I’m always reluctant to draw any conclusions about housing markets based on seasonally low data. More specifically, July-August and December-January typically have suppressed sales volume, so using them to guide decision-making can lead us astray.

Source: TRREB

With that being said, there are a few key things to be mindful of in Toronto Regional Real Estate Board (TRREB)’s most recent Market Watch release:

Home sales are down by 5.3 per cent compared to August last year. This is relatively in line with the declines we’ve seen each month in 2024. As well, homes are taking much longer to sell (40-57 per cent increase in days-on-market).

As a result, inventory continues to accumulate in the absence of absorption, so active listings are up significantly (46.2 per cent). Nominal prices are down slightly (0.8 per cent), so when adjusted for current inflation, real house prices are down over 3.0 per cent since last year.

The fourplex pump

Source: TRREB

When you unpack these data points a little further, you can get a better understanding of the market.

Some things stand out here:

1. Area code 416 detached home sales is the only category posting a YoY increase in number of units sold in August, up 8.3 per cent. It’s also the only category posting a YoY increase in price, up 3.2 per cent.

2. Area code 416 condominiums and townhouses have both seen double-digit drops in volume.

Presumably, the municipality’s upzoning of residential neighbourhoods in Toronto to four units has had some positive impact. A floor on area code 416 detached homes would be established by the last buyer in the market — an investor looking to tear down the home and rebuild a multiplex there. Their output value has now gone from one or two units to four units, as a purchaser can now build a fourplex on detached lots.

In the 905 area code, detached sales appear to be resilient, but less optimistic than in 416. The 905 area code’s detached sales number saw a 3.3 per cent decrease.

The cooling condominium market

Condominium units are a very different story from the detached market. We’ve been hearing alarming reports of condominium volume piling up, with product exceeding 12 months of inventory at some periods.

Condominium apartment sales continue to decline, currently at a rate of 11.4 per cent across the GTA compared to August of last year. This decline is reflected further in the preconstruction condominium sales market, where sales are 50 to 75 per cent below the long-term average.

Declining rents and increasing interest rates have created a difficult cash flow scenario for condominium investors. As a result, many are looking to offload assets, and very few are looking to purchase these assets.

Source: TRREB

Pricing

Prices are down across the board on TRREB. Notably, beyond condominiums, recipients of the pandemic’s urban exodus are seeing a steeper recoil from peak pricing, which seems to correlate heavily with the magnitude of price increases during the exodus.

Source: TRREB

Moving forward

With another 25 basis point rate cut from the Bank of Canada, some pressure has been eased for financial stress on certain sellers. Fixed rates are declining, so there’s a little more light at the end of the tunnel for those facing a steep mortgage payment increase upon renewal in 2025 and 2026.

The bigger question is when interest rate cuts will have a material impact on bringing purchasers back to the market. So far, the impact of 75 bps rate cuts has been relatively muted, as the weight of financial stress seems to outweigh the benefit of lower rates.

The term “missing middle” has become as common in today’s real estate vocabulary as “a hot market” or “location, location, location.” Cliches often have some truth in them — and in the case of the “missing middle,” it’s gaining traction in the Canadian real estate market in part due to the rise of a newer property type: multiplexes.

Changes in B.C. and Toronto

Multiplexes are residential homes that consist of multiple separate units within what would have traditionally been a lot designated for a single detached home. They can generally vary from two to eight units.

In 2023, British Columbia made amendments to their Housing Statutes (Residential Development) Amendment Act — more commonly referred to as “Bill 44.” That same year, Toronto’s city council adopted its own Official Plan Amendment and Zoning Bylaw Amendment to allow multiplexes throughout the city.  

Jasmine Cracknell-Young, vice president of market advisory at Zonda, saw that the rise of multiplex listings in Toronto jumped dramatically since these amendments. According to the Toronto Regional Real Estate Board (TRREB), in 2023 there were 115 listings and in 2024, 168 listings — a 46.1 per cent increase.

“I think because housing has become such a hot topic, we have all levels of government finally talking about it because they realize the crisis that we’re in,” she comments. 

A ‘tiny part of the market’: Legislation may not go far enough

Chris Spoke, builder and developer with Toronto Standard, has seen firsthand the impact of these legal changes on housing projects. Personally, he doesn’t believe the legislation goes far enough. 

