Aug. 27, 2009

Housing Situation Report in Canada: Syntesys

The conditions on the Canadian real estate market in 2008 and the first half of 2009 are analyzed in a report recently published by the Canada Mortgage and Housing Corporation. It deals mostly with the housing starts and with the affordability to rent & buy.

The report finds that after the shock of last year, now our real estate market is recovering again, however slowly. The new home market began the year of 2009 some 43% lower than in the first six months of 2008. However, in July 2009, the MLS sales already grew bigger by over 17% than in July 2008.

The general trend on the real estate market is growth now, and this goes also for the new housing price index. The average price in Canada has changed from -0.6% to -0.1% between January and May. In conformity with the improving resale market, the new housing price change in Toronto was slightly over zero for most of the time.

Economic conditions: Unemployment

We can be rather optimistic at the moment in regard to our economy. First, the unemployment growth seems to have got under control. In July, the number of net losses was 13,000, whereas during the first quarter of 2009, the fall reached 273,000. Moreover, the Bank of Canada describes the positive outcomes of the stimulus packages that were brought out by many countries during the last year.

Affordability to rent

Affordability of home ownership or renting is based on calculations of how many hours one needs to work in a month to bring the average cost of 2-bedroom apartment rent or the average mortgage payment down to 30 per-cent of gross monthly income. In 2008, the average hourly wages has increased by more than 5% up to $23.69 (Ontario: $24.65, Toronto: $24.93)).

Generally, the average number of working hours required to earn the average rent for a 2-bedroom apartment down to 30% has declined from 114 to 113 hours per month. The biggest decrease has been observed in St John's, Brantford and Guelph, whereas in Toronto the number of hours declined from 149 to 146, meaning that Toronto ended up as the second most expensive city in this "competition", just after Vancouver.

Affordability of home owner-ship

While the number of hours required to rent didn't decrease so distinctly, the same number for average mortgage payments down to 30% of gross income was more distinct - between 2007 and 2008 it declined from 255 to 240 hours. One of the cities where the amount of hours required to own declined the most, was Toronto: from 299 to 286. But yet Toronto stays 4th among the most expensive cities to own after Vancouver, Victoria and Abbotsford.

End notes

As an overall result of real estate market recovering from the second half of the year 2008, also new housing made a step towards better affordability, which I really welcome, being a Toronto realtor. If we look at the numbers for the first half of 2009, we can see steady or slight decrease of prices and slight improvement in affordability of both renting and home ownership. As the interest rates are still staying quite low, it is now a good time for purchasing a property, before the market takes a second breath.

Photo source: Rantes Aguirre

Aug. 13, 2009

You Won Your Dreamhouse: And Now What..?

Even after your bid for the property you decided to buy has been accepted by the seller, there's plenty left to do before you can rightfully move in. In the following article, as an experienced realtor from Toronto I can familiarize you with the most important steps of the process.

After your offer has been accepted, the next thing to do is to meet with your legal adviser and have her/him explain you all your responsibilities following from the contract. Your solicitor should help you to understand all the costs related to the closing procedures, including Land Transfer Tax, disbursements and legal fees.


It is also necessary to verify the absence of any arrears or outstanding charges, such as gas, water or hydro expenses. Your legal adviser does this by sending letters to the municipal or regional utility departments. Another purpose of these letters is to find out if the equipment on the property is rented or owned, and also to inform the utility departments about the scheduled closing date, the new owner's name and the name of the seller's legal adviser. Information about the billing type and whether the billing is metered, all this is also demanded by these letters.


Taxes is another serious topic. You will have to provide a Tax Certificate, which will verify the amount of the current year's taxes and any arrears and outstanding charges for the current year and any previous years.


The Building and Zoning Department will need to get involved as to the particulars of zoning by-laws and restrictions relating to the distance from the street and side and rear lines, type of construction, lot areas and building areas, lot frontage and depth requirements and permitted uses. Another letter is sent by your legal adviser to this department, together with a copy of the survey to reveal all this.


The appropriate division of the Land Registry Office will start a Search of title to the property in order to establish whether or not the seller is the owner of the property and whether or not he has the legal right to convey the property. The search also reveals if the property is not a subject to any encumbrances, encroachments, easements, liens, agreements or mortgages that were not disclosed in the Agreement or Purchase and Sale. Also an execution search is done in the appropriate Sheriff's Office to ensure that there are no executions against the seller or previous owners of the property that would affect your title.


