We Interviewed The Top Brokers In Toronto – Here Is What They Are Saying

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I interviewed four mortgage brokers in the Greater Toronto Area about their housing market. Each of these brokers have been in the industry for nearly a decade or more, and all four earned recognition in 2016 as one of Canada’s “Top 75 Brokers” awarded by CMP Magazine. Here’s what they are saying about the Toronto Housing Market.

Note the comments from the brokers are for the large part verbatim

Many people in the media all over the world are waving red flags over the Toronto Housing Market, as someone who’s immersed in the business, is there anything people are missing?

Shawn Stillman, Mortgage Outlet Inc.

“So I definitely think the market has gone down in the last few months, there’s stuff that’s sitting on the market that wasn’t sitting before and in the past it was multiple offers, and in this case there’s not. So, definitely the supply has increased and the demand has dropped off since the government rule changes in April. Do I think it’s a bubble? No, I think the market definitely got overheated over the past twelve months and I think it’s going to slow down probably in the 10-20% range which we’ve already kind of seen happen, but I expect it to remain pretty consistent from here on out.”

 

Irina Antipova, Assured Mortgage Services

“The market value of the houses went up three times and the sale value is still the same in adjustment to the CPI. So the problem we are facing is with the increase in foreign immigration of up to 400,000 and at the same time we have inter-province immigration. So with this double load coming to the GTA, it’s hard to find rental property. Whenever you put a condo on the market, especially in the downtown area, we have like 5-7 offers. So people coming to Toronto, sometimes they don’t have jobs because they change their province or they’re just new immigrants and they need a place to rent and the problem is not enough supply. Supply is not there and demand is still high, so the price will go up, the sky’s the limit you know?”

Jason Georgopoulos, Dominion Lending

“Well I think one thing important to note is our underrating guidelines are still pretty strict, and people aren’t getting loans that don’t qualify for loans – for the most part – I’m saying that as of course there’s always private lenders and B lenders, but for the big banks and 95% of the loans being done in the Toronto Housing Market, the qualifications are pretty strict. There’s a lot of pressure on buyers right now, and there’s definitely a lot of help coming from the bank of mom and dad in terms of first time homebuyers. But I don’t see any real reason for panic based on how the lenders have been pretty prudent on who they’re giving money to, and everybody is paying their loans – there’s not a lot of arrears on everybody’s balance sheets right now, that includes big banks and even the B lenders.”

Anne Brill, Centum Metrocapp Wealth Solutions Inc.

“I don’t personally believe there is a bubble, I do believe things will come down to more reasonable prices. Things went up, obviously for no other reason than supply and demand, and everyone got into a frenzy the last few months. Even though they do say some areas have gone down say 60%, a home that was worth $1 million six months ago is still worth the $1 million today, it’s just in the last six months in went up to $1.6 million for stupid reasons. So, I don’t believe in a bubble, I don’t believe that home that was worth $1 million six months ago is going to be worth $600,000 tomorrow. So I do not believe in a bubble, I just think things will stabilize a bit more.”

A big problem in America’s housing bubble was a lack of financial stability from homebuyers. What kind of FICO scores have you been seeing in the Toronto Housing Market? Is there any difference in these scores from five years ago?

Shawn Stillman, Mortgage Outlet Inc.

“There’s really no difference in credit scores from the past few years, what Canada’s market didn’t do is the same level of no income loans – one thing that was really popular in the US was mortgages that would balloon payments, you know, teaser rates for the first year or two years and then they would explode in years five onward. In Canada that doesn’t happen, so I don’t expect people are all of a sudden going to have problems making their mortgage payments, simply because there’s not going to be a huge increase in their payment going forward. Of course if the market and rates do go up, people could always re-finance their house and stretch out their amortization to keep their payments lower so I don’t think that there’s going to be a huge crash like what happened in the US.”

Irina Antipova, Assured Mortgage Services

“All my clients – I have seven thousand existing clients, mostly doctors, dentists, IT practitioners, truck drivers – all of them are paying their mortgages, but the problem right now is they want to change their house to let’s say a bigger house, with two-car garage, or three-car garage and they cannot afford it you know – so they strengthen their existing house. What they can do is they can afford to get some equity and maybe buy some rental property or investment property because they are still qualified for their condo. So that’s the problem on the condo market right now with the condo prices going up, myself I have only condo rentals.”

Jason Georgopoulos, Dominion Lending

“My clientele are mostly middle to upper class in terms of financial stability so the scores I have seen have not been reduced, everyone has pretty well qualified that I’m dealing with – but that might just be anecdotally in my area of Toronto and the clients I choose to work with.”

Anne Brill, Centum Metrocapp Wealth Solutions Inc.

“FICO scores, I’m going to say are probably very similar to what they were before, consumers are a lot more educated today than they were, so people are very conscious of their score, and a lot of these people pay systems to keep a very close look at their scores, so because consumers are more educated today, scores today are probably higher than they were five years ago, but at the same time I’m sure bankruptcy proposals went up, so because of that other people’s scores went down. But for the most part people are really educating themselves and are really conscious of their credit scores.”

Home prices in the GTA surged 33% YoY in March. Can you explain this change? Are Toronto Housing Market prices sustainable? 

Shawn Stillman, Mortgage Outlet Inc.

“It has definitely gone down since then and if you look at May’s numbers year-over-year they were around 17%, so it’s already slowing down.”

