Our thoughts and prayers are with the victims and their families of Monday’s horrific attack in the Yonge Finch Sheppard area. Thank you to our brave first responders, and to ordinary Torontonians who did extraordinary things today. Photo courtesy of the Toronto Sun.
Toronto real estate news 2018: Introduction
There is an unfortunate situation brewing for those who bought a home off plans from a builder in 2017. The market has cooled significantly and the average price of a new construction home in the Toronto region in February 2018 was $1.22 million. A significant drop! So, the Toronto real estate news 2018 is now that buying a pre-construction Toronto area home can be risky.
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Toronto real estate news 2018: It used to be burn baby burn!
Until recently, Toronto’s real estate market hasn’t been hot; it’s been an inferno. Houses were selling for way over the asking price and real estate agents in Toronto say bidding wars became the new normal. Buyers were so desperate to get into the market that they were making offers and waving a house inspection.
It wasn’t just the resale market that was on fire. According to building industry statistics, the Toronto region real estate values in February 2017 of a new construction home in the was about $1.5 million. Advertising for real estate investing workshops was everywhere.
Toronto real estate news 2018: What caused this drop in real estate prices?
Two main reasons. First, the Office of the Superintendent of Financial Institutions (OSFI) introduced new, tighter mortgage rules, requiring borrowers with uninsured mortgages to undergo a stress test. As of January 1, 2018, uninsured borrowers must qualify at a new minimum rate – the greater of the Bank of Canada’s five-year benchmark rate, currently at 4.99%, or 200 basis points higher than their mortgage rate.
This new mortgage stress test is for protecting homebuyers to ensure that they don’t buy more house than they can afford – even if the interests rates rise. There were only two real estate markets in Canada on fire; Toronto and Vancouver. So, in Ontario, this new test is also known as the Toronto real estate stress test
Second, the Ontario Liberals introduced its Fair Housing Plan which included a foreign buyers’ tax. Many believe that this plan contributed to the drop in real estate prices and adversely affected middle-class families in mid-transaction.
Toronto real estate news 2018: Some buyers who purchased a pre-construction home at the height of the real estate frenzy are now facing financial ruin
These buyers are now contracted for homes that are no longer worth their purchase prices. They can’t resell the new home contracts because the builders are selling new construction homes for less than they’re asking – just to break even.
Some couldn’t get larger loans to cover the difference in price. If they walk away from their contracts they could lose upwards of $200,000 and risk being sued by the builder. To add insult to injury, they can’t afford the interest rates that alternative lenders are charging. This is a recipe for financial disaster.
This is what today the Toronto real estate news 2018 is.
Toronto real estate news 2018: Are you feeling the pain of possible financial ruin?
Are you facing financial ruin as a result of a cooled down market? Is the pain and stress of too much debt, regardless of the reason unbearable?
The Ira Smith Team can help you return to financial health with immediate action and the right plan. Don’t despair; there is a way out Starting Over, Starting Now. Make an appointment for a free, no obligation consultation. Financial peace of mind and pain-free living is just a call away.