“So we have five residential zones in Toronto. Two of those residential zones do support multi-unit housing, but the zoning bylaws paired with the city’s Official Plan and the language of it is if there’s any new development within the neighborhood’s designation, it has to respect and reinforce the existing physical character.

(This) means that even if the zoning technically allows for multi-unit housing, if it’s not consistent with the existing physical character, then you’re not going to get past this test,” Spoke explains. “We’ve still not seen a lot of activity because I think the multiplex bylaw doesn’t go far enough in terms of the permissions. So it’s still like a tiny part of the market.”

Optimism and opposition: Major Streets Study

However, Spoke is optimistic that multiplexes will continue to rise in popularity in Toronto, particularly with the momentum surrounding the Major Streets Study which “focuses on permitting gentle density — missing middle housing — on major streets in low-rise neighbourhoods across Toronto.”

“These are the major arterials in the city that have bus routes on them,” adds Spoke. “So this also opened up a new scale of development in parts of the city where it was not legal before.”

However, these policies are met with some opposition. When it comes to the Major Streets Policy, traffic is a big concern among current residents.

“It’s always traffic,” shares Cracknell-Young. “They just think it’s taking up road space.”

Bill 44 in B.C. addresses these concerns by eliminating new vehicles from entering neighbourhoods altogether in some cases: if a housing project is within 400 metres of a transit stop, no minimum parking is required. Transportation accessibility is poised to play a significant role in the development of multiplex housing.

Ottawa: Multiplex increases expected post-bylaw approval in 2025

Nachiket Kulkarni, an architectural designer with Architrix Studio, has worked on multiplex projects both in Vancouver and Ottawa, where he now lives.

“Ottawa would be two or three years behind Vancouver when it comes to that change,” he says. “So whatever happens in Vancouver right now, the same change would be in Ottawa two or three years down the line in terms of multiplexes.”

While Kulkarni has seen a big shift towards more multiplex development over the past couple of years in Ottawa, he anticipates that to increase even further after December 2025, when the new zoning bylaw is expected to have final approval.

“In Ottawa, they’ve consolidated the number of zones into just six zones now, just like Vancouver did,” adds Kulkarni.

In October 2023, the City of Vancouver implemented a new zoning designation, “R1-1,” otherwise known as “Residential Inclusive.” This was put in place to replace and simplify the previous zoning structure, which included various RS (One-Family Dwelling), RT (Two-Family Dwelling) and RM (Multiple Dwelling) designations.

And similar to Toronto and Vancouver, Ottawa’s changes will also aim to reduce parking requirements.

‘Citizen developers’ on the rise

Spoke believes that with these new changes, multiplexes will open the door towards something he refers to as “citizen developers:” where those such as home builders, general contractors and even everyday homeowners can actively participate in building up new housing opportunities.

“Multiplexes offer a form of development that’s accessible to people who haven’t worked professionally as developers,” Spoke says.

While multiplexes will likely not solve all of our housing problems overnight, they provide an opportunity to think of density in a more nuanced manner. 

“I think it’s a really great product form. You can have multiplexes go into existing communities and have people of different incomes and demographics able to access some of the best communities that we have,” says Cracknell-Young. “To stop the sprawl and have more people in our existing communities where it’s possible … I hope that we will see more of them.”

Image: ShapeYourCity.ca

The Toronto Regional Real Estate Board (TRREB) and its member realtors are supporting high school students pursuing post-secondary education with the TRREB Past President’s Scholarship.

Since the program’s 2007 inception, 73 students have received a total of $264,500 to put toward their futures.

‘TRREB member realtors are helping to open doors … empowering students to pursue their dreams’

To qualify, each student must write a compelling essay dealing with key issues in the real estate industry, and the winners can win one of two $5,000 first-place, $2,500 second-place, $2,000 third-place and $1,500 fourth-place prizes.

“TRREB member realtors are helping to open doors beyond real estate. We’re empowering students to pursue their dreams with our Past President’s Scholarship. The longevity of this initiative is a testament to how the real estate industry truly cares about giving back and making a difference,” says TRREB president, Jennifer Pearce.

