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Will the housing market crash? Why home prices may stay hot

Historically low mortgage rates, a race for space and a rush to get into the market ahead of tougher borrowing rules have all fueled a surge in home prices across Canada during the pandemic, and it’s not limited to major real estate hot spots. But when the borders reopen to immigration, housing experts say fresh demand may keep prices hot.

This is the third installment of Priced Out, a three-part series looking at housing affordability challenges facing young people in Canada. Read part one: ‘Nowhere to go’: Canadian homebuyers without family help are running out of optionsAnd part two: ‘Incredibly stressful:’ Why renting isn’t always a solution for those who can’t buy.

During the earlier stages of the COVID-19 pandemic in Canada, Anita Minh and her partner saw a possible silver lining.

“We thought maybe there is an opportunity to enter the (housing) market,” says Minh, a 31-year-old, Vancouver-based Ph.D. candidate at the University of British Columbia.

She calls homeownership “a dream” — and it’s one she says she’s been holding onto for a long time. After growing up in rental properties and moving around a lot — “we had very good landlords, but eventually, they would sell” — she says she associates owning a home with security and stability.

And at the onset of the pandemic, Minh wondered whether home prices would finally come down a bit and her dream might come true.

She wasn’t alone in thinking the health emergency might cool off Canada’s priciest housing markets. In May of 2020, the Canada Housing and Mortgage Corp. (CMHC) warned of home prices possibly declining as much as 18 per cent from the peak of the first three months of 2020.

Instead, Canada went on to record an extraordinary housing boom that extended far beyond the traditional housing hotspots of Vancouver and Toronto. As of April, home prices nationwide were up an eye-watering 23 per cent compared to the same month in 2020, according to the Canadian Real Estate Association (CREA).

For young Canadians like Minh, the question is where home prices are headed next and whether an actual opportunity to jump into the market will present itself in a not-so-distant future.

While the breakneck pace of appreciation of the pandemic housing market has widely been dubbed “unsustainable,” many housing market watchers say when the border reopens new demand from immigration may keep the pressure on prices.

“There are people out there who are assuming that there’s going to be a home price correction and prices have to fall because they’ve gotten so high. And that’s certainly possible,” says Mike Moffatt, senior director of the Smart Prosperity Institute.

But a housing bust isn’t the only possible outcome, Moffatt adds.

“There is a very real possibility that home prices could continue to rise, particularly if the borders open and we’re able to attract international talent at the same rate as we have in the past.”

Priced out: Renters facing challenges during a red-hot pandemic housing market – May 29, 2021

Population growth unmatched by housing supply

Demographics is one of the many factors that contributed to the pandemic housing craze, says Sri Thanabalasingam, senior economist at TD Bank Group.

While Canada’s borders have been closed to most immigrants since March 2020 to limit the spread of COVID-19, the government of Prime Minister Justin Trudeau has been increasing immigration targets to offset an aging population and boost the Canadian economy.

Between 2016 and 2019, Canada welcomed nearly one million new permanent residents, data from Immigration, Refugees and Citizenship Canada (IRCC) show. And between 2017 and 2018, net immigration accounted for 80 per cent of the country’s population growth, according to IRCC.

That increase likely helped fuel housing demand during the pandemic, Thanabalasingam says. When mortgage rates dropped amid the economic crisis created by the health emergency, housing became temporarily more affordable, allowing more people to enter the market, he notes.

At the same time, government lockdowns and stay-at-home orders created a yearning for larger homes and backyards, pushing homebuyers further away from city cores and into smaller towns and rural areas, he adds.

Lower borrowing costs and the sudden need for more space triggered what Thanabalasingam calls a “pull-forward” of housing demand. In other words, many of Canada’s prospective homebuyers, whose ranks had been growing thanks to immigration, decided to pull the trigger on a purchase at the same time because of the conditions created by the pandemic.

Soaring numbers of international student enrolment are also feeding into the demand for housing, and not just in the rental market, according to Moffatt.

“In the GTA (Greater Toronto Area) alone at any given point in time we have around one 150,000 … individuals on international student visas,” he says.

In 2019 alone, Canada issues more than 402,000 new study permits, according to IRCC.

And a significant number of those students settles here for good, thanks to Canada’s easy path to permanent residency, Moffatt notes.

But while that pool of educated newcomers with Canadian credentials is a coveted resource for the labour market and the economy, it also creates a demand for housing for which governments at all levels have largely failed to plan, Moffatt says.

“It’s great to be able to get this cohort of talented 20-somethings,” he says. “We just need to make sure that we have enough housing for everyone.”

Priced Out: A look at why the hot housing market is out of reach for young Canadians – May 28, 2021

What’s in store for the housing market

As Ottawa eyes the end of the pandemic, immigration is set to resume. Canada is targeting 401,000 new permanent residents in 2021, 411,000 in 2022 and 421,000 in 2023, equal to about one per cent of the population for each of those years.

The impact on the demand for homeownership will likely be felt with a lag, Thanabalasingam says. Typically immigrants live in rental properties at first as they settle in a new country and take a few years to save up for a down payment.

In the near future, Thanabalasingam sees the housing market cooling off “a bit” in the second half of 2021, with sales volume coming down from “unsustainable” levels and possibly price growth slowing down.

There are already signs that the market may be taking a breather. The pace of home sales slowed down in April with the number of properties that changed hands falling by 12.5 per cent compared with the record high set in March, according to the Canadian Real Estate Association (CREA).

Tougher mortgage rules for both insured and uninsured mortgages, which came into effect June 1, will likely also pour some cold water onto the sizzling hot market, he says.

But because of a shortage of housing supply, he adds, “we could see elevated prices for some time to come.”

