Will Real Estate Go NUTS In Canada? 🇨🇦
Summary
TLDRThe transcript discusses the outlook for Canada's housing and mortgage market. Mortgage rates are expected to drop significantly, with variable rates potentially falling to the mid-3% range by spring 2025. There will also be changes in housing financing options, allowing larger down payments on high-value homes. However, the market remains divided: while small condos, especially in Toronto and Vancouver, face declining prices due to oversupply, low-rise homes and townhouses are scarce and likely to see demand increase. Investors are expected to face challenges with small condos, but family homes may stabilize or see slight price increases by 2025.
Takeaways
- 📉 Falling mortgage rates are expected, with a potential 50 basis point cut from the Bank of Canada soon.
- 🏠 Mortgage rates could drop to the mid to low 3% range by mid to late 2024.
- 💡 New policy changes will allow buyers to put 10% down on homes priced up to $1.5 million starting December 15th.
- 📊 The fall housing market is not expected to boom despite optimistic claims on social media platforms like TikTok and Instagram.
- 🏗️ There is an oversupply of small condominiums in Ontario and Vancouver, with many set to hit the market in the next two years.
- 📉 Prices of small condos are expected to fall further, as rents do not justify current prices, creating pressure for investors to sell.
- 💥 Investors make up a large percentage of the market, adding further strain on small condo prices.
- 🏡 There is a scarcity of low-rise homes like single-family houses, townhouses, and semi-detached homes due to a lack of new construction.
- 📈 While small condo prices may continue to drop, single-family and low-rise housing prices could firm up in spring 2025 due to limited supply.
- 🌍 The focus is on Ontario and British Columbia, which make up over 50% of Canada's population and are key drivers in the housing market.
Q & A
What is the expected trend for mortgage rates in Canada over the next few months?
-Mortgage rates in Canada are expected to drop significantly, with variable rates possibly falling to the mid to low 3% range by late spring or early summer next year. This is anticipated due to aggressive rate cuts, including a potential 50 basis point cut by the Bank of Canada in the next meeting.
What impact will the December 15th changes to C8C limits have on the housing market?
-The changes to C8C limits on December 15th will allow buyers to put a 10% down payment on properties priced up to $1.5 million. This is expected to generate interest from buyers, particularly for higher-value homes.
Why is the housing market in Ontario and British Columbia not currently booming, despite falling mortgage rates?
-The housing market in Ontario and British Columbia is not booming due to high affordability challenges, economic uncertainty, and the fact that mortgage rates, although falling, are still much higher than the record low rates of 2021. The market remains slow despite some increased activity in certain areas.
What is the outlook for the real estate market in spring 2025?
-The spring of 2025 may see some price firming, particularly for low-rise properties like single-family homes, townhouses, and semi-detached houses. However, the market for small condos, especially in Ontario and Vancouver, may continue to face downward pressure on prices.
Why are small condominiums in Ontario and Vancouver under price pressure?
-Small condominiums are under price pressure because they are too expensive for investors, with high purchase prices and rents that don't cover the costs. As a result, some owners may become desperate to sell, leading to declining prices in this segment of the market.
What has caused the scarcity of low-rise homes in Ontario and British Columbia?
-The scarcity of low-rise homes in Ontario and British Columbia is due to a focus on high-rise construction over the past eight years, with more than 50% of housing starts being condos. Additionally, new low-rise construction has slowed significantly in the past 14 months.
Why are investors less interested in buying small condos despite falling mortgage rates?
-Investors are less interested in small condos because even with mortgage rates dropping to 3.5%, the high property taxes and condo fees make it difficult to turn a profit. Rent prices aren't high enough to justify the investment, leading to a loss for property owners.
What is the future outlook for people who overpaid for homes during bidding wars in 2021?
-People who overpaid for homes during bidding wars in 2021, particularly in the outskirts of Vancouver and Toronto (the 905 region), have seen prices drop significantly, with some losing up to 25% of the value they paid. However, further price declines may be limited due to the scarcity of low-rise homes.
Why is the low-rise housing market expected to perform better than the condo market in 2025?
-The low-rise housing market is expected to perform better than the condo market because there is a shortage of single-family homes, townhouses, and semi-detached homes, which remain in high demand. In contrast, the condo market is oversupplied, especially with small units that are less appealing to buyers and investors.
How has the lack of new construction in the Greater Toronto Area affected the housing market?
