In the thick of the pandemic, and three years after they immigrated from India, Mifrah Abid and her family were asked to vacate their townhouse in Milton so their landlord could sell it.
The order left them scrambling. Abid’s children were 10 and six, two of her family members were immunocompromised and prices had just started inching toward a pandemic rush. It became clear Abid’s family would have to leave behind the only connections they had as new immigrants. Even renting a single bedroom condo in Milton would cost $2,100 — far more than what they were paying for the three bedroom townhouse.
Rental prices in other cities weren’t particularly promising either. “It just didn’t make sense … we couldn’t go back to renting,” said Abid, an anti-racism advocate.
So they set out to buy a home wherever they could outside the unaffordable GTA. Abid and her husband, who is a web developer, ended up buying a townhome in Kitchener. “We didn’t have the great Canadian dream of owning a suburban house, it wasn’t something we envisioned for ourselves for at least the next 10 years,” Abid said, noting they had to borrow money from family. “It’s a privilege not everyone can afford.”
Even with high mortgage rates, she suspects her family would be paying a comparable price in the rental market, just without the security of ownership. “Homeowners are able to amass a down payment … that’s the only thing differentiating a homeowner from a renter these days.”
Despite facing a more expensive market, historic interest rate hikes and soaring inflation, many young families and millennials — a generation thought to have written off the postwar dream of a house and the picket fence — are entering the housing market to escape the insecurity and cost of renting. While they remain apprehensive about taking the plunge into ownership, some see it as the lesser of two evils.
In fact, it’s more dire to be a renter than a homeowner in Toronto for those born between 1981 and 1996, according to 2021 census data provided to the Star. Thirty-one per cent of millennial renters pay unaffordable shelter costs — shelling out 30 per cent or more of their income for housing — versus 24 per cent of millennial homeowners.
While home prices in the GTA have plunged relative to the market peak in early 2022, Toronto renters aren’t expected to receive similar relief. Instead, rental costs across southern Ontario have gone up by double-digit percentages in the last year, a trend experts don’t expect to change anytime soon. The Toronto region has 125,000 rental units scheduled for construction in the next 10 years — about 175,000 short of the projected demand.
For those lucky enough to challenge generational stereotypes about housing, escaping the precarity of the rental market is top priority, but it also comes with huge financial risks.
Kyle Todd, 35, and his partner had conversations all the time about how home ownership felt unattainable due to the never-ending price increases. He works in sales while she works for the Toronto Public Library. “We didn’t think it was going to be possible, we didn’t have a lot of savings,” Todd said.
But the couple hadn’t had the best experiences with landlords in the city, and felt like there was a lack of security with renting. At the end of 2020, when interest rates were historically low, Todd and his partner were able to cobble together a down payment using the RRSP he’d been building and other savings. Even then, their down payment wasn’t 20 per cent, and the couple knew they’d have to pay a lot in mortgage insurance.
“Anything we could get into is what we were going to do,” Todd said. “It sounds crazy, but that was the kind of desperation.” The couple locked into a fixed mortgage, and bought an older townhome in Mississauga by January 2021. “I have a lot of nervous energy about three years from now when we have to renew our mortgage,” he said.
“We know there’s some risk we might have to sell … and we might not make a ton of money if we have to.”
“Younger Canadians and newcomers of any age are demanded by this housing system to take on so much more economic risk with these massive mortgage debts,” said Paul Kershaw, a professor at the University of British Columbia’s School of Population and Public Health. He’s also the founder of Generation Squeeze, a think tank focused on addressing generational inequality.
According to Kershaw, in the mid-1970s, one would spend around $250,000 in today’s currency on a home in Toronto, with a salary of around $55,000. “The average price of a house was about four and a half times larger than the typical earnings of a young person.” Today, the average home in Toronto costs just over $1 million, and people are making slightly less, $54,000. “Now, the ratio is more like 20 to one.”
This increased burden of debt can be too much to bear, according to a recent study by an Ontario insolvency firm that found about half of all 2022 insolvencies were filed by millennials.
Despite the uncertainty about the affordability of his mortgage, Todd feels “incredibly fortunate” to own. He also feels guilty when he thinks of his friends who might not ever afford a home. “I feel like it’s just a broken system.”
Tim Capes, a 40-year-old principal engineer in the technology sector, intends to help his son Ben avoid the housing dilemma altogether. Capes bought his house in August 2021, a month before his son was born. “It seemed like the thing to do in face of endlessly rising rents in the city,” he said.