In Vancouver, Minh, the Ph.D. student, says she and her partner are weighing the option of being long-term renters versus leaving the city, where they have family, friends and their jobs, and moving somewhere cheaper.

The uncertainty is difficult to cope with, she says.

“This mentality is really stressful.”

New stress test level makes it harder to qualify for a mortgage in Canada

Higher bar for stress test will reduce pool of qualified borrowers and cool the real estate market

The pandemic has created a frenzy in Canada’s housing market, as low rates coupled with people being cooped up at home has caused them to be willing to bid more and more for extra space. (Mark Blinch/Reuters)

It’s a bit harder to qualify for a home loan as of today, as the federal government has raised the minimum financial bar that anyone applying for a mortgage must meet.

Ottawa raised the level of the “stress test” for mortgages today, setting the new level at 5.25 per cent — or two full percentage points above the borrower’s mortgage rate, whichever is higher. That’s an increase of about half a percentage point from where it was before.

Launched in 2017 to cool down the overheated market of the time, the stress test is a minimum threshold that anyone applying for a home loan in Canada has to meet. It doesn’t make the loan itself any more expensive. Rather, it ensures anyone getting a mortgage will be able to pay it off if rates go up.

It’s not hard to find a five-year fixed mortgage with an interest rate of around two per cent right now, with variable rate loans even cheaper and fixed rate loans a tad more.

Despite those low rates, a look at the numbers demonstrates how big the impact of the higher stress test bar could be. Currently, if a buyer wanted to buy a home costing $400,000 and had a $100,000 down payment, they’d need a $300,000 mortgage. At two per cent on a standard 25-year loan, that would cost the buyer $1,270 a month. But under the new rules, the mortgage application would be tested as though the rate was 5.25 per cent. At that level, the loan would cost the buyer over 40 per cent more every month — $1,788.

Even though that higher payment is only theoretical, if the buyer would not be able to pay that extra $518 a month based on their income level, overall debt load and other factors, the lender can’t loan them the money. Those buyers would then have to go find a cheaper home to pass the test. The effect on the market as a whole is to reduce the pool of qualified borrowers in the hopes of cooling down the market.

Cooling market

The stress test only comes into force today, but there are already signs the market may be cooling even ahead of its implementation, says James Laird, co-founder of rate comparison website

“That’s not to say the housing market is slow, it’s just slower than it was in March of this year,” he said in an interview. “Regardless of this rule change, March 2021 is probably going to be the peak.”

Mortgage rates at record lows

While higher rates will come at some point, according to a recent analysis by National Bank, people with loans set to renew between now and 2024 are likely to be able to get a lower rate when they do.

Canada’s housing market capped off a year like no other in March 2021, as that month was the first 12-month period that captures the start of the pandemic, when home sales slowed to a crawl because of the uncertainty. But through the spring, summer and into the fall, demand from Canadians cooped up at home under various COVID-related quarantine lockdowns lit a fire under the housing market, sending volumes and prices soaring for the rest of 2020 and into this year.

As of June 1, Canadian homebuyers will face a tougher mortgage stress test. The new rules will make it harder to get into the housing market now, but could make it easier for others down the road.

The average price of a Canadian home sold in March went for $716,828, a figure that rose by more than 30 per cent in a year. That was that biggest annual increase on record.

April is typically a stronger month for home sales than March, but Laird said that markets came back down to Earth a little in April 2021. Prices were still up strongly compared with last year, but markets slowed as the talk turned to what policy-makers can and should do to cool down the real estate market.

“We’ve seen some of the froth come out of the market that we saw earlier in the year,” he said.

The stress test seems likely to cool things down even more, reducing purchasing power by about five per cent on average, according to Laird. And he says while prospective buyers may grumble about being shut out, in the long run it may be good news for everyone if house prices come down.

“What the policy-makers had in mind was to slow down the rapid appreciation of home values that we’re seeing across the country.” he said. “In the long run, it actually makes it possibly easier for first-time homebuyers to enter, [so] maybe you could call it neutral.”

That’s certainly the perspective that Neil Pettit has on the issue. Along with his fiancée, Amanda Garant, Pettit has been looking for a home in Windsor, Ont., where they live. But they’re currently sitting on the sidelines after losing out on multiple bidding wars — despite offering well above asking price every time.

“We’re losing bids by $100,000,” he said in an interview. “I mean, there’s no way.”

They both have healthy incomes and have saved a good-sized down payment, so they said the new stress test isn’t likely to impact them. Nonetheless, they are glad to see the government step in.

“You may not find yourself in a house that you can afford once that interest rate raise is raised,” Pettit said. “So I think from my perspective, that makes sense for the government to kind of pull that lever a little bit.”

Although the couple still wants to buy, they’re in no rush to do so. And after enduring a feverish house hunt and coming up short, they’re confident they won’t get in over their heads.

“We’re really careful when we were searching to make sure it’s within our budget,” Pettit said. “Not the budget that the bank said that we could afford.”

What Would a Canadian Real Estate Bubble Burst Actually Look Like?


Given the dramatic scene that’s unfolded this past year in Canada’s red-hot housing market, the word “bubble” has been tossed around in many a conversation.

With its jaw-dropping bidding wars and record-breaking home prices, the Canadian real estate market – especially in places like sizzling southern Ontario – has accelerated at what many consider to be an unsustainable pace for much of the past year. (See: tens of thousands of dollars in price increases per month.)

First things first, though — how are we defining a bubble? Well, a real estate bubble can occur when housing levels rise up significantly due to demand, speculation, and exuberant spending – quite the combo. And if you’re thinking to yourself, gee, that sure sounds familiar, you’re not wrong. All of these factors have currently been playing out across the Greater Toronto Area (GTA), small town Ontario, and Canada at large as of late.

