Ontario Real Estate Outlook Remains Strong Heading into Winter Season

TORONTO, ON--(Marketwired - December 20, 2016) - Perceptions of real estate markets in Ontario remain strong heading into the winter season as the Ontario Home Ownership Index edges to an all-time high of 131 points, according to new research from the Ontario Real Estate Association (OREA).

Driving the positive shift in sentiment are perceived improvements in current real estate markets and within the last year. More than half of Ontarians (55%) say the current residential real estate market in their neighbourhood is favourable, up 5 points from a year ago. Half of Ontarians (51%) say that the residential real estate market in their city or town is stronger than it was a year ago, up 11 points from a year ago.

"According to the results, it is likely that perceptions of strengthening markets will continue in Ontario into the foreseeable future," said Tim Hudak, Chief Executive Officer, OREA. "Despite rising house prices in the GTA, buyers remain optimistic. In fact, even more Ontarians than last year say they intend to buy in the future. This speaks to the value of home ownership and the timelessness of this all-important commodity."

More than four-in-ten (43%) Ontarians say their city's real estate market will be stronger in the next year, up 5 points from a year ago. Furthermore, 14% of Ontarians say that they are very likely to purchase a home in the next two years, up 3 points from a year ago. Fifteen per cent of Ontarians say they are very likely to sell a home within the next 2 years, up 4 points from a year ago.

Home Hunting in Ontario

Among those who are at least somewhat likely to be buying a home in the next two years, detached homes remain the most popular housing choice (49%), up 13 points from a year ago. Interestingly, interest in condos (19%) has declined by 7 points year over year, while interest in semi-detached homes (19%) has ticked upwards (4 points). The least popular type of home among prospective buyers is row homes or townhomes (14%, down 2 points).

Majority of First-Time Home Buyers Think they will be Impacted by New Stress Test Rules
Eight-in-ten (79%) first-time home buyers in Ontario believe that at some point the new federal government rules about mortgage stress* testing will impact them. Thinking about how the new rules could impact them, 45% of first-time home buyers say they will need to keep saving for a 20% down payment before buying a home; 27% believe they will need to find additional money to increase their down payment, and many say they will need to look for a less expensive home either in the same city (34%) or a different city (22%).

* As of October 17th, 2016, the Federal Government of Canada requires prospective home buyers with less than 20% down-payment to pass a mortgage-rate "Stress Test" to ensure they will still be able to make their mortgage payments in the event mortgage rates go up in the future (about 2% above the current rates).

About The Ontario Home Ownership Index

The Ontario Home Ownership Index is designed to reflect Ontarians' overall views of the residential real estate market in Ontario, and incorporates measures such as Ontarians' perceptions of whether the market in their neighbourhood, city, and Ontario, respectively, have improved or worsened in the last year and looking ahead into the future, whether home ownership is important to them and whether it is a good investment in the long-term. The first wave of the index, conducted in the fall 2013, was set to a baseline of 100 points.

About the Ontario Real Estate Association

The Ontario Real Estate Association represents 67,800 brokers and salespeople who are members of the 40 real estate boards throughout the province. OREA serves its REALTOR® members through a wide variety of professional publications, educational programs, advocacy, and other services. www.OREA.com

Property assessments are a taxation 'red herring' in a hot real estate market

Whenever I see media stories about the hot real estate market in Hamilton, there will also be the inevitable comments about property taxes going up because house values are going up. 

So, with [CBC reporting that Hamilton home prices have risen 25% in the last year], I was not surprised to read the following comment:

"Can't wait for the Provincial Assessments for property taxes . Should be interesting"

This comment seems to allude to the provincially-mandated MPAC that does property assessments for property tax purposes, largely based on market value data from real estate sales.  But how much do we have to worry about property values affecting our property taxes?  

The short answer is: a bit, but not necessarily as much as you might think.  

As I explained in [a previous blog post], property value increases don't necessarily equate to property tax increases. You can read the more complete explanation there, but in a nutshell, this is because property taxes are set only partly on property values and are also affected by the actual financial need of the city as set out in the budget at city hall. 

Even if property values across the city didn't change at all, your taxes will still go up if the city budget increases.  Or if property values went up evenly across the city and the budget stayed the same, you'd essentially have no tax increase because the city budget gets spread proportionally across properties according to weighted property value.

The hot real estate market does indeed present certain challenges to home ownership, but it doesn't necessarily mean your taxes will go up.  The issue is complicated because your specific neighbourhood might see less of a value increase than another part of the city.  This might result in a minimal increase for you compared to properties in that higher-appreciation area.  The real question is how is your house value doing in comparison to the city average?

To further complicate matters, commercial and industrial properties also get taxed at a higher rate. As such, seeing an increase in commercial and industrial values and new development is likely significantly more important to reducing the residential property tax burden as having a slower residential real estate market would be.

And of course the other place where taxes can be controlled is in the city's planning and budgeting since any money they spend on anything at all has to come from somewhere.  Some of that comes from user fees for services, but the lion's share comes from property tax revenue.

Unfortunately, we all know the saying about death and taxes, so it's a pretty safe bet that taxes will go up.  But it's not as simple as blaming the 'hot hot hot' real estate market.

November 2016 Housing Starts in Hamilton CMA

TORONTO, ONTARIO--(Marketwired - Dec. 8, 2016) - Housing starts in Hamilton Census Metropolitan Area (CMA) were trending down at 2,788 units in November compared to 2,868 units in October, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

"The trend in Hamilton CMA total housing starts was down due to fewer multi-unit housing starts in November 2016 compared to the previous month. The trend in single-detached starts remained practically unchanged in November," said Abdul Kargbo, CMHC's Senior Market Analyst for Hamilton and Brantford CMAs. "The trend for townhouse starts declined slightly in November following a spike in the previous month. Despite the decline, the trend for townhouse starts was nearly double what it had been at the beginning of the year, reflecting strong first-time buyer demand."

CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of the housing market. In some situations, analysing only SAAR data can be misleading in some markets, as they are largely driven by the multiples segment of the markets which can be quite variable from one month to the next. The multiples segment includes apartments, rows and semi-detached homes.

The standalone monthly SAAR was 1,868 units in November, down from 3,207 units in October. Similar to the trend measure, the November decrease in the SAAR measure was entirely due to fewer multi-unit housing starts compared to the previous month.

Record Sales for the Month of November

The REALTORS® Association of Hamilton-Burlington (RAHB) reported 1,323 sales were processed through the RAHB Multiple Listing Service® (MLS®) System in November. Sales were 5.6 per cent higher than the same month last year - which had the record for November sales – and set a new high for the month of November.

[Click here] to read the full release (PDF)