February 15, 2019 · 0 Comments
By Brian Lockhart
A story on a finance industry website this past week showed a photo of a home that recently sold in Toronto.
As houses go, it was not the most attractively designed building. It was a square block with a flat roof that made it appear more like a very small tenement building rather than a single family dwelling.
It has a small yard and backs onto an alley way. Interior photos showed a rather dated décor with small rooms and a lot of white tile. Size wise, it was around 1200 to 1400 square feet.
The selling price was $1.57 million.
Real estate prices in the Toronto market have reached levels that are now unattainable for many first time buyers.
With a house like this you would have to come up with $392,500 cash just to put down the standard 25 per cent down payment – then you’d have a mortgage of $1,277,500. Figure in your monthly mortgage payments, taxes, and insurance, and it would cost you around $9,100 per month just for a place to live.
No wonder people are moving out of Toronto.
As the exodus from the big city continues, home prices in the surrounding regions have adjusted to keep pace with the market that zeros in on Toronto as its centre.
The average house price in Canada in 2018 was $451,500 – that’s nation-wide and the market has cooled slightly due to new mortgage rules designed to get some aspects of the industry back to more reasonable levels.
Of course location is everything and market values fluctuate wildly between provinces and regions.
You can still buy a house with only a five per cent down payment, but under the new rules, a person must have an income that will demonstrate their ability to meet mortgage payments over a five-year term.
In Orangeville, the average house price was reported as $535,000, as of January 2018 with 30 days the average period a property was on the market.
That’s a hefty price for someone trying to get into the market for the first time.
The good news for home buyers is the market has cooled down over the past year and should remain fairly steady for a while.
“Our number of sales in January has been up 40 per cent over last year,” said Andrew Wildeboer, broker of record for Royal LePage RCR Realty, in Orangeville. “We’ve always carried around 30 to 35 per cent of people from out of town,” he said, referring to the number of clients that are moving to Orangeville from other areas.
While the number buyers moving to other towns has increased, the number moving to Orangeville has remained steady. Part of the reason is the fact that Orangeville is landlocked in terms of growth due to several factors including the greenbelt that surrounds the area.
“I see that we will get between one and two per cent increase in home prices this year,” Mr. Wildeboer said of rising prices, adding, “Things spiked in the range of about 32 per cent in January of 2015. We were seeing averages of three to seven per cent per year. I would say that the market is stabilizing. We’re probably going to see two or three years of very modest increases.
“There’s a huge desire for young people, sort of classified as mellennials, to purchase houses. There’s an inability based on the new mortgage rules that were put into place last year. They have to be approved for a mortgage that is a lot greater than they actually need. I will say this will take two to three years to work itself out where buyers say, now I have enough of a down payment. If they’re not buying today, they are saving up.”
Mr. Wildeboer said he has noted many people from Toronto buying property in neighbouring towns within driving distance to the city; however, towns farther from Toronto like Owen Sound are simply too far away for commuting and have not seen an influx of new people.
With home prices now levelling off, it may be time for first time home buyers to get serious about saving up for a down payment.