The downtown market continues to chug along, relatively inline with last months bounce-back, if not a bit stronger on the freehold side. I am starting to see some pick-up in the sale of investment properties. Condos are selling at the asking price or above it, with most selling within a day or two of being on the market. Quality freehold listings are still holding back offers as demand continues. Last spring, sellers wouldn’t accept bully offers, now they encourage them. If there is weakness, it is in properties that aren’t unique in anyway.
The OSFI (Office of the Superindendent of Financial Institutions) announced the new ‘stress-test’ for uninsured mortgages will begin January 1, 2018. The consensus on this new regulation is it will take further steam out of the market, specifically the top-end. As budgets decrease and people still need a place to live, many believe the condo market and more affordable houses will be the beneficiary of this regulation. The rental market may also become tighter, as people will be forced to save for longer to afford the property they want.
Uninsured mortgage: Over 20% downpayment
Insured Mortgage: Under 20% downpayment
When the stress test for insured mortgages was adopted last fall, there wasn’t a significant immediate effect in home values. In fact, the market leaped forward, creating the spring frenzy. It was after the non-resident tax was introduced that the freehold market slowed down. Interestingly, the condo market didn’t slow down, which was the market segment that was expected to have the most non-resident investment. I believe what we have learned since, is that it wasn’t non-residents fuelling the downtown Toronto market, but speculators/investors. They disappeared along with everyone else over the summer, waiting to see if the Toronto market would follow Vancouver’s negative market reaction to its own non-resident tax. Who didn’t disappear were the first-time buyers, who have kept the condo market hot, unfazed by the non-resident tax and the stricter mortgage regulation last fall.
Two questions here. This past year, have most first-time buyers saved enough money to qualify for an uninsured mortgage, thus negating the stress test? Or, simply, are people making enough money to afford the homes they’re buying with 5-10-15% down regardless of the stress test? Mom & Dad or a co-signor could have helped out, but those options will still be available after Jan. 1, if we are speculating on how the market will react.
Without a broader economic issue disrupting the job market, rents becoming more affordable or interest rates rising quickly, I continue to see the market dynamic remain competitive downtown, but with more options for savvy buyers.
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