Award-winning essays and their proposed industry solutions

First place

The first-place winners are Tejiri Inikori and Dev Katyal. Inikori’s essay addresses the challenges of housing affordability in the Greater Golden Horseshoe and the flexibility renting offers individuals and families. Inikori is heading to Queen’s University for its kinesiology program.

Katyal’s essay proposes three solutions to tackle the housing affordability crisis: revisiting zoning, more purpose-built rentals and providing support for vulnerable households. This fall, Katyal will study computer science at the University of Waterloo.

Second place

In second place are Daniel Tan and Jaden da Silva. Tan’s essay explores what’s needed to accommodate our growing population. Tan is attending the University of Western Ontario for computer science and Ivey Business School in the fall.

da Silva’s essay compares housing in Tokyo and Austria and how these regions address building more homes and affordability. da Silva will attend the University of Toronto and major in neuroscience and economics.

Third place

The third-place winners are Elisa Gabriele and Ethan Berger. Gabriele’s essay uncovers if the rental market is keeping up with the growing demand for housing. Gabriele will attend the University of Waterloo this fall for architectural engineering.

Berger’s essay discusses government and its efforts to get more shovels in the ground. Berger will attend the University of Guelph to study animal science.

Fourth place

Yulia Senyuk took the fourth-place award. Senyuk’s essay highlights the rising cost of renting and the impact this is having on consumer debt. Senyuk enrolled in the Schulich School of Business at York University.

Learn more about TRREB’s Past President’s Scholarship, including when to apply for the 2025 program.

In the Greater Toronto Area’s (GTA) housing market, July 2024 tells a story of resurgence and adjustment. A previously stagnant market is now starting to revive, with home sales increasing by 3.3 per cent, reaching 5,391 transactions compared to last July’s 5,220.

This renewed activity is highlighted by an 18.5 per cent rise in new listings from the previous year, providing prospective buyers with more options. However, the revival also reveals contrasting elements — as supply grows and choices expand, the average selling price sees a slight decline, reflecting the complex dynamics between supply, demand and market pressures.

Across these shifts, the condominium sector presents its own scenario, with rental demand rising but being outpaced by an influx of new listings, resulting in more choices and slightly lower rents for tenants.

Significantly more listings helped boost supply and drop prices

July 2024’s GTA home sales rebounded from a previous stagnation and suggest a gradually recovering market. This increase in sales was matched by a significant rise in new listings with 16,293 in July, representing an 18.5 per cent increase compared to the same time last year. 

Clearly, there is an improved market supply, which helps to keep up with demand as prospective buyers have a much larger array of choices available. 

Source: TRREB

Despite the rise in both sales and new listings last month, the GTA’s average selling price declined by 5.0 per cent year-over-year. Reported at $1,106,617, it marked a 0.9 per cent (over $10,000) decrease from the $1,116,950 recorded in July 2023. The reduction in prices can be attributed to the increased inventory which has helped decrease demand pressure on the housing market.

Source: TRREB

Condominium sales and rentals

With this in mind, the GTA’s condominium market had mixed results. Condominium rentals experienced a substantial increase in Q2 2024 with 17,400 rentals compared to 13,896 rentals in Q2 2023. This was a 25.2 per cent increase, but the number of new condominium rental listings rose even more significantly, up by 51.3 per cent year-over-year. 

Source: TRREB

Despite the higher demand for rental accommodations, tenants have benefited from increased choice and slightly lower average rents. On average, a one-bedroom condominium apartment in Q2 2024 rented for $2,452, reflecting a 3.1 per cent decline from the $2,529 average rent in Q2 2023. Similarly, the average rent for a two-bedroom condominium was down by 1.9 per cent to $3,178 from $3,239 in the previous year.

Although there was a substantial increase in condominium rentals, condominium sales dropped to 5,474 in Q2 2024 from 6,824 in Q2 2023, a 19.8 per cent decrease. In contrast, the number of new listings surged by 36.5 per cent year-over-year, reaching 16,917. The average selling price of condominium apartments in Q2 2024 was $729,005 a slight drop from $737,925 at the same time in 2023.

Source: TRREB

Toronto reported a 0.5 per cent decrease in its average selling price of $765,963, while Durham has one of the GTA’s lowest condominium sales and lowest average prices in Q2 2024.