Capes said he isn’t centring his eventual retirement plan on the sale of his house. He plans to gift it to his son. “I want him to be able to do what he loves rather than picking a career solely for financial reasons.”
Buying a house ended up being a troublesome decision for his single-income family, considering Capes lost his primary job soon after the purchase, but not one he regrets. He also doesn’t feel invested in home prices rising to increase the value of his own house — being able to keep it is Capes’ main priority.
“What’s much more important is that home ownership becomes more affordable and accessible to people,” Capes said.
William Strange, an economic analyst and policy professor at the University of Toronto’s Rotman School of Management, said most economists would like to see more Torontonians with that perspective. “Buying a house because you expect it to appreciate in value is precisely what led the world to bubbles in the past,” he said. “And bubbles, when they burst, are incredibly disruptive to households and to the whole financial system.”
Amanda Ieraci, 28, had few expectations when she bought a one-bedroom condo in Fort York recently. “Trying to rent can get very crazy, very quick,” the marketing associate said, referring to her stint as a single renter. “I didn’t want a lot of my salary going to rent without the ability to budget for anything else in my life.”
After many nights spent with mortgage calculators, Ieraci determined she could purchase a condo, but would only qualify if her parents co-signed, due to the stress test. She’s glad she locked in when she did, because both current interest rates and rent prices would be near impossible to manage on her single income.
Declining house prices don’t really concern Ieraci, since she was able to stick to her budget with a small place. “I try to keep it modest,” she said about her 460 square-foot condo that overlooks a parking garage. “If I could get a window in my bedroom, that was success to me.”
Ieraci doesn’t view her home as an investment. “It’s more than that,” she said. “For young people, it’s such an achievement.”
“I just hope it gets easier.”
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There are early signs of rough times ahead in the GTA real estate market, with some Toronto mortgage brokers reporting a rise in the forced sale of homes by private and alternative lenders.
“It’s happening at breakneck speed,” said Toronto broker Ron Butler. “It’s just a strange set of events that have come together to create this vast increase in power of sales.”
While it may conjure up images of deeply discounted homes in the Florida suburbs during the 2008 financial crisis, a power of sale is different than a foreclosure. Under power of sale the borrower still owns their home, but the lender steps in to force the sale of the property, often because the borrower cannot keep up with their mortgage payments.
Seven interest rate hikes last year have renewed fears and social media chatter about Canadians slipping behind on their mortgages. Mortgage delinquency rates remain very low, but it takes months for defaults happening now to show up in those statistics.
“Whatever you see going on right now today is something that started nine months ago,” Butler said.
“This is just the very beginning of the problem; we’re not going to see the real impact of the problem until May, June, July.”
Toronto mortgage broker Vince Gaetano said his brokerage has already had three clients that have been served with notice of power of sale from private and alternative lenders this week.
“I’ve been doing this for 30 years. I haven’t seen this many in recent history,” he said.“I don’t think it’s a coincidence, I think it’s a sign of the times,” he said.
Butler said they are coming mostly from private lenders, also known as Mortgage Investment Corporations (MICs), which pool money from investors and lend it to real estate borrowers. Some of these lenders have struggled in the current high-rate environment.
“The combination of that and the drop in house values in Ontario has motivated many of the private lender organizations, or simply individuals who do private lending, to say, ‘I gotta call in the mortgage,’” he added. Most of these are one-year mortgages, and if lenders can’t pay out in full at renewal, “they’re just simply saying, ‘well we have to get the money back, so we’re going to put you into power of sale.’”
The other group facing forced sales is people who have mortgages with alternative or “B lenders,” who are struggling to keep up with skyrocketing interest rates if they’ve had to renew. These are lenders that cater to individuals who might not qualify with the big banks.
In these cases, “the increase in payment was so substantial as to become almost unmanageable,” Butler said.
Peppered with colourful all-caps copy like “HELP!!! MISSISSAUGA POWER OF SALE **MUST SELL IN 30 DAYS!!!” and “POWER OF SALE* BACK ON MARKET — DEAL FELL THROUGH!!!” power of sale ads are hard to miss on sites like Kijiji and HouseSigma. One three-bedroom, four-bathroom Brampton townhouse was sold as a power of sale for $919,000 in December 2022, after it was bought in 2021 for $1,260,000.
Butler estimates that only around 2 to 3 per cent of homeowners with mortgages in Toronto and Vancouver have either private or alternative lenders. “But it’s still meaningful,” he added. “There’s nothing quite as impactful on a marketplace as too many people who have to sell.”