While your legal adviser is completing his initial searches, it is your responsibility to make necessary arrangements for financing. The amount of financing you will qualify for and the amount you will need to finish the transaction should be clear already before you have signed the Agreement of Purchase and Sale. On the day of closing, you might not be aware of all the fees related to mortgage financing. Your legal adviser can advise you of these fees when the financial institution that you chose provides you with a Mortgage Commitment Letter.


A few days before the closing, you will need to come to your legal adviser's office to sign all the necessary documents and to produce a certified cheque to confirm the balance of closing funds.


Your legal adviser will agree to meet with the vendor's legal adviser at a mutually convenient time at the appropriate Land Registry Office where he will sub-search title and complete final execution searches. They will exchange documents, keys and cheques and your legal adviser will make sure all the necessary documents are registered. As soon as this has been completed, you can get the keys and the seller will get the finances.


Now your legal adviser will provide you with a reporting letter that acknowledges your title and explains all the transaction details. Then you are finally free to move in to your new house! Just make sure to check that all items that should be included in the purchase price, as described in the Agreement of Purchase and Sale, are left on the property by the seller. Let your legal adviser know without any delay if you think something is missing.

(picture by azhure)

Aug. 9, 2009

Toronto's Transport system: Be Ready for Shake-Out

The transportation system is the crucial element of every big city in the world and Toronto is no exemption. In the last four decades, Toronto has faced a population explosion: nowadays it has almost five times more people than in 1970. That's why our transportation system needs to change in order to be able to satisfy the changing demands. Only improvised solutions have been provided by a number of minor improvements in the past. Nevertheless, in the upcoming years, the character of transportation in south Ontario will be totally changed by a project known as The Big Move. (picture by yjh)
MoveOntario2020 is the name of the key part of this overall transportation outlook. It has been announced in June 2007 (is that a coindicence that liberals were reelected just in October after that?) and people are now impatiently anticipating the new reality. $17.5 billion is the total budget set apart for the 52 projects of the total plan ($11.5 billion covered by Ontario’s budget). 1. GO Transit upgrades and extensions; 2. Major municipal transit expansions; 3. Cross-boundary subway expansions; and 4. Rapid-rail link between Toronto Union Station and Toronto

Real estate and transit system

The real estate in Toronto is a very complex industry and can be influenced by many different attributes, either only a little, or the impact may be bigger. It may often be difficult to identify the effect of a concrete change in the local or global economic environment, but clearly there are some factors that are more relevant than other ones. One of the key attributes is the transportation system.

You all can imagine the way in which transportation system positively influences the quality of living. For instance, the direct expenses on commuting are smaller, just as indirect expenses such as time consumption. Moreover, we can mention easier accessibility of public facilities or cleaner air and generally healthier environment, whereas there only a few minor negative short-term aspects.

There are a number of research papers attempting to quantify the effect of various improvements in transportation system. One of the papers from Tinbergen Institute, dealing with railways, offers a number of 25% - that is how much the positive effect of railway accesibility on house price can be. Every house's value can grow by 2.5% on average, provided that the public transport frequency is improved twice. This is valid just one year after the works are completed.

MoveOntario impact on the real estate in Toronto in upcoming years

Our expected outcomes can be based on a recent research made by REIN Canada. One of the key means of transport to decrease the commuting time is a rail commuting system, in Toronto represented by subway and GO Train system.

This kind of system has a positive impact on areas about 800m around from every station, with price maximization in 500m range. The areas that are impacted the strongest are older neighbourhoods or places where people earning less money live. Speaking about real estate prices effect, we can mention Toronto neighbourhoods around Spadina and Younge subway lines extensions. For GO Train it’s more complex; there are 17 projects involving capacity expansion, new lines and/or lines extension and there are 9 more projects involving GO Bus Rapid. In Waterfront and Eglinton neighbourhoods, we suppose a similar effect brought about by new light train transit lines.


All the effects of MoveOntario 2020 on Toronto real estate market are just not possible to be described in one text. The REIN study shows that the most positively affected areas will be around Vaughan, Scarborough and Barrie. Coming next should be the regions of Milton, Brambton and Uxbridge&Stoufville, these will also enjoy high influence. These regions can await 10-20% price rise. The third group is represented by all Toronto quarters which lie along the new lines or along the old lines, which capacity will be improved. Positive effect on real estate prices should appear 1-3 years after the particular project is completed.

And we still haven't described everything. With more neighbourhoods being easily accessible thanks to the new transport system, also the quality of life near the old parts will be better. Some 175 000 jobs are expected to be created thanks to MoveOntario, which may again positively impact the Toronto area real estate prices. With well-functioning transport system we are going to attract more people, more investors and more business. The whole Toronto will profit from the improved transport system and the house values in the area may grow for the next decades.