As we look at the GTA’s housing market for mid-2024, the combination of rising transactions and falling prices reflects a market in transition. A 3.3 per cent increase in home sales alongside a 5.0 per cent decrease in average prices highlights the balance between growing supply and moderated demand.

In the condominium sector, we’re seeing a similar trend — a significant rise in rentals contrasting with declining sales and a notable increase in new listings. This evolving market presents both opportunities and challenges, indicating that while recovery is underway, the future will be complex and multifaceted. Our 2024 housing market is more than just numbers; it illustrates the dynamic interaction of economic forces, buyer sentiment, and strategic adjustments.

It’s no surprise Toronto’s housing market is reaching critical levels as the rising cost of living, high rental rates, a shortage of construction workers and the city’s growing population are exacerbating the imbalance between supply and demand.

Toronto is experiencing a surge in condominium listings, but few highlight that the suites are primarily small and not fit for family living. According to the Toronto Regional Real Estate Board (TRREB)’s June 2024 market watch data, listings for units in the 500- to 599-square-foot range soared by 50 per cent compared to last year.

Are Torontonians being heard?

Unfortunately, family-sized condominiums make up only about 10 per cent of the market, despite a growing and pressing demand from families. This shortage of larger, multi-bedroom suites designed for families and multigenerational living leaves many buyers, particularly those seeking homes that accommodate extended families, underserved and frustrated. This begs the question: when it comes to housing supply, are Torontonians being heard?

In April, we conducted a survey with members of the Angus Reid forum to capture what Torontonians are feeling about Toronto condominiums, and the results were illuminating. Almost half of respondents (47 per cent) see the potential for condominiums to be their long-term homes, and this statement is echoed strongly by current condominium dwellers, with 71 per cent expressing confidence in condominium living.

However, despite the increase in positive outlook, a staggering 93 per cent of respondents believe that Toronto needs better-built condominiums that suit people’s lifestyle needs, and nearly four in five respondents think that most Toronto condominium units are poorly constructed, indicating dissatisfaction with the current landscape.

Market caters to a misguided notion of “investor” instead of “end-user” condominiums

For condominium developers like us, this disconnect between what’s available in the market and what Torontonians need and want is strikingly clear. For far too long the market has catered to a misguided notion of what “investor”-focused condominiums are, rather than “end-user” condominiums.

This belief has been that investor buyers are predominantly interested in smaller units.

We believe all condominiums should be end-user-focused, and by meeting the demands of end-users, they become a good investment as well. This notion of catering to investors has led the market with an overwhelming supply of small units that many do not deem as viable homes.

Understanding and responding to Torontonians’ housing needs

A home should inspire pride and satisfaction. It should not be a compromise driven by convenience. Torontonians need not settle for underwhelming condominium developments with small suite layouts and poor build quality. Developers need to listen and create homes that meet the real needs and aspirations of the people, rather than simply adding more shoebox units to Toronto’s already imbalanced housing stock.

All of this just scratches the surface of the issue. Beyond size alone, developers bear the responsibility to construct sustainable, high-quality homes that meet people’s expectations. Much of today’s condominium stock lacks the thoughtful architecture, quality and design necessary to make condominiums both a comfortable and enjoyable home for everyone.

We’ve all heard the same story from our friends who live in condominiums: “I can hear my neighbours,” “The wait time for the elevators is far too long,” and so on. It’s really no wonder that more than 34 per cent of Torontonians believe that owning a condominium is like owning a box in the sky, but it doesn’t have to be that way.

Liveability above all: Condominium developers need to keep quality at the core

The growing dissatisfaction among condominium owners suggests that we need to make a drastic change in what we’re building and how we’re building it.

Developers must shift their focus to quality and liveability. This means designing homes that people are proud to own and live in, with the space, comfort and amenities that support a high quality of life, creating sustainable, vertical urban environments for people of all ages and life stages. We need to build condominiums that make people want to live in Toronto and enjoy everything that our beautiful city has to offer.

Bridging the gap is a developer’s responsibility

Toronto’s housing crisis requires an approach that addresses both the quantity and quality of homes and developers have a crucial responsibility in this. The solution isn’t just about building more units; it’s about building the right kinds of homes.

Only by closing this gap between what’s available and what’s needed can we hope to resolve the crisis and create a city where everyone feels at home. 