Seamus Benwell, a specialist in housing research for the Canada Mortgage and Housing Corporation, said that despite rising interest rates, data from the third quarter of 2022 shows that mortgage delinquency rates in Canada are “at an all-time low” at 0.14 per cent nationally, and just 0.07 in Ontario and 0.06 in Toronto.
“The bottom line number is that we’re not seeing mortgage delinquencies increase,” he said. But, like Butler, he notes that mortgage delinquencies are a lagging indicator that tend to show up later. This is because of the 90-day time frame but also because Canadians tend to sacrifice whatever else they can before their homes, such as payments on credit cards and car loans.
“We’ve started to see some increases in delinquencies in those products, especially credit cards, over the last five or six months,” he said.“That could be a sign of future difficulties, that Canadians are sort of struggling to keep up with all their payments.”
Rebecca Oakes, vice-president of Data & Analytics at Equifax Canada, which also measures mortgage delinquencies, said their numbers also show very low rates. But they are also seeing a slight uptick in credit card and auto loan delinquencies.
With rising interest rates and inflation, and some people with variable rates hitting their trigger rate, “it still might take them a few months until that starts to really come through in a delinquency rate,” Oakes said. About half of variable-rate mortgage holders with fixed monthly payments have already hit their trigger rate, meaning they are no longer paying off the principal on their home, just the interest, according to a November Bank of Canada report.
Shubha Dasgupta, CEO & Co-Founder, of Pineapple, a digital mortgage company, said he doesn’t see an alarming increase in power of sales at this time. But he is seeing “more than the norm.” This is “more on the private side” and a lot of it is “more so against property value declines.”
For example, if a lender lent $800,000 on a $1-million home that is now worth $900,000 they may not want to renew that mortgage. “But that borrower doesn’t have another option, so what that private lender does is move it into default and power of sale,” he said.
Fellow Toronto broker Denise Laframboise has not noticed an increase in power of sales. She has found though, a lot of fearful clients worried about the rising rates.
“I do think it’s going to get worse for a lot of people,” she said. Laframboise encourages these individuals to look at options when they come up for renewal, maybe a longer amortization period, or going with a one- or two-year rate instead of locking in for five.
Gaetano suggests mortgage holders talk to their lenders if they’re having trouble with payments, and to start thinking ahead now if they’re coming up for renewal soon.
“It’s going to be a bumpy ride,” Gaetano said. “This is not going to end well for many people that bought in the last two years.”
It’s easy to point fingers and try to find a “boogeyman” who is at fault, he added. But it’s clear that record-low interest rates were not sustainable.
“I think FOMO (fear of missing out) took over and people got drunk on low rates,” he said.
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Alghoul is a Toronto-based general assignment reporter for the Star. Reach him via email: fakram@thestar.ca“,”author”:{“author”:”Fares 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The Teranet-National Bank house price index recorded a 1.1 per cent monthly drop, and fell in eight of 11 major markets
House prices in Canada continued to drop in November, falling 1.1 per cent, according to the Teranet-National Bank Composite House Price Index.
It was the fifth monthly decline in a row, according to the index, which tracks house sales and prices in 11 national markets. In October, prices were down 0.8 per cent.
Eight of the markets in the composite index were down, with the largest price declines reported in Montreal, Hamilton, and Vancouver. The drops in these metropolitan areas were 2.2 per cent, 1.9 per cent, and 1.5 per cent, respectively.
The general index for the 11 metropolitan areas showed a nine per cent drop from its peak in May 2022. Toronto saw a 0.8 per cent monthly decline and a 13 per cent drop from the May peak, according to the report.
Karen Yolevski, a Toronto spokesperson for real estate company Royal LePage, says forecasted declines won’t be drastic. She says prices in Toronto and the GTA have slowed, and the situation is more flat. When comparing this quarter to the last quarter of 2022, a roughly two per cent decline is expected in Toronto, she told the Star.
“Much of the price depreciation that we saw when interest rates (were rising) … most has already occurred and occurred in the summer months,” she added.
November marked the first time since the 2008 financial downturn that all the cities covered by the index recorded price declines from their peak period, “marking the end of a prosperous period for the Canadian real estate market,” the Teranet-National Bank report said.
With the Bank of Canada raising interest rates to 4.25 per cent in December — the seventh consecutive hike since March — “we believe that the impact on property prices should continue to be felt in the coming months,” wrote Daren King, the author of the report.
On a yearly basis, the index recorded a two per cent gain, but the gains have slowed for seven months in a row. The latest annual gain marked the lowest growth since November 2019. Calgary, Edmonton, and Halifax led the way, with increases of 14.6 per cent, 7.6 per cent, and 6.2 per cent, respectively. In Toronto, the index remained stable and in Hamilton was about one per cent down.