At some point however — no one actually knows when — this growth theoretically becomes unsustainable; eventually the demand decreases or flatlines, thus causing a steep drop in prices.

It is at this moment that the bubble bursts. And Twitter users who have been calling for this to happen for the last 12 years suddenly get to shout ‘I told you so!‘ all the way to the public stratosphere.

Just a few months back, experts seemed more divided on the existence and probability of a bubble. But Bank of Canada indicators released just last week confirm that some Canadian real estate markets – Toronto, Hamilton, and Montreal – were considered bubbles in Q1 of 2021. Toronto and Hamilton (the latter of which, once an underdog, is now North America’s third worst city for affordable housing) have seen their most exuberant quarters since 2016.

In its annual review of financial systems, Bank of Canada last week acknowledged that growing household mortgage debt and imbalances in the housing market were increasing threats to Canada’s economy. While Canada’s housing market boom — undoubtedly fuelled in part by record-low mortgage rates — and the subsequent rise in mortgage debt boost the country’s economic growth in the short-term, they pose a risk in the medium-term, says the bank. In the event of a lost job or illness, families burdened with steep mortgage debt could be at risk.

Tellingly, last week, the Office of the Superintendent of Financial Institutions (OSFI) announced it would change the qualifying rate on uninsured mortgages. Following suit, the Department of Finance confirmed it will apply the same higher qualifying rate to insured mortgages (those with less than 20% down). As of June 1, all buyers — regardless of down payment – will have to qualify at 5.25%.

While not everyone agrees with the recent stress test move, the reality is that some sort of change is needed – and fast. House prices have accelerated at such a rate that 1/3 of Canadians under 40 are kissing the once relatively-attainable goal of home ownership goodbye. A Reddit group has even crowd-funded satirical billboards to make a bold statement about the Canadian housing market. That’s the point we’ve reached, sadly.

“The recent pace of house price growth is not sustainable (25% for all of Canada in February 2021 compared to February 2020) and, as reported in our most recent Housing Market Assessment report (HMA), we have identified  an increase in the number of CMAs across Canada in which overheating, price acceleration, and overvaluation are being detected,” says Dana Senagama, an economist at Canadian Mortgage and Housing Corporation (CMHC).

While Senagama acknowledges that the pandemic has disproportionately impacted lower wage making sectors and the rental market, she highlights the impossible-to-ignore fact that homeownership demand has continued to grow and defy expectations in Southern Ontario.

“With evidence of price acceleration and excess inventories detected simultaneously, our overall assessment for the Toronto CMA moved from a moderate to a high degree of vulnerability,” says Senagama. “While high level of indebtedness continues to be a concern, the Government continues to monitor all risks and adjust its actions accordingly.”

With a Bang or a Whimper?

According to Diana Petramala, senior economist at Ryerson University’s Centre for Urban Research and Land Development, a lot of the dramatic, bubble-like real estate scene that’s played out is largely demographically driven, thanks to first-time millennial homebuyers, for whom the pandemic acted as a catalyst.

“I am a little bit concerned, because if we were to look at past bubbles, they are typically characterized by five years of double-digit home price growth,” says Petramala. “Five out of the last six years, we have had that.” She points to the abundance of home building taking place outside of the city, resulting in an influx of future listings on the market, as potential area of concern.

So, we know we’re in a relatively risky spot, arguably. But what will a GTA bubble burst even look like? Will it be a big, dramatic and catastrophic pop, or more like a slow and steady leak (if you will)?

While many agree there is merit in being cautious in our current climate, most experts don’t foresee a crash that’s nearly as dramatic in nature as recent bidding wars or endless doom and gloom headlines.

“At least in the near-term, the low-rise housing market looks like it’s going to stay steady,” says John Pasalis, President of Toronto real estate brokerage Realosophy. “It’s stabilized, but still a seller’s market. While demand is cooling, it’s probably going to need to cool a bit more to hit a more calm market, because it’s still quite competitive.”

But, we won’t see a rapid decline any time in the near future, says Pasalis.

“When we think of what could cause that – of course, it’s really hard to predict – but usually the causes are triggers of potentially another recession,” he adds. “This would obviously mean an increase in interest rates, which will eventually cool the market a bit.”

Mike Moffatt, a senior director at Smart Prosperity Institute national research network, doesn’t see house-price crashes as the most likely scenario either. “I don’t think it’s inevitable. Things won’t keep growing 40% year-over-year, but there’s no guarantee that we’re going to see a big crash,” says Moffatt.

“The idea is that, once the pandemic ends, population growth in Canada will be quite robust. Right now, we do have quite a few people who are buying second homes and will be selling that off, but that will balance out by an influx of new residents. I see that as the most likely scenario.”

While Moffatt doesn’t believe that a crash is inevitably in our cards, he says that – in theory, at least – we could see a situation where people who own a home in Toronto and a vacation property may discover they’re happy to live at the cottage year-round and sell their home in the city. “That, coupled with rising interest rates and – for whatever reason – if population growth slows down, then things could get ugly in Toronto, and you could see a crash like you saw in the 1980s of prices going down as much as 30 or 35%,” he says.

Of course, this would still only bring us back to the prices of 18 months ago, Moffatt points out. “But still, if you bought at the top of the market that could be disastrous,” he adds.

In assessing the probability of a mortgage rate hike, we should turn to the past, says Petramala. “If you look at bubble bursts, there’s always a hike in interest rates that precedes a following crash,” she says. “In 2008-09, households and the financial sectors took on too much risk. But, what really brought the market down was an increase in the average mortgage rate.”