Yesterday, the Bank of Canada lowered its overnight lending rate by 25 basis points to 4.5 per cent, the second consecutive rate cut this year.

The Bank says that growth in the Canadian economy has picked up but is still below long-term potential and that our economy’s weakness is across both household consumption and the housing market, with the labour market softening.

Although the Bank expects growth to increase later this year and into 2025, it notes that excess supply will continue to put downward pressure on inflation.

Sidelined buyers may return to many options, activity should pick up in the fall

Karen Yolevski, COO of Royal LePage Real Estate Services Ltd., weighs in: “Our research shows that many buyer hopefuls have been waiting for a concrete signal from the Bank of Canada that the economy is moving in the right direction. A second cut to the overnight lending rate indicates just that, and with mortgage qualification thresholds continuing to come down, sidelined buyers may have the confidence they need to make their return to the housing market.

We expect this will prompt a slight boost in activity in the short term, followed by more robust buyer demand in the fall. In the meantime, some much-needed inventory has been building in major markets over the last few months, giving buyers more options to choose from. In addition to lower rates, this may also encourage more buyers to re-enter the market in the near future.”

More than rate cuts needed for sales recovery

Zoocasa points out that following June’s rate cut, home sales didn’t recover as many expected — with non-seasonally-adjusted national sales down by 10.9 per cent from May to June and GTA and Metro Vancouver sales down by more than 10 per cent.

As well, the Canadian Real Estate Association adjusted its annual housing market forecast to 6.2 per cent growth from its original 10.5 per cent in April. This is reflected in excess inventory levels the Toronto Regional Real Estate Board reports, with active listings up 67.4 per cent year-over-year in June.

This may not be surprising, given that a recent survey reports 42.3 per cent of respondents note home prices being their main concern about buying in today’s market, with interest rates (25.6 per cent) and economic uncertainty (14.9 per cent) following.

Christopher Alexander, president, Re/Max Canada, seems to agree: “The Bank of Canada’s decision to decrease its key interest rate by a quarter of a percentage point is welcome news for Canadian homebuyers who are still contending with a high cost of living and higher interest rates than we’ve seen in a long time.

We’ll likely need to see interest rates come down further for the housing market to kick into high gear again, but if they continue trending downward, there’s a possibility of a more active fall market.”

Good news for commercial real estate

Avison Young’s Mark Fieder, principal and president, Canada, notes that the rate drop will positively impact investor sentiment.

“Commercial real estate (CRE) return metrics are improving compared to other asset classes, and we expect this will further fuel investor appetite and capital allocation into CRE,” he says.

“We have been in a very uncertain interest rate environment over the last two years. This second rate drop certainly shows the Bank’s confidence in the inflation data and reinforces the fact that we are finally shifting into a different interest rate regime.”

Home sales in the GTA dropped in June compared to the same month last year. Despite the Bank of Canada’s interest rate cut at the beginning of June, many potential buyers remained hesitant to enter the market. This resulted in a high supply that created a slight dip in the average selling price compared to the prior year. 

Source: TRREB

Fewer sales from a year ago but with over 12% more new listings

There were 6,213 home sales in June 2024, representing a 16.4 per cent decrease from the 7,429 sales recorded in June 2023. However, new listings increased by 12.3 per cent year-over-year, reaching 17,964. 

Source: TRREB

The average selling price in June 2024 was $1,162,167, down 1.6 per cent from $1,181,002 in June 2023. The MLS Home Price Index Composite benchmark decreased by 4.6 per cent compared to the previous year.

First half of 2024 performed better than all of 2023

Annual sales were $1,126,279 last year. After six months into 2024, we’re currently at an average of $1,130,744 which is slightly better than all of 2023. Sales have been steadily increasing since their fall in December 2023 which helped us achieve a slightly higher sales average. The current 6,213 June sales compared to December 2023’s 3,420 demonstrates the changing economy.

Source: TRREB

While the recent rate cut provided some relief, most homebuyers are likely waiting for multiple rate reductions before re-entering the market. This proves that the current well-supplied market has given recent home buyers more choice and negotiating power on prices. As sales increase alongside lower borrowing costs, the elevated inventory levels will help prevent a rapid increase in selling prices. 

