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Housing bubble not going to burst yet, realtors say

Broker Dianne Usher expects the real estate market to remain very active in midtown.

“We’re still very buoyant, still dealing with multiple offers, still dealing with pre-emptive offers, in all price ranges,” the vice president and division manager at Royal LePage’s Johnston & Daniel Division said in a recent interview.

Usher cites record-low interest rates, immigration and millennials migrating from suburbs to central Toronto as some of the reasons why she expects the market to remain strong.

“We’ve got the Echo Boomer generation coming into the city, either fed up from commuting or because they want a more urban lifestyle,” she added. “Yonge and Eglinton is a prime example.”

As the price of houses continues to rise, one of the challenges is an increasing difficulty for residents to move up out of their starter homes.

“The price differential from going from a starter home to that next level up is growing exponentially faster than young people starting out can save,” Usher said.

A Sept. 8 report by CIBC World Markets found that price increases in mid-and high-priced homes are outpacing lower-priced homes.

The report says that while homes in the $300,000–500,000 range rose an average of 28 percent between the first quarter of 2010 and the first quarter of 2014, homes priced between $800,000 and $1.2 million rose more than 40 percent and homes priced between $1.2 and $1.6 million rose more than 50 percent.

According to the CIBC report, if a family paid $500,000 for a house in 2010, the home value increased by $140,000, to 640,000. However, the hypothetical $800,000 home they wanted to eventually move into would have increased more than $300,000, to $1.12 million, in the meantime.

An added challenge in the process Usher points out is the double land transfer tax, since home buyers in Toronto are double-taxed: having to pay municipal and provincial land transfer taxes after purchasing a home.

“The cost of moving is horrific,” Usher said. “It’s a huge, huge burden on young families.”

In addition to people making an upward move, the double land transfer tax also effects people downsizing.

“People that are downsizing are often on a fixed income, and they want to make most of their equity in their current homes and that equity is being eroded by the double land transfer tax when they go to buy,” she said.

Although there are still houses coming onto the midtown market, Usher said supply and demand is influencing the price.

“The demand is far outweighing the supply that’s coming onto the market,” she said.

According to the latest report from the Toronto Real Estate Board, released on Sept. 4, listings in August were down compared to last year, while the number of sales had increased.

“We see a lot of demand out there, but inventory is scarce in a lot of neighbourhoods,” said Jason Mercer, director of market analysis at Toronto Real Estate Board. “That means we see a lot of competition between buyers and, as a result, upward pressure on home prices.”

What ensues is a seller’s market, with a lot of competition between buyers.

Detached and semi-detached homes in the central Toronto neighbourhoods have seen increases either in line or slightly above the city of Toronto averages, he said.

“We’re looking at increases that are in the high single digits to low double digits,” he said. “If you look at midtown Toronto — North Toronto as well — those areas represent a lot of established detached, semi-detached and town home stock.
“It makes sense that those areas are falling in line with that trend.”