The impact of an interest rate increase may not be immediate, says Petramala, because people in Canada are more likely to take on five-year mortgage rates. “So, it may be five years down the road,” she says.

Petramala points to the recent increase in popularity of alternative lenders. “With a chartered bank, you need to do a stress test,” she says. “But with alternative lenders, there’s this whole component who may not have had to comply with a stress test. The mortgage rate hike is the one thing that could break the camel’s back.”

You Can’t Correct By Going Sideways

In the meantime, things appear relatively stable in Toronto’s housing market (albeit still unattainable for many would-be first-time homebuyers) compared to the early months of 2021. Petramala, however, warns against reading too deeply into short-term statistics.

“I worry about looking at month-to-month comparisons in the real estate market because it’s always been seasonal,” says Petramala. “The pandemic is shifting the traditional seasonal patterns of demand. It’s difficult to say we’re cooling after one or a few months. Maybe demand would have been spread out over the year.”

While the market has proved that anything is possible (and nothing is shocking) experts predict a slightly-softening market in the medium-term.

“Our price forecast for the Toronto CMA calls for strong house price growth in 2021 and more modest, single-digit, price growth in 2022 and 2023,” says Senagama. “Upside risks to the resale market forecasts include lower than-anticipated mortgage rates and higher demand from new immigrants, which would result in sales outpacing supply and lead to higher house prices. Downside risks include unexpected changes to borrowing conditions and a persistent pandemic with recurring lockdowns.”

As for the much-discussed interest rates, for some time, we’ve been assured that the Bank of Canada would not raise them. In April, however, the bank forecasted that the rates could rise earlier than expected.

Interest rates aside, the FOMO frenzy-filled homebuyer culture we saw (the exuberance factor when it comes to bubble precursors) earlier this year has started to subside. “Today, while home prices are high, the mood isn’t what it was three months ago, with this crazy insanity and exuberance – people paying $50K more than what the same house sold for two weeks ago – that’s not happening as much anymore,” confirms Pasalis.

“Those are the symptoms of an exuberant, bubble-like market. Now, what we are left with is the bubble from the home prices we just had, and those home prices are actually very stable right now and not going up a lot. House prices have been flat in recent months; just condos have picked up.”

This is a sign that there are fewer bids on homes, says Pasalis. “There’s a little more inventory coming up, so buyers are thinking a little more rationally in terms of what they’re willing to spend,” he adds.

Either that, or they’re putting the whole defeating process on hold for the time being. “I think that people have either gotten their place or just given up,” says Moffatt. “It’s got to be disheartening. You hear stories of people getting outbid on their 10th or 15th house. So, you are seeing people give up, and that should cool down the market a bit, because that’s what was driving it – these bidding wars.”

If you have fewer bidders, it’s going to be less likely we’ll see these outrageous prices that have characterized southern Ontario’s market, particularly in Toronto. But, still, it doesn’t mean they’ll drop dramatically. Or that the current market threats will disappear.

“Bubbles always go further than you think but they never correct by going sideways,” says David Rosenberg, chief economist and strategist at Rosenberg Research, who has been vocal in his belief that Canada is in a dangerous housing bubble. And some may say we’re indeed in a sideways market.

“I think that when most people think of the market softening – which it is – they think that means the price is going to fall, and I don’t think that’s likely at least for this year,” says Pasalis. “If, say, June 2022 they start raising rates and there’s a lot of inflation and people who are financially stressed are at risk, that’s harder to predict.”

That seems to be a common theme in talks of Canada’s real estate market: It’s a tricky one to predict. “Making real estate price predictions is a really great way to look foolish in retrospect,” says Moffatt.

After all, just a year ago, the CMHC released their now-famous forecast calling for average housing prices to drop up to 18% in the 12 months ahead, based on the amount of mortgage deferrals taking place. And just look what happened next.

One thing’s for sure, you’d best start believing in real estate bubble stories — whether they pop or not — ’cause if you live in Canada, you’re in one.

U.S. real estate is hot, but Canada's market is even hotter

Home sales as well as prices in Canada are growing faster than in the United States

Source: Joel Schlesinger  •  for the Calgary Herald

In March, Canadian home sales were 75 per cent higher than 2018 and 2019, while sales in the United States were only 13 per cent higher.


Americans are in a home-buying frenzy because of the pandemic. Then again,Canadians are, too, but even more so, a new report states.

TD Economics recently released a comparison study titled Heat Check: Comparing Canada and U.S. Housing Markets that found both markets are experiencing demand “well above historical averages.” Yet as of March, Canadian home sales were 75 per cent higher than 2018 and 2019, while sales in the United States were only 13 per cent higher.

Home price increases are also higher in Canada than the U.S., the report found. The average home sold this year is 32 per cent more expensive than one year ago in Canada, while it’s 17 per cent higher stateside.

Driving demand on both sides of the border are low interest rates slashed to help spur economic activity amid the pandemic.

Another reason for higher sales and prices is demand from 25- to 34-year-olds. They accounted for 40 per cent of sales in the U.S. last year, although that figure is seven percentage points below the average from the early 2000s. Similarly, Canadian millennials and younger adults accounted for 40 per cent of sales, still below the historical average.

The report notes low supply — while helping drive prices — does not account for the hotter market conditions in Canada as levels are similar with the U.S. The likely difference in demand, the report suggests, are due to Canada’s growing population from non-permanent residents, and scars of the subprime housing crash on the U.S. market.

Home sales are down across Canada, but it’s still a seller’s market


Canadian home sales dropped in April, but that’s not necessarily a sign the bottom’s about to drop out of the real estate market, experts say.

A report from the Canadian Real Estate Association released Monday showed that 12.5 per cent fewer homes were sold across the country in April than in March.