As the market adjusts to changing economic conditions, any first-time buyers and sellers in the GTA will be closely watching for further interest rate cuts and their impact on housing affordability and the ever-changing consumer market.

The Greater Toronto Area (GTA) housing market experienced a period of stability on a month-over-month basis in May, with home sales remaining at a low 7,013 transactions, the Toronto Regional Real Estate Board (TRREB) reports.

That being said, “stability” is not really what you want on a monthly basis in the middle of what ought to be a spring market. In a typical year, transactions rise pretty consistently from January until May. When looking at an annualized context, it’s a significant 21.7 per cent decline from the 8,960 sales in May 2023, so it’s no surprise that Ontario Real Estate Association (OREA) CEO, Tim Hudak, has publicly called for rate cuts.

Unaffordable markets see very little transaction volume — a problem for the industry

Hudak’s comments bring attention to something that is painfully apparent in advanced economies with lower homeownership than Canada: unaffordable markets see very little transaction volume.

While this is not necessarily a bad thing for consumers of housing, it’s certainly a bad thing for an industry that depends on transaction volume to make a living. This is why countries like Canada and the United States have large numbers of realtors per capita, whereas countries like Switzerland and the United Kingdom have very little.

Much of the transaction volume that professionals do see in these markets is in leasing, which has become a growing share of income for real estate professionals in the GTA during this record-low period of sales volume.

It has not been hard to find acknowledgment of Canada’s crippling housing affordability issue from economists at Canada’s biggest banks, for example, with RBC’s analysis:

People will start buying houses when they can afford to

From my perspective, in order to see meaningful growth in transaction volume, we need housing to be affordable again. It’s so simple that people call me stupid when I say it, yet it appears to be so easily ignored.

Bloomberg broke down what it would take for Canada to see a retreat from this affordability crisis:

1. A 33 per cent decrease in house prices, and/or
2. A 55 per cent increase in incomes, and/or
3. A 350 basis point decrease in mortgage rates

The average selling price for homes in the GTA in May was $1,165,691, marking a 2.5 per cent decrease from May 2023’s average price of $1,195,409. Similarly, the MLS Home Price Index composite benchmark saw a year-over-year decline of 3.5 per cent.

Despite prevailing high interest rates, there was a modest month-over-month uptick in the average selling price on a seasonally adjusted basis from April 2024, indicating slight strength in the bid of buyers in today’s spring market. 

“Inflation could be higher … if house prices in Canada rise faster than expected, or if wage growth remains high relative to productivity”

With this updated annual decrease in house prices, we have arrived at a juncture where prices continue to do the bulk of the work in restoring affordability. Measured from the peak of the market, house prices are down 20-30 per cent, depending on which metric and market you use. 

Mortgage rates have only just begun to move down 25 basis points this week, and incomes have risen a nominal 2.5 per cent since 2022. Without further material changes in incomes or interest rates, it would not be unreasonable to expect house prices to continue bearing the burden of increased affordability, as fewer and fewer Canadians can afford to buy homes.

The Bank of Canada acknowledged this in their press conference opening statement for the June rate cut — by stating that “Inflation could be higher … if house prices in Canada rise faster than expected, or if wage growth remains high relative to productivity.”

As such, the Bank of Canada is a little bit stuck here when it comes to restoring housing affordability, as that growth in wages or house prices would decrease their likelihood of further cuts. 

Reasonable to expect a buyer’s market this summer

Despite the annualized decrease in demand. new listings showed a contrasting trend, increasing by 21.1 per cent year-over-year to reach 18,612. The combination of the increased supply (listings) and decreased demand (sales) is sending us on an expedited path toward a buyer’s market, which is typically coupled with downward price discovery.

This influx of new listings provided prospective buyers with a larger range of choices and greater negotiating power, leading to a less competitive market environment compared to the previous year. The supply/demand imbalance led to a relatively low sales-to-new-listings ratio. Given supply growth alongside a typical summer decline in buying activity, it would be reasonable to expect a buyer’s market this summer. 

While many are optimistic that interest rate cuts will be the beginning of the end for unaffordability and low-volume challenges in Canada’s real estate market, this reality comes at a cost. Much of the listing volume increase we see after rate cuts take place could come as a result of financial stress on borrowers, despite their slight relief. 