Markets that registered the most significant price growths in the past two years (including Toronto) “are also those that have recorded the sharpest decline,” the report says.
The cooling market is due to inflationary pressure combined with interest rate hikes, says Yolevski. This has created two groups of people: those who can’t qualify for a mortgage based on the new rate and a large group of both buyers and sellers who simply want to wait and see where the prices settles.
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Brayden Hooper has ambitious plans for growing his real estate investments over the next five years.
The Toronto mortgage broker bought his first investment property, a three-bed, three-bath condo in Cambridge, Ont., in October 2021 for $489,900, with a 20 per cent down payment. Renting it for $3,000 a month, Hooper is able to make a $300 monthly profit in what is called a cash-flow positive transaction — meaning, the investor isn’t bleeding money.
He hopes to buy four more long-term and short-term rentals, including delving into Airbnb’s and a mixed-used commercial property (a shop on the first floor and an apartment on the second).
Now, the biggest question for Hooper remains: When is it the best time to buy his second investment property?
“We’re still waiting for the spring of 2023 for prices to fall down even further,” Hooper said. “We have another Bank of Canada rate hike coming in December which will continue to put downward pressure on home prices.” (Economists predict home prices could drop by 30 per cent from the February 2022 peak to spring 2023.)
But if a good deal presents itself, Hooper is open to buying a property earlier. Being a mortgage broker, he is constantly looking for deals, which is his biggest tip to clients.
“Whether we’re in a busy or slow market, if you’re not constantly scanning for deals you could miss something,” he said. “That’s general good practice if you want to be a good investor.”
It’s investing adage that the time to invest is typically when the market is down because it’s easier to enter the market when the asset is cheaper to buy. Since the February 2022 peak, home prices have dropped by more than 15 per cent in Toronto. However, mortgage rates have also tripled at the same time, meaning higher rates are offsetting lower home prices.
But higher rates aren’t sticking around forever, said Ralph Fox, broker of record (a manager of a brokerage) and founder of Fox Marin Associates.
“We have higher interest rates to help offset soaring inflation and we know that will cause an economic slowdown,” Fox said. “When that happens interest rates will also come down because it’s not sustainable.”
It’s unknown when mortgage rates will come down, but when they do it will be a good time to invest, real estate experts say. Or, if home prices drop by another 10 to 15 per cent by spring, the costs could be low enough to mitigate the impact of higher rates.
What makes the market appealing now, according to Fox, is that buyers are facing less competition, with sales activity having dropped by a whopping 49 per cent in October 2022 compared to October 2021. It’s becoming less of a seller’s market — when there is high demand and inadequate supply — and becoming a more balanced market for buyers, as there is currently less demand, Fox said.
“Buyers aren’t having to compete nearly as much as the January and February 2022 market frenzy,” he said, adding buyers can put more conditions on their offer such as a home inspection, and can have more time to negotiate with the seller.
An investment property should be bought with the intent to rent it out, not flip it, said Tom Storey, sales representative and team lead with Royal LePage Signature Realty in Toronto.
When prices are declining, it’s not wise to flip a property as it could make less money on the resale. But if it’s a rental, and is seen as a long-term investment — that means owning the property for at least five years, but ideally 10 years — then it will be a profitable investment, Storey said.
Currently, the average rent in Toronto is $3,360 for a two-bedroom apartment, which is up 27.7 per cent year-over-year. And it doesn’t look like rent is going down any time soon, experts say. Skyrocketing rent can help investors cover the higher mortgage payments, Storey added.
However, while rent is drastically up in Toronto it still won’t be enough to make an investor cash-flow positive — at best they can be cash-flow neutral, meaning they’re not making any profit from the property at the end of each month, he said. That’s because higher mortgage rates make it difficult to charge rent that will cover the monthly mortgage cost in addition to making a profit — the rent would be too high and above market value.
If the rent is too high, prospective renters will scout for landlords who are charging less and are likely taking a financial hit.
“In Toronto, it’s a market where you’ll see greater appreciation of the property overtime, which is why it should be a long-term investment,” Storey said. “You’re typically losing money each month but have the goal of building substantial equity in the long-term.”
Ron Butler, mortgage broker of Butler Mortgages, warns that even being cash-flow neutral is dangerous. Investors must conduct a meticulous review of the economics of the rental before buying.
That includes: the monthly mortgage payment; the property tax and the annual rate of increase the municipality imposes on the tax; around one per cent of the property’s value should be set aside for repairs (if the house is valued at $1 million you should set aside at least $10,000 for repairs); and 30 days of vacancy should be set aside in case the tenant leaves, Butler said.