-The lack of new construction in the Greater Toronto Area over the past 14 months has created a scarcity of housing, particularly low-rise homes. This has increased demand for the few available properties, which may help stabilize prices in this segment of the market, even as other parts of the market struggle.
Outlines
📉 Falling Mortgage Rates and Upcoming Changes
This paragraph discusses the recent rapid changes in the mortgage and housing markets in Canada, particularly falling mortgage rates. The Bank of Canada is expected to cut interest rates by 50 basis points, which could lead to variable rates dropping to the low threes by late spring or summer next year. This could result in five-year fixed rates dropping to the 3% range in the near future. Additionally, changes to CMHC limits, effective December 15, will allow buyers to put 10% down on homes valued up to $1.5 million. Despite optimistic projections from realtors and social media, the reality is that the housing market remains sluggish due to affordability issues and higher rates compared to 2021.
🏙️ Oversupply of Condos and Investor Woes
This section highlights the growing divergence in real estate markets, particularly in Ontario and Vancouver. While low-rise housing is scarce, there is an oversupply of small condominiums, with thousands more being constructed. These condos, priced around $900 per square foot, are not financially viable for investors due to high costs and low rental returns. Prices for these units are dropping, and this trend is expected to continue into the spring. Investors, who make up a significant part of the market, are under pressure as they struggle to sell or make profitable investments. This creates price pressure on small condos while other types of housing face different challenges.
🏘️ Scarcity of Low-Rise Homes and Market Divergence
The focus shifts to the scarcity of single-family homes, townhouses, and semi-detached houses in Ontario and British Columbia. Despite high demand for these types of homes, construction has drastically slowed, especially in the Greater Toronto Area (GTA), where almost no new low-rise homes have been built in the last 14 months. While some housing prices have fallen, especially in areas where buyers overpaid, these drops are limited by the lack of new supply. Though prices for some homes have decreased, the housing shortage creates a strong demand that could lead to price stabilization or increases in low-rise homes by spring 2025.
Mindmap
Keywords
💡Mortgage Rates
💡Bank of Canada
💡Variable Rate
💡High-Ratio Mortgage
💡December 15th Seatec Limit Changes
💡Real Estate Divergence
💡Tiny Condominiums
💡Lowrise Housing
💡Housing Scarcity
💡Real Estate Investors
Highlights
Falling mortgage rates with expectations that the Bank of Canada will cut rates by 50 basis points in the next meeting.
By late spring or summer next year, variable mortgage rates could fall to mid-to-low 3% in Canada.
Five-year fixed rates could drop into the 3% range in the coming weeks, not limited to high-ratio or specific mortgage types.
New rules from December 15 will allow for 10% down payments on homes priced up to $1.5 million, sparking more interest.
Despite social media hype, the housing market isn't booming yet, though British Columbia and Ontario are getting slightly busier.
Affordability remains challenging as mortgage rates are not as low as the 1.99% seen in 2021.
Rate cuts in 2025 are expected to fuel a significant impact on mortgages and the housing market.
A divergence in real estate products is emerging, with many new small condos not making financial sense for investors.
Toronto condo prices are falling, with current prices around $900 per square foot and possibly dropping to the $800s soon.
Price pressure will continue on small condos, especially as investors struggle to cover costs with rental income.
Investors, a major part of the market, may be forced to sell as prices fall and new condos keep being built.
There’s a scarcity of single-family homes, townhouses, and semi-detached homes as most new builds in the last eight years were high-rises.
People still aspire to own low-rise homes, but the lack of supply and high prices make them unaffordable for many.
Some areas, like the outskirts of Vancouver and 905 regions, have seen single-family home prices fall significantly, sometimes by 25%.
Spring 2025 may see price stabilization for single-family homes, townhouses, and semi-detached homes in Ontario and British Columbia.