Mortgage rate delinquencies rise after rate cuts

There are two reasons why mortgage delinquency rates typically rise after rate cuts take place: 

1. The lagging impact of rate hikes being felt on borrowers
2. The reality that central banks cut rates in response to bad economic data, which leads to more bad data such as rising unemployment, which constricts household ability to service debt

This was well visualized by Ben Rabidoux of Edge Realty Analytics: 

Caution, dangerous curves ahead

Currently, the housing market is characterized by cautious behavior among buyers, largely driven by high mortgage rates. According to Ipsos’ recent polling, a significant number of prospective homebuyers are holding off until they see concrete evidence of mortgage rates dropping. Even the Bank of Canada’s rate cuts may not accomplish that goal, given that the Canada five-year bond yield, the primary pricing mechanism for five-year fixed mortgage rates, just went up in response to June 7 data from the U.S.

It’s expected that as borrowing costs decrease over the next 18 months, a substantial number of buyers, including many first-time buyers, will be drawn into the market. This surge in demand is expected to ease some strain on the tight rental market, as these new homeowners transition from rental properties.

Jason Mercer, TRREB’s chief market analyst, pointed out that although high interest rates have tempered home prices, affordability will likely improve as borrowing costs decrease. However, this improvement may be short-lived as increasing demand is expected to exert upward pressure on home prices again.

Source: TRREB

On Monday, the Ontario government announced the Homeowner Protection Act 2024, which contains new measures to enhance consumer protections for homeowners and buyers, aiming to prevent harmful business practices and support informed decision-making.

The new measures include:

1. Banning consumer NOSI registrations. Businesses use Notices of Security Interest (NOSI) registrations to claim interest on rented or leased equipment installed on properties, and their misuse has been rising, leading to pressures on consumers to pay high buyout costs when selling homes or securing financing.

2. 10-day cooling-off period. A proposed 10-day cooling-off period for new freehold home purchases will allow buyers to reconsider their commitments, aligning protections with those for condominium buyers.

3. Cancellation disclosures. Builders’ histories of cancelling purchase agreements for new freehold homes will be publicly disclosed, boosting buyer confidence.

4. Combating illegal building and selling. The province will consult on measures to protect consumers from illegal builders, who often bypass licensing and fail to enroll homes with Ontario’s new home warranty and protection program, Tarion, resulting in more defects, increased risks and higher payouts.

5. Condominium owner protections. The Condominium Authority Tribunal’s jurisdiction will be expanded, and consultations will focus on improving condominium operations, management and transparency with more protections for owners and buyers.

6. Heritage conservation. Amendments to the Ontario Heritage Act will give municipalities until January 2027 to evaluate properties on their heritage registers, easing administrative pressures and supporting heritage conservation.

7. Transit-oriented housing. To expedite mixed-use housing near transit, Ontario proposes exempting designated transit-oriented community lands from certain Planning Act provisions, ensuring building partner certainty and efficient use of transit investments.

NOSI ban and 10-day cooling off period: Where OREA and TRREB stand

The Ontario Real Estate Association (OREA) says the Act is “a significant step towards protecting homeowners from bad actors during the largest financial transaction most Ontarians will make in their lives, and towards building much-needed housing supply across the province.” Similarly, the Toronto Regional Real Estate Board (TRREB) applauds the government’s introduction of the Act.

OREA says it commends Minister McCarthy and the Ford Government for the legislation and their efforts to protect vulnerable homeowners from bad actors who unfairly exploit the use of NOSIs.

“Too many Ontarians, when selling their home, have been surprised by one or more NOSIs — fine print in contracts for water coolers, furnaces or security systems that include exorbitant buyout charges to be paid before the home can be sold. Banning NOSI registrations will help reduce additional and unnecessary fees being tacked onto the price tag of a home,” says Tim Hudak, CEO of OREA.

He goes on to say that OREA is pleased with the 10-day cooling-off period for purchasers of newly built freehold homes, a protection that is already in place for pre-construction condominium sales in Ontario. “Extending this protection to newly constructed homes will enhance consumer protection by allowing buyers a 10-day period to review and cancel an agreement without penalty, levelling the playing field between Ontario’s hardworking families and well-resourced corporate developers with a team of lawyers.”

