AN INTERESTING LOOK AT MORTGAGE INTEREST RATES

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First-time homebuyers nowadays may not realize how good they have it, with current mortgage interest rates as low as they are. Just ask anyone who purchased a home in the 1980s and paid double-digit rates. I still wonder whether people entering the homeownership marketplace understand how significant the rate is over the course of the mortgage amortization.

Even a percentage of a point higher can cost you thousands over the course of the amortization.

Let’s look at a few examples, using a $300,000 mortgage over a 25-year amortization, paying monthly for the full 25 years.

  1. Mortgage interest rate of 3 per cent:  $1,422.63 per month = $426,789  total paid at 25 years
  2. Mortgage interest rate of 3.1 per cent:  $1,438.29 per month = $431,487 total paid at 25 years
  3. Mortgage interest rate of 3.2 per cent:  $1,454.04 per month = $436,212 total paid at 25 years

Going from 3.0 per cent to 3.1 per cent costs you $4698; from 3.0 per cent to 3.2 per cent, you pay another $9,423. Even a fraction of a percentage point lower can save you thousands in the end – and who can’t use thousands of dollars at any stage of life?

Now, keep in mind, usually you are working with a limited-year term, which changes the amounts slightly. If you want a more detailed calculation, the Government of Canada’s mortgage calculator (https://bit.ly/2zvHjMD) takes the term into consideration.

The moral of the story is to buy NOW as opposed to later, when rates are likely to go up, is a wise decision. The one thing holding back first-time and other buyers is the mortgage stress test imposed last year, which begs the question as to whether it is in everyone’s best interest. However you look at it, buying sooner rather than later will save you money in the long run.

INNOVATIVE PROGRAM OFFERS YOU THE AFFORDABLE OPTION OF LIVING AT THE HUMBER, IN THE CITY SURROUNDED BY NATURE!

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At Baker Real Estate Incorporated, we are excited about representing Options for Homes’ new condominium, The Humber, where developer Options for Homes offers the most powerful homeownership program in Toronto – a Down Payment Loan Program that is payment free until buyers sell or move!

Options for Homes will boost a down payment of 5 per cent by 10 or 15 per cent of the purchase price of a new condo at The Humber to help qualified buyers secure a conventional mortgage. Purchasers can own homes sooner than expected, and take advantage of lower monthly carrying costs. They will also enjoy some of the lowest maintenance fees in Toronto. The loan is available to anyone who has a 5 per cent down payment, who qualifies for and secures a mortgage from a primary lender, and who plans to live in their Options home. First-time buyers may be eligible for an additional $60,000 to boost their down payments!

The Humber
The Humber, can be yours through an innovative program that boosts a 5 per cent down payment by 10 or 15 per cent, interest free, until you sell/move. Live in the city in the midst of nature.

The opportunity is outstanding. Located at 10 Wilby Crescent in the up-and-coming Weston Village neighbourhood on the banks of the Humber River, The Humber boasts an idyllic setting with 13 km of trails and parks at the door, and with local conveniences and restaurants just a walk away. These include access to GO Transit, UP Express and the future Crosstown LRT. UP Express gets residents to Union Station in 15 minutes, and Pearson International Airport in 12.

This pet-friendly modern building features a social lounge and party room with a kitchen, rooftop terrace and social lounge on the 7th floor, outdoor barbecue patio, indoor bicycle storage, plus numerous green features for environmental sustainability including five electric vehicle spots. The Humber is also Toronto’s first smoke-less condo, limiting smoking in private suites to vaporizer or e-cigarette devices.

How can Options for Homes do it? The organization develops high-quality condominiums with building partners, takes what would typically be the developer’s profit and offers it as down payment support. Once Options buyers move, sell or pay off their primary mortgage, the loan is paid back with some appreciation – money that is rolled into Options’ next development project. Talk about paying it forward!

Baker is proud to be associated with this mission-driven social-enterprise organization that has operated for 25 years without government funding! Register for The Humber at https://www.optionsforhomes.ca/the_humber/

BANK OF CANADA OFFERS STRESS RELIEF!

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For the first time since 2016, the Bank of Canada has lowered the rate that mortgage stress tests use to determine qualifying for purchasing a home – and it’s a good news story! The five-year benchmark qualifying rate was 5.34 per cent, and is now down to 5.19 per cent, meaning more people will be able to purchase homes, or purchase larger homes than they anticipated, to the tune of $4,000 more.

The stress test has been a highly contentious issue that has hurt the real estate industry on many levels, especially for first-time and move-up buyers. Perhaps the only ones not affected are the Right‑sizers who are traditionally not borrowing, or borrowing less. The initial stress test ruling did soften home sales across the country, which was its goal. Many people who would have bought homes sat on the sidelines waiting for relief – which is now in sight.