The average selling price rose, jumping 2.4 per cent nationally. In the Greater Toronto Area, the average selling price of a home rose 1.2 per cent, to $1,005,500 in April.

Shaun Cathcart, senior economist at the association, said the numbers show the scorching hot market — which saw prices jump by double digit percentages in many areas over the last six months — is finally starting to cool off ever so slightly.

“While we still have a ways to go, measures of market balance have finally turned a corner and monthly price growth has decelerated. I believe we’ve all wanted to see the temperature turned down on this market after the last year and it looks as though that is finally happening,” said Cathcart.

TD Bank economist Rishi Sondhi wasn’t surprised to see the CREA numbers but cautioned some buyers may have simply stayed on the sidelines during April as the third wave of COVID-19 continued across the country.

“Our long-standing view is that Canadian home sales and prices would eventually cool from their stratospheric levels. While April may have marked the beginning of this trend, the extent to which the third wave of the pandemic negatively impacted the data is unknown,” Sondhi wrote in an analysis of the association’s data.

Sondhi also argued that the potential for tighter mortgage regulations from the Office of the Superintendent of Financial Institutions could cool the market.

“However the near-term story plays out, we expect sales to trend lower in the second half, as rising interest rates and (potentially) stricter stress test regulations begin to bite. This should also sap some steam from price growth,” Sondhi said.

Currently, borrowers with a down payment of less than 20 per cent have to demonstrate they can afford a mortgage (or home equity line of credit) at a rate two percentage points above the rate being offered or the Bank of Canada’s five-year benchmark rate, whichever is higher. In mid-April, the office suggested a minimum of 5.25 per cent.

Still, Cathcart pointed out there aren’t many homes being listed for sale, something that should theoretically keep prices from dropping. While the two months worth of inventory in April is still higher than the record low 1.7 months available in March, it’s well off the historical long-term average of five months of inventory.

Phil Soper, president of real estate firm Royal LePage, said already low inventory dropped during the second half of 2020.

“There were a lot of first-time home buyers in 2020, so that took a lot of inventory off the market, but didn’t add any. Normally if you’re buying a place, you sell the one you’re living in, so it’s one to one,” said Soper.

Another sign that demand is still strong is that the number of homes sold in April was roughly 75 per cent of the number of homes listed. While that’s down from the record of 90 per cent seen in January, it’s still substantially higher than the long-term average of 54.4 per cent.

“Eventually, we’ll see a levelling off. But this is still a seller’s market,” said Soper. “As long as interest rates are low and inventory’s low, that’s going to support prices.”

Correction — May 18, 2021: This article was edited to correct that the report from the Canadian Real Estate Association showed that almost 12.5 per cent fewer homes were sold across the country in April than in March.

Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer

It takes Toronto homebuyers 21 years longer to save for a downpayment than Montreal buyers



Montreal’s much more affordable housing market has long made Torontonians envious, whether you’re renting or buying your forever home.

Now data published by National Bank of Canada this month reveals how stark the disparity has become when it comes to the homebuying experience in Canada’s two largest cities.

The bank’s Housing Affordability Monitor calculates housing affordability by looking at changes over time to the monthly mortgage payment on a median-priced home, assuming a 25-year amortization period and a five-year term.

Even with a household income of at least $183,594, it would take a Toronto buyer 297 months — or just shy of 25 years — to save up for a downpayment on what the bank describes as a “representative home” in the Toronto region. According to National Bank, the price of a representative home in Toronto was $1,069,111 in the first quarter of 2021.

In Montreal, it is, unsurprisingly, a much different story. With a household income of $94,760, a Montreal buyer could accumulate a downpayment for a representative home in just 40 months. That’s just over three years, creating a more than 21-year gap between Montreal’s downpayment savings time and Toronto’s.

Of course, this is mostly illustrative of the serious affordability problems facing Toronto homebuyers. No buyers are actually waiting it out for nearly 25 years to save for a downpayment on their first home and the price of a representative home changes constantly.

But the National Bank data paints a grim picture of just how out-of-reach saving for a home can seem for many Toronto residents and it’s hard not to look on with a twinge of jealousy when hearing about the much more reasonable situation in Montreal.

According to the bank’s report, Toronto’s condo market is predictably more accessible to first-time buyers. A buyer with a household income of $125,202 could save for a condo downpayment in 51 weeks, or just over four years.

Montreal condo buyers need a far lower household income — $69,459 — to save for a condo in just 29 weeks, or slightly more than two years.

What’s particularly striking is how relatively close Montreal’s downpayment savings periods for homes and condos are — just 11 months separates the two property types. In Toronto, it’s a staggering 246 months, a sign of how far the region’s single-family home market has drifted from the condo market in the last year.

Buyers Market Vs Sellers Market

The Toronto housing market is expected to remain in seller’s favour in 2021.

What does this mean to both buyers and sellers during this time?

Housing supply levels continue to decline, and are not expected to improve in 2021, which may push average home prices up.

Market shifts and interest rates have been driving demand for housing all across Canada..but not all residences are affected.

Want to discuss these changes and how I can help YOU in this market?

Reach out to me.

Milind Jog


Is the condo sales slump over? Toronto-area new construction sales near pre-pandemic levels in Q1

Mon., May 3, 2021

The 5,593 new condominiums sold in the Toronto area in the first quarter put sales only four per cent below pre-pandemic levels and surpassed the 10-year average, a sign the market has shaken off last spring’s malaise, according to a condo report released Monday.

Seventy-six per cent of the new condos launched in the first three months of 2021 were sold by the end of the quarter, the highest level since 2017, according to Urbanation, a market research firm that tracks GTA development.

