Will Real Estate Go NUTS In Canada? 🇨🇦

Summary

The 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

00:00

📉 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.

05:00

🏙️ 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.

Keywords

💡Mortgage Rates

Mortgage rates refer to the interest rate applied to a loan for purchasing property. In the video, falling mortgage rates are a key factor impacting the Canadian housing market, with the potential for further rate cuts by the Bank of Canada. Lower rates can make borrowing cheaper, which may drive more activity in the housing market, particularly by the middle of next year.

💡Bank of Canada

The Bank of Canada is the central bank responsible for setting monetary policy, including interest rates. In the video, it is anticipated that the Bank of Canada will aggressively cut rates, which could lead to lower mortgage rates and potentially stimulate more home buying in the near future, particularly by spring or summer of next year.

💡Variable Rate

A variable rate mortgage is one where the interest rate fluctuates based on changes in the broader financial market, as opposed to a fixed rate. The video mentions that by mid-2025, variable rates in Canada could drop to the low threes (3% range), making home ownership more affordable and potentially driving a housing boom.

💡High-Ratio Mortgage

A high-ratio mortgage is one where the down payment is less than 20%, requiring the borrower to purchase mortgage insurance. In the video, the speaker mentions that high-ratio mortgages and other types of mortgages could see 5-year fixed rates in the 3% range in the coming months, further impacting housing affordability.

💡December 15th Seatec Limit Changes

The video refers to upcoming changes on December 15th that will allow buyers to put down only 10% on homes priced up to $1.5 million, under new Seatec limits. This change could encourage more people to enter the housing market by reducing the upfront cost of buying expensive homes, contributing to increased market activity.

💡Real Estate Divergence

Divergence in real estate refers to the growing gap in performance between different types of properties. In the video, it is mentioned that while tiny condominiums are losing value and facing downward price pressure, single-family homes, townhouses, and semi-detached properties could experience price firming by spring 2025, showing how different segments of the market are behaving differently.

💡Tiny Condominiums

Tiny condominiums, sometimes referred to as 'dog crate condos' in the video, are small apartment units, particularly in high-rise buildings. These are described as being in a precarious position due to high costs and diminishing returns for investors, with prices potentially falling as more units are built in Toronto and Vancouver.

💡Lowrise Housing

Lowrise housing includes properties such as single-family homes, townhouses, and semi-detached houses. The video highlights that Ontario and British Columbia have built very few lowrise homes in the last eight years, creating scarcity. These types of properties remain highly desirable, and their prices could stabilize or increase due to this lack of supply.

💡Housing Scarcity

Housing scarcity refers to the shortage of available homes, particularly in certain market segments. In the video, it is noted that the lack of new lowrise housing developments, coupled with high demand for such homes, has led to scarcity in Ontario and British Columbia, driving prices higher for single-family homes and townhouses.

💡Real Estate Investors

Real estate investors play a significant role in the housing market, especially in buying condominiums and rental properties. The video explains that investors are now facing challenges with tiny condos, as high costs and declining rents make these investments less attractive, leading to potential price drops and reduced profitability in the condo market.

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