The Bank of Canada has lowered the mortgage stress test 5-year benchmark qualifying rate.

New condominiums have been less affected by the test, especially in the Greater Toronto Area, where sales are strong after the temporary slowdown in Q1 2019. Sales exploded in April and May, and according to the June Altus Group statistics from BILD, condo sales were up 14 per cent from 2018 and only 5 per cent below the 10-year average. In addition, the benchmark price of new condos increased slightly from May. Even at the higher stress test levels, people have been finding ways to purchase new condominiums.

It seems that we have a good news story all around. Now, if we could just get the Bank of Canada to restore 30-year mortgages!

JULY NUMBERS FROM ALTUS GROUP SHOW ROBUST CONDO SALES

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The Altus Group statistics released by BILD show that in July, Greater Toronto Area new condo sales were up 22 per cent year over year and 42 per cent above the 10-year average! In fact, that was the second-strongest July on record for new condos. In addition, of the 2,863 homes sold in the GTA in July, 2,297 were condos, making this type of housing the preferred choice once again. Of those, 1,565 sales were in Toronto, and coming up close behind, 1,295 were in Durham, Halton, Peel and York Regions.

Altus Group stats for July show GTA condo sales were up 22 per cent year over year and 42 per cent above the 10-year average – the second-strongest July on record.

There was less inventory available in July, as there are typically fewer openings in summer. You will still find a wonderful selection of suites available in pre-construction projects, buildings currently under construction and completed residences.

OH, and in July, condos also saw a benchmark price increase to $838,824, up 8.3 per cent over the last 12 months. The moral of the story is, as I have said many times, the best time to buy a new condo is NOW. Here’s to a great fall season – watch for exciting openings in phenomenal locations!

TORONTO LOOKS UP TO ANOTHER NORTH AMERICAN RECORD

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You don’t have to crane your neck to see that Toronto once again holds the record for the most construction cranes of any city in North America! We saw similar headlines in August 2018, and in January and March of this year. Now, the Rider Levett Bucknall Crane Index reports that in July, we had 120 active cranes in the city, ranking us as having the most real estate development on the continent. That is 16 cranes more than we had in January, and 23 more than 2018. In fact, we have twice the number of cranes than the next cities on the list, Seattle and Los Angeles, which tie for second place with 49 each. It is no surprise that in Toronto, the peak has largely to do with high-rise condominiums.

Toronto and the Greater Toronto Area are growing concerns when it comes to new home real estate. Condos remain the most attainable choices, and sales are on the upswing this year since a slower first quarter. Now, with the Bank of Canada stress test rate being changed in favour of buyers, we should see increased sales and even more cranes up in the near future.

Toronto once again holds the record for the most construction cranes in North America!

JUNE A SOLID MONTH FOR GTA CONDO SALES

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The Altus Group statistics for June 2019 released by BILD show that sales for new condominiums in the Greater Toronto Area were up 14 per cent from one year ago, and only 5 per cent below the 10-year average. In addition, the benchmark price of new condos increased slightly from May and were up 3.9 per cent over the past year. Interestingly, the total number of condos sold in June was 2,420, and only 1,214 were in Toronto. The 905 areas of Durham, Halton, Peel and York accounted for 1,206 of those sales. Of the 932 new single-family home sales in June, only 6 were in Toronto. The rest were in the 905 municipalities.

Toronto
Sales for new condominiums in the GTA were up 14 per cent from one year ago.

A lot of this success has to do with overall inventory. In June, there were 19,062 new homes for sale, which was up over 25 percent from the year before. A full 14,377 of these were condos, up over 39 per cent over the same time period. Of the 3,352 new home sales in June 2019, 2,420 were condos – meaning once again, condos are king in the GTA!

CONDO MARKET IN FULL SWING AGAIN!

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The Altus Group statistics are in for the GTA new home market for May 2019 (https://bit.ly/2IO7Lqk), and the news is wonderful. BILD has posted the stats, which show that the slowdown in the first quarter was temporary. The market exploded in April and May. In fact, in May, total new home sales were up 94 per cent from 2018 and up 27 per cent from the 10-year average. Sales of new condos were up 76 per cent from May 2018 and 64 per cent above the 10-year average. In addition, the benchmark price of new condos increased from April to $779,687.

There were a near record number of condo units launched in April, which accounted for much of the success. Perhaps the strongest factor in the upsurge in sales, however, is the fact that interest rates are holding steady. After a series of increases in 2017 and 2018, for the fifth consecutive time recently, the Bank of Canada left key rates unchanged. This is encouraging for both end-users and investors, and people are obviously finding ways to cope with the stress test imposed by the federal government. 