Transcripts
you know there's been so many quick
developments in the mortgage and housing
space so let's break it down we have
constantly falling mortgage rates
because let's face it the biggest
possibility is the Bank of Canada is
going to cut 50 basis points half a
percent of the next meeting and rate
cuts are going to become very aggressive
we could easily have a a variable rate
in Canada in middle of the summer ear
late spring next year it's going to be
in the mid to low threes uh we're going
to have all we going to have all kinds
of uh fiveyear fixed rates not just High
ratio not just c8c mortgages but we're
going to have all kinds of five-year
fixed rates in the 3% range in the next
couple of months next couple of weeks
so we couple that with the changes that
are coming up on December 15th for
seatec limits where it's going to be
possible to put 10% down on a much
bigger over a million dollars okay no
problem all the way up to 1.5 million
10% down it's going to get some interest
obviously some people are going to make
use of it so what should we expect in
the spring what let's face it it doesn't
look like this fall is going to be some
huge you know no matter what realators
are telling you no matter what you see
on Tik Tok no matter what you see on
Instagram about hey if you don't buy now
you're diomed how's this going to the
Moon okay like all the crazy realtor
and half of the mortgage broker
incredible with from them on
Tik Tok and insta but look the reality
is so far things are getting a little
busier in the housing market British
Columbia and and
Ontario but it's not booming I mean it's
not all of a sudden like it's becoming
great because the truth is the economy
is pretty shitty affordability is hard
and these rates aren't 1.99 like we had
in 2021 okay so to sum up there is going
to be some reasons why after December
15th and once we get more and more rate
Cuts in 2025 by the time we get to 20125
we're going to be feeling the definitely
feeling the effect of the rate Cuts in
mortgages and in crime
rate so we're going to see a boom in the
spring is it is real estate just going
to go crazy in the spring
look here's the key thing to understand
we have developed a huge
Divergence in real estate products in
this country we've got way too many dog
crate condominiums in Ontario and
Vancouver way too many like there's
going to be like 40 50,000 more in the
next two years that are just the cranes
are in the air the buildings are getting
built and the truth is that you know
even with rates in the 3%
range they don't make any economic sense
for investor to buy there's just too
expensive they're like right now
Condominiums are selling sort of in a
desperation mode for about $900 a square
foot and that could slip like it started
at 975 950 925 now it's 9 it could get
into the eight soon for people who are
desperate to sell their little dog crate
condos because the rents don't make
sense and the prices are going down
they're not going up so people could be
desperate to sell some of those units
and there's more and more and more
coming
particularly in Toronto so there's price
pressure on those units that are going
to be very clear right into the spring
like like a 3.5% rate doesn't
save the high you know by the time you
put in the property tax by the time you
put in the condo
fees doesn't make sense you can't rent
it for what you're paying so you're
losing money and the price is going down
like who the hell wants that so there's
tremendous pressure on that product
those small Condos for investors and
investors are a huge huge percent of the
market so they're so much bigger than
they were even 10 years ago so the truth
is this that part of the market could
easily cons have continuous pressure on
price and not become a good deal for
anybody those those tiny condos now
totally different for lowrise for single
family for town houses for semi-
detached all that stuff
in Ontario they stopped effectively
stopped building them about eight years
ago I know what do you mean Ron that's
no it's not because when you
study the numbers of housing starts you
find out that for the last eight years
more than 50% some years 80% of the new
housing starts have been high-rise they
have not been lowrise they have not been
houses and semis and town houses so we
are have failed to build that product
and that is still the aspirational
product that the majority of people want
that's the house most people wish they
could have they can't afford it because
the house prices in particularly in
Ontario and British Columbia are batchet
crazy but that's what they want and
there isn't any so we haven't built any
of them we haven't built anywhere near
near enough and 14 months ago we stopped
building pretty much all together in the
GTA there's there's nothing getting
built for the last 14 months so we have
created scarcity we have created a fact
that you know if you could possibly find
a way to buy one of these you could
don't get me wrong some prices have
fallen people who would overbid went
crazy on bidding wars in 20121 out in uh
you know the outskirts of Vancouver deep
into the Fraser Valley and all around
the 905 the far reaches 905 people
overpaid badly and those prices have
crashed I mean some some people have
lost 25% of the value they paid 2.5
million for a single family home in the
far reaches of
9005 and you could barely sell it for
under two million now if you're lucky so
yes some people have already felt that
effect but there's so few of those
houses that's about the limit of how far
they're going to fall so the truth of
real estate in Ontario and British
Columbia I know I keep talking about
those two provinces but they're they're
52% of all the people who live in Canada
so that's why I talk about them a lot so
we're going to see that
Divergence there could continue to be
real problems with tiny condos but it's
possible in the spring we'll see a
little bit of price firming up in the
single family the town
houses and the semis and I think that is
something we should be watching for
spring of 2025
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