Buyers also need to evaluate their cap rate, which is the cash yield you get from the property after accounting for all expenses but before mortgage payments. It’s calculated as the ratio between the annual rental income to its current market value. The rate needs to be higher than the interest paid on the mortgage otherwise money won’t be made.
Around 10 years ago the goal cap rate would have been six to seven per cent, Butler said. But now, southern Ontario has deviated so much from cap rates that it’s about three per cent, he added. In the pandemic, when interest rates were as low as 1.5 per cent, it was possible to make a profit. But now, with interest rates close to six per cent, it’s difficult to get a cap rate higher than the interest rate in urban centres.
To be cash-flow positive, Hooper said buying property outside of Toronto is a safe bet. That’s why he bought a property in Cambridge, and is looking in places such as Ajax or Oshawa where property prices are cheaper.
It’s a trade off, as homes farther from Toronto don’t appreciate as much, but it means you can make a monthly profit, he said.
“You need to crunch the numbers and see if you’re cash-flow positive. If the answer is no, you have to ask yourself, can I afford to lose that money?” Hooper said.
That’s why Hooper emphasized being prepared to buy outside of Toronto, and to look into growing communities that have the potential to appreciate in value over time.
“I really encourage investors to look elsewhere, because places like Cambridge have lower land transfer tax and ‘cheaper’ prices,” Hooper said. “You can have better cash flow and sell it down the road for a higher price than what you bought it for.”
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That determines how bad it will be,” said Ben Rabidoux, founder of Edge Realty Analytics, a real estate data firm.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”stn-smart-player”},{“text”:”The UBS Global Real Estate Bubble Index 2022 placed Toronto in the top spot out of 25 cities, calling it the riskiest housing bubble in the world. A housing bubble is a run up in housing prices fuelled by demand, which reaches unsustainable levels to the point of collapse.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”The report found that home price levels in Toronto have more than tripled in the last 25 years fuelled by strong population growth, a housing shortage, and falling mortgage rates. High investor demand has also added significantly to the price increase.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”slimcut”},{“captionPosition”:”overlay”,”origImageSize”:”1200×800″,”fullWindowGenericImage”:false,”lastmodified”:1666378140519,”forceoriginal”:false,”caption”:”By spring 2023 house prices are expected to have fallen 30 per cent from their February peak ? what many economists define as a housing crash. “,”type”:”genericimage”,”credit”:”R.J. 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the pandemic, prices accelerated even more due to the Bank of Canada’s ultra low overnight rate, which drove mortgage rates as low as 1.5 per cent. Because of this, households have been leveraging up at the fastest pace since before the 2008 financial crisis, the report said.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“Toronto has strong risk signals,” said Mattias Holzhey, co-author of the UBS report. “Prices are moving faster than peoples’ income. More people are leveraged, prices have tripled in a short time frame, outstanding mortgages are up … it’s an overheated market.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”ad”,”heading”:”ARTICLE CONTINUES BELOW”,”name”:”ArticleThirdBigBox”,”display”:”medium-down”,”pos”:”3″,”interstitial”:true,”sizes”:[[300,250]]},{“text”:”Canada’s housing market had steadily gained steam for years before the pandemic, kicking off in 2015 due to the oil price crash, said Philip Cross, senior fellow at the Macdonald-Laurier Institute and former chief economist at Statistics Canada.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”The oil dependent economy weakened as oil prices dropped and inflation fell below the Bank of Canada’s two per cent target. The bank, therefore, lowered its overnight rate to half a per cent in 2016 to stimulate spending in the economy, according to Cross.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“That’s when prices really took off in Toronto and Vancouver, and that’s now where we’re seeing the biggest drop in demand. They’re the most vulnerable and we’re already seeing cracks in the market,” Cross said.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Since the market first showed signs of breakage in early 2022, uncertainty has taken hold. Unit sales plunged by more than 44 per cent in Toronto from September 2021 to September 2022, and the average selling price dropped to $1.09 million, down from the February peak of $1.33 million, according to the Toronto Regional Real Estate Board.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”This sales slump is “a major correction,” said Cross, and prices will decline further as sellers realize the market sales price will not reach the February market peak again for a long time. Right now, sellers are holding off on lowering home prices, waiting to see if prices will rise again, which is why prices aren’t falling as drastically as sales. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“snippet”:”\n”,”heading”:””,”fullWindow”:false,”fullBleed”:false,”showFullBleedOnMobile”:false,”headColor”:””,”type”:”html5mobile”,”textColor”:””,”mobileImageUrl”:””,”bgColor”:””,”imageUrl”:””,”registeredOnly”:false,”linkUrl”:””,”aodaTitle”:”Transactions plunge”,”internalScroll”:false,”displayStyle”:”small-up”},{“text”:”A 30 per cent drop in Toronto prices would bring prices back down to where they were in December 2020. For Cross, a 40 to 50 per cent home price decline — which would take prices back to where they were in 2015 — is needed in the country’s major markets to make real estate sustainable again.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”textBreakPoint”,”insertAt”:”contentLongBreakPoint”},{“text”:”Tony Stillo, director of Canada Economics at Oxford Economics, said the housing bubble in Toronto is already starting to burst as sales and prices drop sharply. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”But home prices in Canada are still 35 per cent higher than what buyers making a median household income can afford, he said. Despite the more than 15 per cent drop in house prices since the February peak, the real cost of buying a home for a Toronto buyer taking out a typical mortgage is still higher than it was at the housing peak, due to the run-up in borrowing rates. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“Prices can only outpace household income for so long,” Stillo added.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”In 1990, the average Canadian home was 19 per cent above what a typical household could afford. It took about three years of rising interest rates to lower house prices, along with higher incomes to restore affordability, Stillo said.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“People have factored in interest rates and the stress test to see if they can qualify for a mortgage and it’s soured the market,” he said. “This will continue to push buyers on the sidelines.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”There are already worrying signs that investors, who helped produce the bubble in Toronto’s housing market, are in serious trouble. Stillo noted evidence of buyers backing out of assignment sales. An assignment sale is the sale of contract to purchase a pre-construction condominium unit. Typically, investors are interested in assignment sales, as they attempt to sell the condo for a higher price. But as prices continue to drop, investors are trying to back out of the deals, placing downward pressure on condo prices.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”There is little hope that the current trajectory will change any time soon. The latest inflation numbers were down slightly in September, but not as much as economists expected, so rates are likely to keep rising.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Bank of Canada Governor Tiff Macklem recently said he’s laser focused on bringing inflation down, meaning further rate hikes are needed. In Canada, inflation has dropped from the June peak of 8.1 per cent to 6.9 per cent in September. Far off from the two per cent inflation target set by the Bank of Canada.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Economists predict the Bank of Canada’s overnight rate will reach 4.25 per cent by the end of the year — up a quarter of a percentage point from earlier forecasts. The current overnight rate is 3.25 per cent. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”cta”,”buttonText”:”Sign Up Now”,”buttonLink”:”/emails.html?nsrc=article-inline-realestate”,”description”:”Find out more about owning, renting and just getting by in Toronto and beyond with our weekly Real Estate email newsletter.”,”title”:”Get more housing news in your inbox”},{“text”:”A 4.25 per cent overnight rate will result in major banks setting their prime lending rate to 6.45 per cent. The stress test, which adds two per cent to the qualifying mortgage rate, means people will need to qualify for a mortgage with an interest rate of eight to nine per cent, real estate experts say. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”However, even if interest rates remain at the 3.25 per cent for the next year it’s “plenty sufficient to cause a lot of pain,” said Rabidoux.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“snippet”:”\n”,”heading”:””,”fullWindow”:false,”fullBleed”:false,”showFullBleedOnMobile”:false,”headColor”:””,”type”:”html5mobile”,”textColor”:””,”mobileImageUrl”:””,”bgColor”:””,”imageUrl”:””,”registeredOnly”:false,”linkUrl”:””,”aodaTitle”:”Income vs. home prices”,”internalScroll”:false,”displayStyle”:”small-up”},{“text”:”Rising debt servicing costs are rekindling concerns about the vulnerability of heavily indebted Canadian households. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“People will be facing the fastest interest rate increase since the 1990s, it’s been an incredibly fast move (from the Bank of Canada),” he said. “It will stress a lot of homeowners.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Mary’s Sialtsis, a mortgage broker based in Toronto, said she’s doing more refinancing for homeowners as opposed to arranging finances for purchases. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”The problem is more than just mortgages. Canadians consumer debt has risen to $2.32 trillion with an average debt load of approximately $21,000, excluding mortgages, according to a new report from Equifax. That’s an 8.4 per cent increase over the last year and a 6.4 increase from the first to second quarter of 2022. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Canadians have been piling on debt for years, so much so, that the debt to income ratio is now over 180 per cent, meaning that for every dollar earned, $1.80 is owed. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Even those who don’t have debt troubles will begin to feel the squeeze. A homeowner who bought five years ago when a five-year fixed rate mortgage was 2.69 per cent is facing an interest rate renewal of 4.89 per cent, which could see monthly costs go up by 21 per cent.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Sialtsis is helping clients refinance their mortgages, to use the equity of their home to help pay off the rising debt on their credit cards, personal lines of credit and home equity lines of credit, as many are struggling to meet their baseline payments, she says. But, the problem arises when they refinance and the value of their home isn’t where they need it be.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“That’s the big issue,” Sialtsis said. “So far in my career I haven’t seen refinancing to this degree since I began in 2011.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”relatedStories”,”relatedStories”:[]},{“text”:”And for those who bought at the peak of the pandemic, interest rates have tripled as they look for new lenders. “I told two homeowners that they needed to sell,” she said. “There was not enough equity in the homes or enough income coming in.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Canadians who bought homes near the housing peak and those who need to renew their mortgage in the next year or two will be hit hardest by a housing crash and retirees looking to live off the equity of their home sale will also take a hit.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”But the biggest question remains whether the housing crash will be long and drawn out like it was in the 1990s, or whether there will be quick recovery.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”If the fall in prices bottoms out in spring 2023 and manages to bounce back later that year, the crash will cause limited damage. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”But if interest rates remain elevated for a long period of time, which seems increasingly likely, the housing market — and the larger economy — will be impacted heavily, said Cross. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”The real estate market accounts for a staggering 14 per cent of Canada’s economic growth. If it falters there is “tremendous collateral damage,” Rabidoux added.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”What happens in this distressing scenario? “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”People will be saving more and spending less as mortgage payments increase, dampening consumer spending, which is what happened during the 1990s housing crash. Jobs in real estate will be lost. Already, full-time employment in the Ontario real estate sector is down at least 34,000 jobs from the peak in June 2022. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Homeowners will hold off on major spending projects, such as renovations, impacting construction jobs. Falling house prices are also a major deterrent to new construction, Cross says. Already, more than 30,000 construction job losses have taken place in Canada since July 2022. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”While home defaults are still relatively low, Stillo said the impending recession will trigger a rise in defaults (those who can no longer afford to pay their mortgages). The Canadian banking system has, however, kept delinquencies low (loans that are 90 days or more past due) during rocky economic periods, he noted. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”No matter how painful it gets, the housing correction will run its course.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”In the 1990s the economy began to recover towards the end of the decade. Toronto home prices regained strength in 1997, continuing to rise steadily from the ashes. Unemployment fell from the 12 per cent peak to just below seven per cent in 1999 — a healthy unemployment rate is between three to five per cent. The country’s overall debt fell substantially and economic growth and output returned.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”textBreakPoint”,”insertAt”:”contentEndBreakPoint”},{“text”:”“At some point prices eventually do realign with household borrowing capacity,” Stillo said. “We saw that change eventually in the ’90s. We’ll have to see that again in the current market. Home prices need to be lower and income growth needs to be steady.” “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Clarrie Feinstein is a Toronto-based staff reporter for the Star. Reach Clarrie via email: clarriefeinstein@torstar.ca“,”author”:{“author”:”Clarrie