Some experts are calling our current robust market our “new normal,” and I agree. When is the best time to buy a new condo in the GTA? The answer will always be NOW!

BILD COMES THROUGH WITH CLARITY ONCE AGAIN

Kudos to BILD (The Building Industry and Land Development Association) GTA, which has created an innovative interactive website called BUILDINGANSWERS.CA. The association invites people to ask questions about the building and land development industry in the Greater Toronto Area – and with the amount of construction going on, there are surely questions. BILD’s commitment is to answer honestly, factually and openly.

The website has many frequently asked questions already answered, such as:

  • Why does the price of homes in the GTA keep rising?
  • What role do land developers and home builders play in housing prices?
  • What are housing prices going to do in the long term?
  • How do parks and public spaces benefit from new housing and developments?
  • What makes up the cost of a new home or condominium?
  • How does new housing and development support public infrastructure?
  • How does the economy benefit from new housing?
  • Why are developers building so many condominiums instead of houses?
  • How do housing and condominium developments get approved?

These are just some of the questions that are answered on the website. According to BILD, “Our goal is to provide you with accurate information on how the building and land development industry is working with residents, communities and the governments to build a livable GTA for all.” Remember, that’s BUILDINGANSWERS.CA

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AT LAST, A BUDGET THAT ADDRESSES HOUSING SUPPLY IN ONTARIO

The 2019 Ontario Budget entitled “Protecting What Matters Most” upholds that promise where housing supply in the province is concerned. The upcoming “Housing Supply Action Plan” addresses problems that I and many builders, developers and other real estate professionals have pointed out for years.

After public consultation, the Ontario Government is taking action regarding the following:

  1. that it takes too long for development projects to get approved;
  2. that there are too many restrictions on what can be built to achieve the right mix of housing where it is needed;
  3. that development costs are too high because of high land prices and government-imposed fees and charges;
  4. that tenants need to be protected, and it should also be easier to be a landlord in Ontario;

and that innovative solutions to increase housing supply should be encouraged.

As for bullet points #1 and #2, remember that the longer it takes to get approvals, the more costs go up, and of course, these are passed on to purchasers. Governmental red tape holds up the development and building of new homes and condos to the point that supply is low, and prices are unattainably high for far too many would-be buyers.

And let’s talk about #3, development charges. According to Dave Wilkes, president and CEO of BILD, in an article that appeared in November 2018, development charges for a single-family home in the City of Toronto increased last year from $41,251 from May 1 to $60,739 on November 1. As of November 1, that number will increase to $71,432 on November 1, 2019 and then to $80,227 on November 1, 2020. That will add $38,976 to the cost of a new home in three years. An Altus Group study commissioned by BILD last year showed that government fees, taxes and charges amounted to 22 per cent of the cost of a new home. Development charges mounted to 30 per cent of all charges. And it is not just Toronto: since 2004, development charges have increased between 236 and 878 pre cent across the GTA.

As for #4, yes, tenants must be protected, but right now, they are far more protected than landlords. Making landlord requirements less complicated will achieve balance. One thing potential investors can be sure of is the continued need for rental accommodations in the city. Many people who dream of owning a home have to rent until they can afford one, and nowadays, we see numerous empty-nesters looking to cash out on their large homes and move to a rental property for convenience or the fact that they are priced out of buying again at today’s prices.

The Budget contains the commitment for the Ontario Government to support the residential construction industry more, as it is a major source of employment in the province and extremely important to our economy. If we have ever needed a housing supply action plan, it is now! To read the contents of the Ontario 2019 Budget, visit http://budget.ontario.ca/2019/contents.html

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The United Building

CANADIAN HOME SALES BODE WELL FOR ECONOMY

I have always said that people create the economy, and when they feel good about it, they buy homes. According to the Canadian Real Estate Association (CREA), in April, sales on MLS systems across the country increased 4.2 per cent year over year, and 3.6 percent month over month. (https://bit.ly/2GpPPQK) Greater Toronto Area sales were a driving factor in this gain.

We also know that in the new homes arena, condominiums are the driving force, and in the first quarter of 2019, the construction of condos hit an all-time high. According to Urbanation
(https://bit.ly/2YRax3y), which tracks the GTA condo market, there were 242 projects underway, representing 71,378 units. In downtown Toronto alone, there were more than 100 cranes. Developers can begin construction on condos only when they have substantial sales, so this flurry of activity is an exciting step in our local economy.

According to BILD (https://bildgta.ca), the home building, land development and professional renovation industry is one of the largest in the GTA and represents $30.2 billion in economic value (7 per cent of Ontario’s Gross Domestic Product). This also represents billions in wages. When home-buyers show faith in our economy, in turn, they help to improve it with their purchase decisions.

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SXSW Condos