overhaul to remove duplication, inconsistencies, and outdated planning policies. The industry has the capacity to build, but first government must help by modernizing the system and clearing the path.

Speeding up the Approvals Process

To significantly increase the pace of housing construction, the development approvals process desperately needs modernization. With up to 45 government entities involved in approvals, getting projects off the ground takes far too long.

Ontario should follow the lead of jurisdictions like Singapore that rely on just 12 bodies to grant approvals, using online systems and clear guidelines to speed up decisions. Digitizing and consolidating the approvals process would help eliminate duplication and inconsistencies. Provincial and municipal governments also need to review outdated planning policies and zoning rules that restrict housing density and supply.

Establishing firm timelines and service standards for approvals along with “deeming provisions” if delays occur, would help quicken the pace. With today’s technology, there is no reason the approvals process can’t be far more efficient. But it will take political courage from leaders to push through the necessary reforms.

The Risks of Inaction

If significant action is not taken soon to remedy the housing supply shortage, Ontario risks losing talent and economic competitiveness. With home prices and rents Spiraling out of control, young professionals and working families are already leaving major urban Centers for more affordable cities out west and east. Ontario could face a dangerous brain drain if Unaffordability persists.

Businesses will also struggle to attract labor if workers cannot secure housing they can reasonably afford near job centers. Furthermore, the lack of supply is preventing natural population growth from immigration, costing the economy in missed opportunities.

While all levels of government now recognize these risks, acknowledgment must be paired with swift, bold reforms before the situation deteriorates further. The consequences of failing to act decisively on removing barriers to construction and boosting housing supply will be far-reaching. The time for urgent action is now.

Conclusion

Ontario finds itself at a critical juncture when it comes to resolving its housing crisis. The construction industry has signaled it can deliver the hundreds of thousands of new homes required over the next decade through embracing innovation and new building techniques.

But government must also play its part by clearing away systemic barriers like excessive regulations, tax burdens, and broken approvals processes currently restricting supply and driving up costs. With strong leadership and a willingness for systemic reform, it is possible to ensure Ontario remains a place where workers, families, and businesses can thrive.

But action must be taken now before the window of opportunity closes. By working collaboratively, government and industry can ensure the province builds the homes it needs to support economic growth and prosperity for all its residents.

The solutions are within reach – what is needed is urgent implementation driven by political courage.

The Toronto Regional Real Estate Board recently released housing data for the second quarter of 2023, providing a glimpse into how the market in Brampton is shaping up this year.

As one of the fastest growing cities in the GTA, Brampton’s real estate trends are always top of mind for buyers, sellers, and agents alike.

The data shows that while the frenzied market of 2021 and early 2022 has cooled considerably, the correction many predicted has not materialized in a significant way. Rather, prices in Brampton remain high while sales volumes have slowed down.

This points to a market that is re-balancing but still competitive for buyers. Sellers who price their homes appropriately can still expect healthy interest.

In this report, we’ll break down the key statistics from Q2 2023 and what they mean for Brampton’s real estate outlook for the rest of the year. Whether you’re looking to buy, sell or invest, understanding where the market is heading will help you make informed decisions.

The data suggests Brampton remains a strong market, albeit one that is transitioning from an extreme seller’s market to something more moderate.

Sales Activity Slows Down but Prices Remain High

The most telling statistic is the year-over-year drop in total sales. There were 659 existing home sales in Brampton in Q2 2023, down 15% from 780 in Q2 2022. This cooldown was expected given rising interest rates meant to tame the overheated market. Sales are returning to more normal levels after the frenzy of the past 2 years.

However, while sales declined, average prices increased across Brampton. The average selling price for all home types was $1,043,704 in Q2 2023, up 5% from $1,002,450 last year. This divergence of sales decreasing while prices hold steady points to a tempering rather than collapse.

Detached homes, always in high demand in the suburbs, saw the strongest price appreciation. The average detached price jumped to $1,052,338, up 10% from $960,000 in Q2 2022. With more modest price growth for condos and townhouses, low-rise detached remains the engine driving Brampton’s market.

The takeaway so far? Buyer demand has cooled from its peak but supply is still limited enough to put upward pressure on prices. Sales activity has normalized but no dramatic price corrections yet. For buyers, less competition but still high asking prices.

What’s in Store for the Rest of 2023

The data from Q2 provides clues on where Brampton’s market is headed for the remainder of 2023. Several key factors will influence activity and prices.

Interest Rates

The Bank of Canada has aggressively raised interest rates in 2022 and early 2023 to combat high inflation. The benchmark rate sits at 4.5% as of July, up from just 0.25% at the beginning of 2022. This has pushed mortgage rates higher, reducing purchasing power and cooling demand. Expect rising rates to be the biggest drag on sales through the end of 2023.

Economic Uncertainty

Recession risks are mounting with inflation still high, rates rising, and global growth slowing. Consumer confidence has dropped which may further deter buyers. However, Brampton’s market has so far brushed off economic worries as job growth remains solid. Employment trends in the coming months will be key to watch.

Imbalance Between Supply and Demand

The sales to active listings ratio shows demand exceeds supply in Brampton. Though demand has fallen, supply is still constrained. This imbalance prevents a more dramatic slide in prices. More listings may come onto the market in the fall. But builders are slowing construction, limiting new inventory.

Overall, expect sales to continue easing while prices remain relatively firm through 2023. There are deals for buyers willing to search, unlike last year’s frenzy. But no dramatic dips on the horizon barring a sharp rise in unemployment.

Key Takeaways for Brampton’s Market

The Q2 2023 real estate statistics from TRREB reveal a market that has cooled from last year’s feverish pace but remains relatively healthy.

For buyers, the takeaway is that competition has eased with fewer bidding wars. However, prices remain elevated as demand still outpaces supply. Being pre-approved and ready to act quickly on the right listing is advised. Focus on value segments in Brampton like condos and townhouses where price growth has been more modest.

Sellers still have the upper hand given the sales-to-active listings ratio. But pricing correctly is critical. Chasing last year’s prices could mean sitting on the market longer. Review comparables thoroughly and price just slightly below market.

Investors may want to monitor segments like Brampton East Industrial and Claireville Conservation for future development potential.

While sales have tempered from their 2021 peak, Brampton remains a strong market thanks to its affordability and growth prospects. The data shows resilience even as rates rise. Staying informed on local conditions is key for navigating the path ahead.