The average selling price in the first three months of this year in the Toronto region was $1,261 per sq. ft. — an 8.8 per cent or approximately $100 per sq. ft. year-over-year increase.

In the City of Toronto first quarter sale prices averaged $1,419 per sq. ft., 5.7 per cent higher than the $1,343 per sq. ft. average in the same period last year.

“The recovery has been pretty much ongoing. Even last year during the summer time we had a lot of bounceback in terms of activity,” said Pauline Lierman, Urbanation’s director of market research. “To be only four per cent off last year’s quarterly total for Q1, which was a strong quarter itself, is a good thing.”

The second quarter of 2020, however, was down 82 per cent from the same period in 2019.

Spring and fall are normally the busy seasons for new condo launches, said Lierman.

The brisk start, she said, “certainly has given a punch to confidence for other launches to come to market.

“A lot of them were waiting in the wings and a lot launched in that break between Q1 and Q2 so they’re Q2 product for us,” said Lierman.

“We’re still in a lockdown but we’re in an environment where everything can be done virtually. People have got their bearings,” she said.

There has also been a return to downtown sales activity with slightly more than half of the units sold — 2,886 — in the City of Toronto, which has felt some lag due to a sluggish rental market throughout the pandemic.

That was two and a half times higher than the average of the last three quarters of 2020 and above the 2,829 sales in the first quarter of last year.

Condos selling now won’t be ready for occupancy until about 2024, said Lierman.

Urbanation attributes the rebound to low interest rates and economic optimism. But a 30 per cent year-over-year price increase in suburban houses, has also helped renew interest in more urban real estate.

The number of condos under construction in the Greater Toronto Area hit a record 83,497 units — a 10 per cent year over year increase.

Downtown Toronto, however, accounted for only 44 per cent of those units. The 905 communities are seeing 32 per cent of that construction — a record high proportion for those areas.

The remaining 24 per cent are being built in the old City of Toronto suburbs.

Amid hot housing market, stretched borrowers may be stretching the truth to get loans

Suspicious income letters ‘the most advanced employment fraud I’ve ever come across,’ mortgage brokerage chief says
Geoff Zochodne Publishing date: Apr 26, 2021


Rising home prices may require borrowers to take on more debt, and to prove to lenders that they can afford the added burden.

The recent surge in home prices has a federal regulator reminding lenders to stay sharp, but it is also prompting concern that borrowers may be stretching themselves financially and, in some cases, stretching the truth when they apply for a mortgage.

One Canadian mortgage brokerage told the Financial Post it has recently uncovered a rash of suspicious employment letters submitted by individuals trying to obtain loans in the Greater Toronto Area.

“I must say this is the most advanced employment fraud I’ve ever come across,” said Dan Eisner, chief executive of True North Mortgage Inc.

Income letters are provided by prospective borrowers as proof of employment and income, to help show they have the means to pay back a loan.

True North, Eisner said, calls the companies on the job letters prior to funding a mortgage (it also has an exclusive lending arm called THINK Financial). For letters that they now suspect are phony, Eisner said that process was followed and someone answered the phone and confirmed the details of the letter. Other documents, such as purported pay stubs, were provided as well.

However, Eisner said a few weeks back something strange was spotted by a “closer” at the brokerage, who handles documentation. That employee noticed that two letters provided by two would-be borrowers from two supposedly different people at two supposedly different companies had the exact same signature.

True North’s closer alerted the underwriting manager, and six or so other suspicious letters were subsequently discovered. In one case, True North pulled its funding at the last second, but heard nothing back from the client, which led Eisner to suspect fraud.

This is the most advanced employment fraud I’ve ever come across


“Because when we pulled the funding on the deal, the client didn’t complain,” he said in an interview. “And you’ve got to imagine if you’re buying a house, and all of a sudden your bank pulls the funding on the day of closing, you will complain.”

True North checked its files to see if there were other deals that fit the profile, and found a handful of other suspicious letters. They were, Eisner said, from companies the lender had never heard of, that all claimed to be located in the Greater Toronto Area, and that they had websites that had been created recently and contained a fair amount of detail.

“They’re not just coming up with websites, they’re coming up with websites that seem fairly deep,” Eisner said.

The discovery by True North comes amid a red-hot Canadian housing market that is being driven by low interest rates, high levels of household savings and a preference for more space among potential buyers, some of whom may fear missing their chance to own a home. Rising home prices may require borrowers to take on more debt, and to prove to lenders that they can afford the added burden.

Previous bull markets for housing have also caused suspicion about mortgage fraud, which can involve providing false information to a lender. Equifax Canada, for instance, said in January 2017 that its data showed a 52-per-cent increase in suspected fraudulent mortgage applications since 2013.

More recently, a survey by Equifax in February of 1,540 Canadians found that nine per cent hadn’t been totally truthful on a loan application and that that nine per cent said it was acceptable to inflate annual income when applying for a mortgage (which was down from 12 per cent in 2019). Forty per cent of respondents agreed that mortgage fraud is a growing problem.

Furthermore, one of the trends the credit-reporting agency is seeing recently is a rising level of complexity in manipulating documents, said Carl Davies, head of fraud and identity at Equifax Canada.

“Fraudsters are getting far more sophisticated,” Davies said in an interview. “That’s a problem, not just in the mortgage space, that’s everywhere.”

However, when it comes to mortgages, it also means there is a bit more demand for homes amid an already limited supply.

Some borrowers may be able to afford their mortgage payments in the current low-rate environment, Eisner said, but not at the level they are stress-tested at to ensure they can meet their obligations, which for loans not insured against default is proposed to rise in June to at least 5.25 per cent.

That higher hurdle is in addition to another steadily climbing one for borrowers, which is increasing home prices. The Canadian Real Estate Association reported recently that national home sales set another all-time record in March, and that the actual average sale price rose by 31.6 per cent from a year earlier.

