Why are real estate prices going so high in Toronto right now? Well, you have a fixed supply of available housing, but you have several different groups of people – foreign investors, millennials, new couples, young families and professionals on the move – all looking to live in one of Canada’s hottest cities. The province has put in place some regulations for the lending and mortgage industry that should make the market calm down a bit, but that is not expected to last.
RE/MAX recently released their 2017 Spring Market Trends Report, and the numbers are still spinning upward. The average residential sale price has gone up 29% in the last 12 months and is nearing $900,000 – but it’s not just the big, detached homes pushing the numbers. The average price of a condo has crossed the $500,000 line for the first time this year. A lot of people looking to downsize are trying to take advantage and use their profits to find a nice place outside the metropolitan area.
The luxury home market is now moving homes for prices between $3 million and $6 million. The hottest luxury neighborhoods in the area are Rosedale, Yorkville and that Bayview corridor in North Toronto. In Bayview, the average home sale price in 2016 was $1,421,700 – a 68 per cent increase in price over just three years before.
Looking for something a little lower in price point in Toronto? The Woodbine Corridor neighborhood is a strong one, with a 2016 average home sale price of $821,500, a three-year increase of 40 per cent. You’ll find lots of families and couples just starting out, but you also get a lot of amenities – and you’re close to the city center. These are just a couple of the neighborhoods that are popping in one of the hottest real estate cities in North America.
So what does this mean for HOS Financial investors?
The entire Greater Toronto Area continues to skyrocket in value, and in a situation like that, a lot of people who apply for mortgages will experience difficulty in gaining loan approval despite having the means to afford the payments on a home, and so the “rent to own” scenario could help keep them out of another year – or longer – in the rent cycle. A lot of people think that “rent to own” means looking down a small set of listings on the back of the classifieds and having to settle for much less in terms of quality. However, in the aftermath of the 2008 housing collapse, more and more people are hearing “no” from traditional lending sources. Bank lending guidelines have become much more conservative, particularly in the areas of credit score and income verification. That means that a lot of people who would have qualified for loans before – and have the means to purchase homes in upscale parts of Canada, including the Toronto Region – need alternate forms of financing. If they don’t have the large down payments that private lenders ask for, then they often end up looking for lease purchase or Rent to Own Programs.