When it relates to real estate in Toronto and the GTA, 2015 will be a year for the record books. Strong sales, price gains and growing momentum emphasized the confidence buyers have in Toronto real estate. On top of that, near-record low interest rates and minimal supply will continue to support both prices and sales in 2016.
Record Home Sales in Toronto
Toronto and the rest of the GTA experienced a strong increase in demand for homes and record prices in 2015. Home sales were up every month on a year-over-year basis in 2015.
For the first 11 months of the year, the GTA reported record home sales of 96,401¹, which was more than the entire preceding year and beat the previous record of 93,193 set in 2007². With December home sales data still to be announced, many expect to see home sales in the GTA break the 100,000 mark.
Thanks to a strong demand for home ownership in the GTA, prices have also been climbing at a blistering pace. The average price for all home purchases rose 9.6% from $577,502 in November 2014 to $632,685 in November 2015.
Minimum Down Payment for Homes Doubled
In early December, the Federal Government announced it was raising the minimum down payment from 5% to 10% for the portion of a home purchase above $500,000 (and under $1.0 million).³ The new tiered down payment system—which takes effect February 15, 20161—will have an impact on a small number of first-time homebuyers in the GTA.
While many think the increased down payment system for homes listed above $500,000 and under $1.0 million will put the brakes on Toronto’s real estate market, the new rules will actually only affect a small number of homebuyers—namely those purchasing a home in that price range with a down payment of 5% .
The new down payment rule does not apply to homes over $1.0 million because they do not qualify for mortgage insurance. The new tiered down payment rule will also not affect those looking to buy a home listed under $500,000 for which the 5% down payment rule is still in place.
With the average price of a home in the GTA reaching $632,685 at the end of November 2015, it is expected that real estate in Toronto and the GTA will continue to have another solid year in 2016.
Mortgage Company of Canada—Toronto’s Leading Private Mortgage Specialists
Many expect the Canadian real estate market to cool in 2016 and 2017 as the pace of new residential construction and sales of existing homes slow down across the country. However, one major aspect that keeps Toronto’s housing market trending higher is an increased demand and decreased supply. Thanks to Toronto’s solid economy, economic outlook, job growths, near-record low interest rates, and minimal supply, home ownership in the GTA will continue to be an excellent investment.
Unfortunately, many Canadians are underexposed to real estate as an investment class, especially in places like Toronto where the average single detached home is now priced at over $1.0 million.
One of the best ways for investors to gain exposure to the real-estate market in Toronto is through a Mortgage Investment Corporation. As an investment vehicle, a mortgage investment corporation (MIC) manages a diversified pool of mortgages. MICs allow individuals to pool their resources and invest this capital in mortgage loans. 100% of a MIC’s annual net income (as verified by external audit) must be distributed to its shareholders by way of dividends.
Mortgage Company of Canada (MCC) is a mortgage investment corporation whose objective is to provide investors with an attractive risk-adjusted return by primarily investing in first and second residential mortgages on single family homes in the GTA. MCC’s experienced management team employs a focused lending strategy and follows a rigorous underwriting analysis for each mortgage.
To find out how you can diversify your investment portfolio with Canadian real estate, call Mortgage Company of Canada or email at email@example.com..
1.“Record Sales in November 2015,” Toronto Real Estate Board, December 3, 2015; http://www.trebhome.com/market_news/market_watch/2015/mw1511.pdf.
2.“Historic Statistics,” Toronto Real Estate Board, last accessed December 30, 2015; http://www.trebhome.com/market_news/market_watch/historic_stats/pdf/treb_historic_statistics.pdf.
3.Pedwell, T. “Minimum down payment for homes over $500,000 going up,” Toronto Sun web site December 11, 2015; http://www.torontosun.com/2015/12/11/minimum-down-payment-for-homes-over-500000-going-up.