Irina Antipova, Assured Mortgage Services

“Purchases of these higher priced houses, a regular person cannot afford. There’s a rule $25,000 of salary there’s $100,000 of mortgage. So guess what, if you want to buy a house for $1 million and you only have 5% down payment, your salary should be $250,000. Look at the statistics you know – statistics will say average salary even for the higher earner, like IT’s and so on, it’s like $50,000-$60,000. The graduate from University will get maybe $45,000, or $50,000, or $60,000. So two of them cannot afford to buy the condo, so that’s the problem right now. Unless their parents will give them 20% down payment – how come the parents will get $200,000 on a $1 million house for their children? They have to re-finance their house. So right now all this strength from demand and supply will come into the rental. You know, because people cannot afford to buy, they have to rent.”

Jason Georgopoulos, Dominion Lending

“Well there was no inventory on the market in February and March so what was there was getting really bit up and there became almost frenzy buying in terms of “there’s going to be nothing available”. We’ve definitely seen a big change between the later part of April and then in May – the Ontario government announced some new rules: a foreign buyers tax, some new rules around rentals in the Toronto Housing Market, and I don’t think that’s necessarily destroyed all demand but what it did do is get a lot of people who were thinking of listing their homes to list, so we saw about a 60% jump in listings. And what that’s done is now we have a much more balanced market. Now, we’ve been so used to a hot market for definitely the last six months but really in the last few years, and now people all of a sudden are saying the sky is falling because it’s taking 2-3 weeks to sell your house as opposed to 2-3 days. But the truth of the matter is, it’s still very very much a seller’s market, but I don’t think people are being as irrational as they were a few months ago in terms of the bidding wars, people are waiting a bit more, and being a little bit more picky with the properties they are purchasing.”

Anne Brill, Centum Metrocapp Wealth Solutions Inc.

“You know what, it’s not sustainable and let’s hope it isn’t because nobody will be able to afford a home. Obviously it was the lack of supply and increase in demand, that’s what surged the market with prices going up dramatically, but that did not last long. I do believe the Home Capital situation a month ago really made a big damper in the industry. Right now, if you need to go to a B lender cause credit may not be ideal for the A lenders or income may not be conventionally proven, a B lender right now is going to take six weeks to close a deal, you can’t do anything faster than that – and that’s really hurt the market.”

What do you think will happen to the Toronto Housing Market if the Bank of Canada raises interest rates? How many current homeowners are out there with variable rate mortgages? What will happen to them?

Shawn Stillman, Mortgage Outlet Inc.

“The demand in the Toronto Housing Market I think is going to stay fairly consistent, because people are immigrating to Toronto, internationally, and also inter-provincially. Ontario is definitely the top market and people want to live in Toronto. So I suspect that the demand is going to remain strong. When interest rates go up, it’s going to hurt some people and some people are definitely going to be in trouble, but once again, they could re-finance their house, they could always cut down on other expenses – people don’t want to lose their house, so they’re going to find a way to stay in their house.”

Irina Antipova, Assured Mortgage Services

“99% of my clients have variable, I do not believe in a fixed rate because with variable it’s always convertible, you can always convert the fixed rate – if the variable will go up, the fixed will go down because investors convert from their prime rate investment to the bond market and back from the bond market to the variable rate, like the Bank of Canada prime rate – there will be time to convert the fixed rate. And all mortgages are all insured except for the B lending. The bank will insure the portfolio – so the government will pay if the market will go down, put it this way – not the banks, the banks will get their money back no problem. Let’s say people cannot pay, they will leave their houses to the lenders, but the lenders will get their full amount from the insurer.”

Jason Georgopoulos, Dominion Lending

“80% of my clients are opting for a fixed rate – I’ve always been a big proponent of the variable rates myself because over time it saves people money, but Canadians are generally a conservative bunch, and my average client is still taking a five-year fixed rate, so I don’t’ think an jump in rates is going to effect people immediately, but at the same time budgets are being pinched, housing prices in Toronto are very very high, so when they are up for renewal, and if they’re renewing at 1-2% higher, that’s definitely going to effect some people and it’s going to make monthly budgeting a lot tougher and then we’ll probably see some of those homes go on the market.”

Anne Brill, Centum Metrocapp Wealth Solutions Inc.

“We continue as a country to allow immigrants in in the hundreds of thousands every year, so I think the demand will always be there for the Toronto Housing Market. We are bringing a lot of educated, and high net worth people that want to come into this country and buy. Canada has taken such precautions in the past several years, that even if you do get a variable rate, you have to qualify at the benchmark rate. So you might be offered 2.2% but you have to qualify at 4.64%, and if you qualify for that, even a half point or quarter point increase, you can still manage with what income you make, so I don’t think that’s going to be a big effect.”

Toronto Housing Market  – Conclusion
It seems these brokers are not concerned about the Toronto Housing Market. They’ve all acknowledged the market got overheated in the past couple months from a shortage of supply, and feel conditions have gotten better recently. Another overwhelming consensus was the confidence in borrowers’ financial stability, all noted their clients’ credit scores haven’t been deteriorating and that people have been paying their mortgages.  Although none of the brokers think we’re in a bubble, they did recognize the difficulty for some to acquire homes. The solution to this seems to be renting, or for younger homebuyers, reaping help from their parents.

The brokers feel the demand in the Toronto Housing Market will always be there, and while each of them expressed different types of clientele in terms of fixed or variable rate mortgages, they all concluded that a rise in interest rates will affect some buyers but not be a big market risk. In the month of May, housing in the Toronto area saw a 43% increase in active listings, and a 7% decline in prices compared to April.

Prices have cooled down but May’s prices were still up 15% YoY. Some see this cooling as the market stabilizing, other see it as crashing. We can debate all we want, at the end of the day, we can’t predict the future, but caveat emptor.

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