These trends might lead a would-be borrower to try to fudge details on a loan application.

“They’re seeing that their ability to get into a home is only getting further away as home prices increase,” Eisner said. “You can’t save up money fast enough to keep up with the increase of home prices.”

They’re seeing that their ability to get into a home is only getting further away as home prices increase


One federal regulator has already warned lenders not to let their guards down amid all the recent housing madness.

That warning came in a letter from the Office of the Superintendent of Financial Institutions earlier this month, which also announced plans to toughen the uninsured mortgage stress test contained in the B-20 guideline for residential mortgage underwriting.

OSFI also said it will be “looking for heightened vigilance” from federally regulated financial institutions in applying B-20’s principles related to collateral management, income verification and debt servicing, among other things.

Superintendent Jeremy Rudin told reporters on April 8 that this was a “proactive measure” motivated by what the watchdog is seeing in the housing market. Conditions such as fast-rising home prices and a high pace of real-estate transactions can tend to undermine sound mortgage underwriting, the head of OSFI said.

Specifically, OSFI said it expects federally regulated financial institutions to “continue applying rigour in the verification of a borrower’s income,” although its concerns seem more aimed at ensuring property values don’t usurp the place of a steady paycheque.

“The most secure mortgages are those to borrowers who have the capacity to repay the loan, and not those that accumulate equity through rapidly rising house prices,” the regulator said in its letter to the lenders. “Consistent with Guideline B-20, FRFI lenders should not rely on collateral values as a substitute for stable and verifiable income.”

The Bank of Canada welcomed OSFI’s proposal in its latest monetary policy report, saying past experiences with surging housing markets show they can lead to “more speculative, extrapolative behaviour,” and can ultimately pose a number of risks.

“High prices could result in stretched borrowing and lending, leaving some households and financial institutions more financially vulnerable to an economic downturn,” the central bank said.

At the moment, though, demand for residential real estate is up, and policymakers have so far avoided any major moves to try to slow things down. The heightened demand is also increasing the amount of due diligence for lenders, and the rush has yet to die down, potentially putting homeownership further out of reach for some would-be buyers, and particularly younger ones.

That can provide a strong incentive for someone to inflate their income on their application to obtain the home they want, Equifax’s Davies said.

“While we continue to see a very hot housing market, that kind of first-party fraud, that misrepresentation that we see, I think we’re going to continue to see that coming through pretty strong in Canada,” he added.

• Email: | Twitter: GeoffZochodne

Tighter mortgage standards, blind bidding ban may be needed to slow housing market: National Bank of Canada CEO

Louis Vachon says further analysis needed to understand if housing market trends are permanent

Author of the article: Reuters | Publishing date: Apr 23, 2021


Home prices have been on a tear in Canada.

TORONTO — National Bank of Canada’s CEO said on Friday that additional macro- and micro-prudential adjustments may be required over the next few months to avoid a potential burst of a speculative bubble in the country’s housing market.

Regulators may need to implement additional tweaks to Canada’s mortgage underwriting criteria and consider new measures. That might include banning blind bidding — the practice of bidding on a property without knowing the value of competing offers — to slow the speed of the home price growth, Louis Vachon said at the lender’s annual shareholder meeting.

Home prices have been on a tear in Canada during the coronavirus pandemic, with the latest data showing an increase of nearly 11 per cent in March from a year earlier, far exceeding gains during the last peak in 2017.

“New macroprudential adjustments to mortgage underwriting criteria may be required over the next few months,” Vachon said. “But there are a lot of moving parts” and further analysis is needed to understand whether these are permanent or transitory, he added.

He suggested federal agencies conduct surveys on baby boomers’ plans to sell their single family homes, whose pullback has contributed to a shortage of houses; the role and impact of parental support in financing current buyers; and how long work-from-home arrangements are likely to last, to inform additional measures.

Vachon called for public consultations as a first step on measures to bring increased price transparency to the homebuying process.

© Thomson Reuters 2021

How Involved should GOVT be in the Housing Market?

Taking a look at the challenges associated with Government intervention in the Canadian Housing Market

Terence Corcoran: Canada's big banks amid blistering housing market: Stop us before we lend again

The latest in bank ‘thought leadership’

When it comes to woke corporations, no Canadian institutions can match Canada’s big banks. Pick a subject dear to the trembling hearts and scheming minds of stakeholder capitalists and you will find that the banks are all over it — racial and gender diversity, climate and carbon issues, social responsibility, net-zeroism, charitable giving, COVID guidance. In the upper echelons of the bank towers of our major cities, bank executives have moved in on these areas as part of their mission to provide Canadians with “thought leadership.”

Where once we all went to banks for financial info, better interest rates and lower service fees, today we are apparently expected to approach local branch managers and ask: “I need some thought leadership today. What’s the best you can do?”

Two current issues — Canada’s housing policies and Ottawa’s great carbon emissions reduction plans — are among the thoughts circulating through the biggest banks. On both fronts, the banks see looming crises that require government action — even though our bank leaders bear more than a little responsibility for having thought-led Canada into these crises.


On Tuesday, for example, the TD Bank Group’s economics team issued a report warning that Ottawa’s 2050 net-zero carbon emissions target could kill up to 400,000 jobs in the oil and gas sector. “With that level of job dislocation,” said the TD economists, “there is an enormous need for policy to step up and ensure workers can smoothly transition into a clean energy economy.” Major new spending and job-creation schemes will be needed.

