Episode 109: The Toronto real estate market will crash at 4 p.m. April 6th

Just kidding.

I was looking at some pre-COVID numbers this morning. Specifically, interest rates: We know that some interest rate
hikes are coming up. Let’s review where we’ve been, where we’re going, and what I think will happen.

Pre COVID, while we were all living the dream, all maskless and carefree, the housing market was doing its usual Toronto thing: booming. Houses were expensive, condos were expensive, and there wasn’t enough on the market. Multiple offers were a thing visually across the board, and well – we had pretty much the same market we have now. But, with a lot more supply at the time.

Pre-COVID, the Bank of Canada interest rate, was 1.75% (we’re sitting at 0.5% now). That’s what people seem to be forgetting. Toronto real estate isn’t only attractive because it’s cheap to borrow money.

It’s not like all the buying activity stops when you make borrowing more costly. Toronto currently has and will always have a deep buyer pool regardless of where interest rates land.

I always laugh when some Twitter warrior goes on about how properties will become 30% to 40% cheaper if interest rates increase 30% to 40%… how laughable is that? If only things were so black and white.

Anyway, pre-COVID, we were thriving in a 1.75% Bank of Canada rate environment. Variable rates were 1.5% higher at 3.65% posted and fixed at 5.34%.

On April 13, 2022, the BoC, confident on the back of an improving economy, will increase its overnight lending rate by 0.5%. We’ll be sitting at 1.0%, a full percent lower than February 2019 before the world went crazy.

What’s different this time around? We’ve got some meddling from the provincial government (again), and inflation is a problem. The province made some announcements that some people are misinterpreting.

Remember back in 2017 when the NRST (Non-Resident Speculation Tax) aka Foreign Buyer Tax was introduced? There was a ton of speculative buying in the suburbs, which caused a lot of panic and fire selling of properties. It resulted from the NRST and some seriously irresponsible lending practices by some B Lender banks. And the stress test was also introduced at that time.

How can you possibly draw a comparison between then and now? It’s insane.

So far, the provincial government has announced an increase in the NRST from 15% to 20%. This will make NO impact on the Toronto real estate market. But, they closed a loophole that could affect some entry-level condo sales, which is good for first-time buyers and local investors.

What loophole? Previously, you were exempt from the NRST if you were an international student enrolled in one of our colleges or universities or a foreign national on a minimum two-year work visa.

I can see how many would use those two as loopholes to avoid the 15% tax.

But again, Toronto is too safe and attractive to the rest of the world for that to matter. We’re talking about an extra 5% here. It reminded me of that 2006 interview with Allen Iverson when he went on a rant about “we talking about practice, man”… bang on!

Things are getting more expensive now, and the last time we saw inflation at this level was in 1989 when the real estate market tanked. Interest rates were nearly 14% (higher in some cases), unemployment was just under 8%, commodity prices were low, and the United States was in a severe recession, a big problem for Canada.

This is another comparison people are drawing, which is so misguided I can’t stand it. There should be a competency test before being given a social media account these days.

Do you think Toronto is the same today as it was in the late ‘80s and early ‘90s? If you answered yes, you’ve been living under a rock, and you need help.

Toronto today is a global leader in so many industries, from tech to crypto to film to education. We have homegrown talent that’s influencing the rest of the world, from the creator of Etherium to companies like Shopify.

So, despite all of the things that have happened in the past, we have too much attention and momentum to just “crash” or have a significant slowdown to the point where you can all of a sudden afford something today that you couldn’t afford yesterday.

So, what does this all mean to you? Let’s talk about that.

Urban houses added a little bit of supply, but sales practically doubled, proving that buyers are not scared and are comfortable with the market and where it’s headed. Nice to see sales back up again after a couple of weeks of slow activity.

On the other hand, condos pulled back in supply again, proving that we do not have a market full of panic sellers who make stupid decisions at the mere mention of slowdowns or economic turmoil.

There’s strong buyer sentiment out there still. Many buyers have decided to pull back and “wait it out.” If that’s you, then cool, it’s your decision, and we have no choice but to respect it. We’re not here to convince you to do something you don’t want to.

Just remember that buying is not a short-term play. It’s not a “play” at all. What is it that I always say? You can’t daytrade real estate. I’m going to say that until everyone understands that.

Regardless of the market, you should be buying anything and everything as often as possible and holding until you’re ready to retire.

My client, who owns 12 houses in Leslieville, always says it best. “I wish I bought more.” Do you know he bought the majority of those homes? He bought them at the peak of the market in 1988. Then he bought more in 2017, just before the dip. Do you think he’s ahead or behind now? A day trader would say that he bought terribly. But, a person who understands the real estate market would say that he purchased just at the right time. Anytime.

Anyway, that’s all I have today. If you see any comments out there, tag me in them. I’ll engage in any convo online. My Twitter is @aramammo (so is my IG), so tag me, and we’ll get some context into those dreadful soundbites.

Ciao for now!

Have a question about something you’ve seen another realtor post? Ask! I guarantee you there will be more to the story.

Have a wonderful day, and don’t forget to share this. We have over 42,000 subscribers, and the list keeps growing. Thank you for that!

Don’t forget to follow us on Instagram and Facebook. We post some real-time stats on our channels you don’t want to miss. You can also catch up on my 2022 real estate forecast post here.

And, please find me on Twitter as I’ve been more active there these days.

That’s all for today; thanks so much for your energy and attention. If you want some clarity on the market and your specific situation, please DM, comment below or email Ara@thespringteam.ca.

Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,855,078
House Median Price: $1,650,000
395 Active Listings
107 Firm Sales This Week
Months of Inventory (MoI) ~ 1.072
Average Days on Market ~ 10 DoM

Condo Average Price: $914,378
Condo Median Price: $800,000
1065 Active Listings
191 Firm Sales This Week
MoI ~ 1.12
Average Days on Market (DOM) ~ 10

Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $3,496,201
House Median Price: $2,975,000
105 Active Listings
20 Firm Sales This Week
Months of Inventory (MoI) ~ 1.47
Average Days on Market ~ 24 DoM

Condo Average Price: $1,122,292
Condo Median Price: $822,500
159 Active Listings
24 Firm Sales This Week
MoI ~ 1.76
Average Days on Market ~ 19

Leaside, Davisville, Yonge & Eglinton
House Average Price: $2,449,014
House Median Price: $2,300,000
43 Active Listings
13 Firm Sales This Week
Months of Inventory (MoI) ~ 1.07
Average Days on Market ~ 9DoM

Condo Average Price: $990,893
Condo Median Price: $846,500
90 Active Listings
14 Firm Sales This Week
MoI ~ 1.18
Average Days on Market ~ 13 DoM

Birch Cliff
House Average Price: $1,384,686
House Median Price: $1,090,000
22 Active Listings
7 Firm Sales This Week
Months of Inventory (MoI) ~ 0.98
Average Days on Market ~ 9 DoM

Kingston Rd Corridor to Highland Creek
House Average Price: $1,453,571
House Median Price: $1,475,000
61 Active Listings
7 Firm Sales This Week
Months of Inventory (MoI) ~ 1.10
Average Days on Market ~ 11.4DoM

Condo Average Price: $611,792
Condo Median Price: $585,000
21 Active Listings
8 Firm Sales This Week
MoI ~ 0.63
Average Days on Market ~ 12.7 DoM

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