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Healthy Toronto Market is Not Crashing

Forget about a looming housing crash—it’s not going to happen. But Canada’s real estate market is changing, and both buyers and sellers will need to adapt if they want to thrive.

Let’s be clear: despite what some in the media would have you believe, Canada’s housing market is not at the edge of a cliff, ready to plunge into free fall. “There are articles saying we’re going to have the same kind of crash we had in the United States, but that’s not going to happen,” says Jane Londerville, a real estate and housing adviser at the University of Guelph.

Like many Canadians, you’re probably wondering what all this means if you’re looking to enter the housing market, sell your home, trade up to a bigger residence, or downsize to a condo. We will help you navigate all of these scenarios and show you how to profit from the changing nature of Canada’s housing market.

“Young people are having a tough enough time with getting jobs and earning money, but to see home prices going up at such a rapid clip has been really disconcerting,” says Toronto fee-for-service adviser Jason Heath. “Now, young people will feel like they’re getting less and less behind, and that it’s not an impossible dream to own a home.” But first-time buyers shouldn’t be overly optimistic, especially outside Canada’s three largest cities. Sylvia Lewis-Havard and her husband are still renting, hoping the changing market might enable them to purchase a home in Ottawa. “I don’t expect a complete crash we can take advantage of,” says Lewis-Havard, but she hopes to find something for 15% less than the current average of $354,000. Gulati says that’s not likely to happen—in fact, she doesn’t expect real estate prices outside Toronto, Vancouver and Montreal to decline much at all. Her opinion is in line with a recent report by RBC Economics predicting “both resale activity and home prices in Canada to be flat or slightly negative in 2013.”

Sonya Gulati, a senior economist with Toronto-Dominion Bank, says we could see a slow 10% decline in house prices in Toronto, Vancouver and Montreal by the end of 2014. “We think those cities are the ones most overvalued.” As of September, year-over-year housing prices were already down 3.8% in the Greater Vancouver Area, according to Gulati. Toronto is now starting the same downward trajectory, she says, despite roughly an 8% increase in sales over the same period. Montreal is following the same pattern, too.

The biggest advantage Canada’s changing housing market will offer first-time buyers is the luxury of time. “In places like Toronto you might have a bit more breathing room to look at a place and think about it for 24 hours without having to shove an offer in with six other people and hope you win,” says Jane Londerville. “So it gives you a little time to do some careful thinking.” Even in her town of Guelph, Ont., bids can be aggressive for downtown properties, so buyers in smaller centers can expect to benefit from less competition, too.

Buying newbies should also bear in mind that sellers may be more open to negotiation now, says Marc Lamontagne, a fee-for-service adviser with Ryan Lamontagne in Ottawa. Lamontagne believes there will be opportunities for savings in any region of Canada, provided you’re a patient, aggressive bidder. “A lot of homes that will be staying on the market longer were purchased by developers or flippers. These people are going to be desperate and motivated to sell.” Another option for those struggling to enter the market is to buy a property and rent out part of it to help you pay the mortgage, says Londerville. “You have to find creative ways to get into the bigger markets.”

Posted: Monday, February 04, 2013 2:40 PM by Sutton Realty

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