This warning comes from the same TD Bank Group which, while in thought leader mode last November, announced its commitment to the job-killing global climate action plan. The bank promised to establish a “sustainable finance and corporate transitions group to support clients and promote long-term sustainable economic growth.” No mention in November of the need for mass government action to replace the jobs to be lost as the bank curbs lending to fossil fuels.

All the banks have joined the “thought leader” movement on climate.

On housing, the thought leader conclusion is that the Canadian market is running way too hot and Ottawa should adopt policies and tax measures to cool it down. “Hot housing markets call for a policy response,” said Royal Bank. “Policy-makers need to act immediately,” said a Bank of Montreal report. One key proposal is for a new capital gains tax on the increase in value of personal residences, including homes and condos.

At least one bank executive has dissed the housing capital gains tax idea. TD Bank CEO Bharat Masrani told a reporter last week that such a tax is a “difficult one politically,” and therefore not worth pursuing.

These “political difficulties” have not dissuaded economists at the other banks, who in turn have had an influence on media and others. Over the past couple of weeks, the editorial board of the Globe and Mail has jumped on the idea that Ottawa should move in with a fire hose, perhaps including a capital gains tax, to cool down housing prices.

The argument against taxing housing capital gains is deep and significant, as Murtaza Haider and Stephen Moranis outlined this week in a Financial Post commentary. As they note, a capital gains tax implies the ability to deduct mortgage interest costs and the costs of home improvements over time.

Scores of likely unintended consequences arise. If interest costs were deductible, that would make owning a home more affordable and drive up prices even more. And as owners attempt to postpone paying the capital gains tax, they could decide not to sell and thus reduce the supply of homes for sale, especially since home values are considered by many to be a source of retirement income.

Another complexity is measuring the capital gain. Unless the plan involves retroactive taxation of past capital gains — technically illegal — each home or condo would have to be valued as of the day of introduction of the tax. Unless, of course, Ottawa should decide to impose a straight tax on the final sale value of the property, regardless of the original purchase price. This would be in keeping with the current fixation on the need to tax wealth as wealth, regardless of purchase price.

Another argument against another tax on housing is that housing is already heavily taxed. Jack Mintz notes in a recent commentary on this page that adding a new tax on top of all the other levies could make a principal residence the most heavily taxed asset in Canada. We already have property taxes, sales taxes on new home purchases, land transfer taxes, development charges on homebuilders, plus high corporate income tax rates on developers.

One key solution to the too-hot housing market would be to increase supply by removing all the regulatory barriers and zoning obstacles that prevent new housing construction in areas where demand is high.

As for the banks, let us pause to wonder why the banks — which account for 75 per cent of Canadian residential mortgages — do not themselves put a halt to blistering house prices. They seem to be saying “Stop us before we lend again.”

Instead of engaging in national thought leadership campaigns, the banks should maybe stick to their role as bankers rather than playing politics and looking for governments to intervene to fix parts of the economy where the banks play a major economic role.




Toronto Home-Price Surge Tops 20% as Bubble Debate Heats Up

By Ari Altstedter April 6, 2021, 5:00 AM GMT-4


Toronto home values continued to swell in March, bringing annual average price gains to more than 20% and adding fuel to a raging debate about whether policy makers should try to cool the market.

New listings were up 57% from March 2020, when the onset of the pandemic temporarily caused a freeze in real estate activity. But the new supply was not able to keep up with demand spurred by low borrowing costs and demand for bigger homes, especially in the suburbs, a report from the Toronto Regional Real Estate Board said Tuesday.

Across the metropolitan area, the average price of all homes sold was C$1.1 million (about $878,000) during the month, up 21.6% from last March. Detached homes in the 905 area code, which surrounds the city’s core, sold for 31.4% more, an average of C$1.32 million.

“The potential for double-digit price growth could continue without a meaningful increase in the supply of homes available for sale,” Jason Mercer, the Toronto real estate board’s chief market analyst, said in a news release. “This will become more apparent as population growth resumes over the next year.”

Cheap mortgages and new remote-working conditions have spurred a frenzy for more spacious homes, with house hunters bidding up prices in Canada’s largest cities and then looking further afield when they’re priced out. The resumption of more normal levels of immigration, which was slowed by the pandemic in 2020, is another source of demand.

The rapid price appreciation has spurred a debate among prominent economists at Canada’s largest banks over whether Prime Minister Justin Trudeau’s government or other policy makers should step in.

The chief economist of Bank of Nova Scotia, Canada’s third largest lender, said policy makers should not rush to act because price gains are being driven by a lack of homes for sale. Many sellers were sidelined by the pandemic last year, but that problem could take care of itself as the traditional spring selling season gets underway, Jean-Francois Perrault said in a report released Sunday.

That came after Toronto-Dominion Bank’s top executive, Bharat Masrani, told Bloomberg that governments should be cautious in taking action. Meanwhile, economists at Royal Bank of Canada and Bank of Montreal are calling for more urgent action to keep prices from becoming completely unaffordable for first-time buyers and head off the possibility of a destabilizing crash later.

Policy makers so far have not signaled plans to take action, but some have expressed concern. Canada Mortgage & Housing Corp., a federal agency that monitors the market, last month raised its assessment of Toronto’s vulnerability to a sudden drop in prices to high, citing the rapid climb in prices. There are five markets in Canada with that designation.

Toronto’s benchmark price index, a measure that takes into account the mix of types of properties sold, has posted a 10.8% gain in the first three months of 2021, the fastest period of appreciation the city has seen since since early 2017. Back then, the Ontario government stepped in with a number of measures, including a tax on foreign buyers.

Milind Jog
Sales Representative

Royal Lepage Credit Valley Real Estate, Brokerage.
10045 Hurontario Street, Brampton, Ontario, L6Z 0E6
M: (416) 561-7511
O: (905) 793-5000