Time for your weekly cheat sheet on the most important stories in real estate.
Canadian Real Estate
Real estate mega firm CBRE, put together a report for US tech firms looking for tech talent and real estate. Two Canadian cities ranked, but most interesting is why Canada remained attractive. The combination of education and years of experience placed Toronto and Vancouver amongst the top 10 for quality of labour. In terms of pay, you would pay 57% more to be located in the American tech hub with the worst relative quality of labour. Great for the tech firms coming up to Canada, not so great for Canadians that face a higher cost of living.
Real estate prices across the country now have huge gaps, compared to just a few years ago. For detached homes, the most expensive urban market is now Vancouver – where the typical home costs a whopping $1,587,000. The least expensive is now Moncton, where a the benchmark detached will only cost you $172,000. To give an idea of how insane Vancouver prices are right now, it’s 64% more expensive than Toronto.
Canada saw the Consumer Price Index (CPI), one of the primary measures of inflation, fall to 1 percent. This is a 20 month low for the index, and brings into question whether the Bank of Canada can continue to hike rates. Generally speaking, the Bank of Canada slashes rates to stimulate CPI growth, aiming for 2%. At 1%, we’re about halfway from their target. Increasing rates would cause further drops – and possible deflation.
The OECD house price-to-rent ratio is accelerating fast. The index saw a 23.2% increase over the past 12 months. This is roughly the same size increase over the past 9 years before that. The quick rising ratio means home prices are becoming detached from reality.
This means one of two things, rents will rise or home prices will come down. Rents rising would be the natural assumption, but rent is tied to the growth of income. Since income growth is stagnant across Canada, home prices are likely to come down. No one knows how long it takes for these things to balance, but the takeaway is renting is better value from a financial perspective right now.
Toronto Real Estate
We conducted data analysis on landlord applications provided by the province of Ontario. In Ontario, June 2017 saw 4,893 applications, a 1.76% increase from the same time last year. The City of Toronto proper is seeing a decline however, a 2.93% decline from the same time last year. The largest growth was in L2 applications, which are landlord initiated applications for issues other than non-payment. That means more tenants are paying on time, but landlords are applying to get people out for other reasons.
The Toronto Real Estate Board (TREB) updated us on rental unit demand in the second quarter of 2017. Looks like landlords are pricing in almost a decade of rent hikes ahead of Ontario’s plans to restrict rent increases on rental units. The average one bedroom lease is now $1,910, a 17% increase from the same time last year. Rentals rise at best, at the rate of inflation. In the past 5 years, we haven’t seen an increase of more than 1% – so needless to say this is a pretty big hike.
Being one of the most in-demand tech hubs means Toronto employees are living large, right? We crunch the average pay for Toronto’s “well paid” tech workers, and find out they would have devote more than 50% of their income to rent a 1 bedroom apartment. If they manage to save 10% for a downpayment for a condo, it would take them 24 years. This implies they’re using a “traditional mortgage,” not a high-ratio one. Detached home? They’re looking at over 60 years. If tech isn’t as lucrative as it once was, what’s everyone doing that they can afford this market?
Vancouver Real Estate
Vancouver’s annual crime statistics were released, and the city is experiencing mild growth. There were 204,939 incidents of crime committed in the city last year, a 0.44% increase from the year before. This is almost half the rate of growth from the year prior, so there’s reason to be optimistic about the tapering growth. The fastest growing crimes were all pretty disturbing however.
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