Toronto's Rental Shakeup!

😱 Toronto Power-of-Sale Listings Jump 112% in 1 Year

• Power-of-sale listings occur when a lender takes over a property and sells it because the homeowner cannot make mortgage payments.

• The average monthly power-of-sale listings have increased significantly:

  • 2022: 38 listings per month

  • 2023: 83 listings per month

  • 2024 (so far): 159 listings per month

• Most power-of-sale listings involve private lenders with higher interest rates, not significant banks.

• Homeowners are losing life savings and equity; some need to declare bankruptcy because they cannot repay lenders.

Why it Matters: Borrowers who opt for B Lenders should carefully consider their financial situation and ability to withstand market fluctuations before deciding. B Lenders may offer more lenient credit requirements, but the trade-off is often higher interest rates and less flexibility.

💸 New Loan Program Helps Homeowners Build Rental Suites

• On Tuesday, the Government of Canada announced a new insured mortgage program for homeowners. (effective January 15, 2025)

• Eligible Homeowners can refinance their mortgage to add a secondary suite. (like a basement apartment or laneway home)

• They can borrow up to 90% of the value of their home, including the value of the new suite.

• They have up to 30 years to pay back the refinanced mortgage

• The maximum property value limit is currently set at $2 million.

Why This Matters:
This provides access to funds for constructing rental units, generating additional income streams, and addressing housing shortages. With up to four self-contained units allowed on a single property and long-term rental stipulations, investors can use this program to boost rental inventory, especially in high-demand markets.

 🏡Toronto's Renovation Boom Prices Out Homeowners

• Toronto's older homes, mainly bungalows, are being bought by renovators, torn down, and replaced with larger, more expensive houses.

• Analysis of 102 homes that were rebuilt and resold within 1,000 days showed an average purchase price of $1.2 million, rising to $3 million after renovation.

• Over 4,600 permits were issued to demolish detached, semi-detached, and townhouse units in Toronto from 2019 to 2024.

• Hotspots for these rebuilds include Scarborough, Etobicoke, North York, and midtown Toronto.

Why This Matters: This trend is significant as the renovation boom in Toronto is driving up housing prices, making it increasingly difficult for homeowners and potential buyers to afford properties in desirable neighborhoods. The demolition of older, more affordable homes in favor of larger, expensive builds exacerbates the housing crisis, pushing many residents out of the market.

📉 US Inflation Falls but Interest Rate Uncertainty Remains

• According to today’s print, U.S. inflation dropped to 2.4% in September, the lowest since February 2021.

• Gas prices fell 4.1%, helping reduce overall inflation, though grocery and restaurant prices rose slightly.

• Core inflation, excluding food and energy, remains elevated at 3.3%, driven by rising costs in medical care, auto insurance, and airline fares.

• A recent jobs report showed strong hiring and a decrease in unemployment.

Why This Matters: Lower U.S. inflation may lead the Fed to consider rate cuts sooner, which could influence the Bank of Canada's decisions on interest rates. However, a U.S. rate cut is hard to predict, as inflation is cooling slower than expected. On the other hand, a recent strong jobs report indicates a robust economy, which might cause the Fed to delay rate cuts.

🤑 Canadian Rental Market Update

• In September 2024, Canada's average rent for all residential property types rose 2.1% Y-O-Y to $2,193.

• Rent growth has slowed for five consecutive months, from a peak in May 2024 when rent increases exceeded 9%.

• Despite this slowdown, average rents remain 13.4% higher than two years ago and 25.2% higher than three years ago during the COVID-19 pandemic.

• Average rents for condo apartments declined by 1.7% year-over-year to $2,296.

• Purpose-built apartment rent increased by 5.4% year-over-year in September, averaging $2,138.

• Three-bedroom purpose-built apartments also saw strong growth, with rents up 10.5% to an average of $2,730.

Why This Matters: While condo rents dipped, purpose-built rentals and significantly larger units continued to see strong demand. This trend indicates that renters are seeking more spacious living options, likely due to changing lifestyle needs.

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🤔 WTF of The Week

Toronto and Vancouver's condos are getting noticeably smaller— In the 1990s, the median size of a Toronto condo was 947 sq. ft., while condos built after 2016 average just 640 sq. ft. In Vancouver, a 90s condo would give you 912 sq. ft., compared to today's average of 790 sq. ft.

The concern is that investors, who are essentially funding these projects, significantly influence what gets built. Since smaller units typically generate higher rent per square foot, these are the ones investors prefer.

Did you know investors own 65% of 600 sq. ft. condos in Toronto?

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