TRREB aligns with this, stating the proposal to apply a 10-day cooling-off period to purchasers of new freehold homes, is essential for protecting consumers and fostering trust in the real estate market. “It allows buyers to take a step back and get professional advice on the review of contracts and other aspects of a new home purchase,” notes Jennifer Pearce, TRREB president.

The regional board also agrees with the decision not to apply the cooling-off period to resale homes. “The dynamics of resale transactions are significantly different from new builds, and imposing a cooling-off period could introduce unnecessary complications and delays. While there are merits to cooling-off periods for new freehold homes that could establish protections for consumers against any pressure tactics when purchasing a new build, both sellers and buyers are consumers in the resale market which is different.

Most resale home transactions are intertwined and could have a negative domino effect on other transactions in a supply-constrained market. The resale home market operates under different conditions, and applying the cooling-off period to these transactions is neither practical nor necessary,” Pearce explains.

Hudak echoes similar sentiments, noting that Ontario’s realtors commend the province for not extending this policy to resale homes, “Which OREA has long emphasized would negatively impact both buyers and sellers as it would undermine certainty in resale transactions, which are typically between private citizens and do not involve corporate developers, and could lead to speculation.”

‘Easier and faster to add ‘missing-middle’ homes and increase overall density in areas that can best support high population levels’

In addition, OREA notes that mandating public disclosure of a builder’s history of cancelled purchase agreements for newly built freehold homes is a welcome policy that will provide consumers with transparency and peace of mind.

Finally, OREA commends the Ministry for acting on one of the key recommendations outlined in its most recent policy report, Analysis of Ontario’s Efforts to Boost Housing Supply: modernizing zoning to support greater density along transit corridors. “By exempting specific transit-oriented community lands from immunity provisions in the Planning Act, it will be easier and faster for the province to add ‘missing-middle’ homes to Ontario’s housing stock and increase overall density in areas that can best support high population levels.”

Pearce sums up TRREB’s support for the measures in the new Act: “We are committed to working with the government, industry stakeholders and our members to implement these changes effectively. We believe these measures will enhance the integrity of the real estate market and provide greater peace of mind for all Ontario homeowners.”

The City of Toronto recently approved the motion of allowing townhomes and small six-storey residential units along major streets.

In response to the motion, Jennifer Pearce, Toronto Regional Real Estate Board (TRREB) president, says elected leaders need to step up and deliver policy action to make a meaningful impact where it matters most.

“For families and individuals, housing is often the biggest monthly cost. To increase affordability, City Council must prioritize building more homes people can afford, faster.”

‘Will cut through red tape to get more affordable homes built faster’

The regional board feels that permitting townhouses and small six-storey residential buildings on designated major streets is a promising public policy that will cut through red tape to get more affordable homes built faster.

“TRREB is leading the way in calling for more as-of-right zoning in our city. This approach encourages more gentle density in existing communities and makes it easier for developers to build family-friendly homes. The proposal before City Council will upzone major streets, put more homes closer to transit and enable builders to create more multi-family housing,” Pearce says.

“City Council should know that this initiative is in perfect alignment to meet the agreed upon goals when receiving the $471 million from the federal government as a part of the Housing Accelerator Fund by streamlining zoning bylaw approvals, eliminating barriers to build the housing we need and allowing increased housing density.”

‘A momentous decision that will benefit generations of Torontonians’

The board has urged City Council to “think big and be bold in their approach to building housing by going further and supporting additional motions that enable more units along major streets to ensure their financial feasibility.”

On May 23, City Council approved the decision to allow townhomes and small six-storey residential buildings with a maximum of 60 units to be built along major roads as-of-right. Pearce says this is a big win for housing affordability.

“Council’s decision builds on a less ambitious original plan to only allow townhomes and small residential units to a maximum of 30 units on the “edges of neighbourhoods” and along some major roads. The expansion of the original plan to build more homes is a momentous decision that will benefit generations of Torontonians,” says Pearce.

“This change will also make the City of Toronto a more equitable and inclusive city by reversing decades of zoning policy that was historically used to prevent the building of more units in existing neighbourhoods.

For too long, Toronto’s planning policies forced working families and individuals to live on the edges of the city and endure long commutes. Council’s decision will help generate more affordable units in every neighbourhood so that people can live closer to where they work and play.”