Feinstein”,”photo”:{“origImageSize”:”2483×3262″,”lastmodified”:2700061000,”url”:”/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”,”sizes”:{“1:1”:{“small”:”https://images.thestar.com/5ERidraZnocPtp95xo5IVe2-L7k=/100×100/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”},”3:2″:{“small”:”https://images.thestar.com/mHaqavllBp03ClV-ifY7BB6YWns=/114×76/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”,”medium”:”https://images.thestar.com/nI5mq0nVFJ93WwgR_qq1PTZBXk4=/330×220/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”,”large”:”https://images.thestar.com/p94WY5sRNdvBgapw_mxhItbqNTU=/690×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”},”21:9″:{“large”:”https://images.thestar.com/ltdioRQPWFIY3ImPuDfjpw8W8Lg=/1080×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”}},”nonWebPSizes”:{“1:1”:{“small”:”https://ukpropertyguides.com/wp-content/uploads/2022/07/As-Torontos-real-estate-market-cools-where-are-the-investors.jpeg”},”3:2″:{“small”:”https://images.thestar.com/OcjCNkkJ9YvhSNqLC7_MfJXs1pI=/114×76/smart/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”,”medium”:”https://images.thestar.com/ySfjf1mV00YMTdkh8Zc3GpllpRo=/330×220/smart/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”,”large”:”https://images.thestar.com/jDRCVFVdvt1SlBrT1t-wcjVuMhk=/690×460/smart/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”},”21:9″:{“large”:”https://images.thestar.com/f3h7R_BcafJ-YcVBFw4BFldGASI=/1080×460/smart/https://www.thestar.com/content/dam/thestar/columnist_logos/Feinstein_Clarrie_logo2022.jpeg”}}},”location”:”Toronto”,”tag”:”feinstein_clarrie”,”credit”:”Staff Reporter”,”twitterId”:”ClarrieF”,”email”:”clarriefeinstein@torstar.ca”},”authorPageUrl”:”https://news.google.com/authors.feinstein_clarrie.html”,”type”:”endnote”,”isLast”:true},{“type”:”articleRelatedFooter”},{“type”:”shareBar”,”position”:”bottom”},{“type”:”trustbar”},{“type”:”conversations”}],”assetTags”:[“real_estate_economics”,”feinstein_clarrie”,”housing”,”economy”,”real_estate”,”starlock”,”smg_business”,”housing_crash”,”InHouseArticle_thestar”,”financial_crisis_of_2007_2008″,”dct_ts_personal_finance”,”home_sales”,”housing_market”,”equity”,”financial_loss”,”canada”,”united_states_housing_bubble”,”financial_economics”,”home_prices”,”bank_of_canada”,”dct_ts_real_estate”,”real_estate_bubble”,”foreclosure”,”mortgage_loan”,”dct_ts_housing”,”economic_inequality”,”kmi2″,”inflation”,”toronto”,”nicrt1″,”real_estate_bubble”,”economy_of_canada”,”algolock”],”seoKeywords”:”Housing,real estate,housing market,housing crash,real estate bubble,home prices,home sales,equity,financial loss,NICRT1,KMI2,smg_business,InHouseArticle_thestar,dct_ts_real-estate,dct_ts_housing,dct_ts_personal-finance,algolock,starlock”,”excludeInRecommendations”:false,”promo”:[],”tier”:”tier1″,”related”:{“pubdays”:0,”strategy”:0},”personalizationMetadata”:{“inHouseArticle”:”true”,”image”:”https://images.thestar.com/X3SICk-KPtJdL2eWUKDj_2XteEM=/0x0:1200×800/1280×1024/smart/filters:cb(1666438278149)/https://www.thestar.com/content/dam/thestar/business/2022/10/22/torontos-real-estate-market-will-crash-30-or-more-by-the-spring-economists-say-how-bad-will-it-be/housingbubble.jpg”,”enableLivechat”:”false”,”images”:”https://www.thestar.com/assets/img/thestar-ribbon.png”,”noShow”:”false”,”enableConversations”:”true”,”description”:”The biggest housing bubble in the world is popping and prices are predicted to crash by 30% or more as the country slides into recession. 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The biggest housing bubble in the world is popping and prices are predicted to crash by 30% or more as the country slides into recession. It could be the early 1990s all over again.
It was barely halfway through the year when the governor of the Bank of Canada decided to hike rates for the 11th time.
Soaring inflation was causing headaches around the world. Homeowners were on edge — as were businesses, who had begun to lay off workers. Bankruptcies were up 30 per cent in the first two months of the year. Recession loomed.
It was 1990 and the beginning of what would be a long, dark period in the Canadian economy, thanks to fast rising interest rates and a crashing housing market. The economic downturn that eventually hit lasted for a full two years and by 1996, house prices had dropped by 40 per cent.
Toronto’s housing market took the biggest blow. Between 1986 and 1989 house prices in the city had more than doubled, hitting an average price of $274,000. By 1996 they’d fallen to $198,000, a more than 25 per cent drop. There was a wave of foreclosures and the market spiralled downwards, not regaining strength until the late 1990s.
The similarities to today’s situation are alarming. During the pandemic, interest rates hit historic lows creating an easy-money feeding frenzy. For many Canadians, investing in real estate wasn’t just about finding a family home, it was seen as a can’t-miss opportunity to increase one’s net worth, as values rose by almost 40 per cent in Toronto from April 2020 to the February 2022 market peak.
The run up in prices earned Toronto the dubious title of riskiest housing bubble in the world, according to Swiss bank UBS.
Now, suddenly the once unthinkable is happening again: prices are falling and interest rates are quickly rising amidst fears of persistent inflation.
The majority of economists surveyed by the Star forecast that Toronto’s home prices are set to decline by 30 per cent or more from the February peak to spring 2023 — a drop many economists would define as a housing crash — as the Bank of Canada continues to push interest rates upward to curb inflation. At least another three-quarter percentage point rate hike is coming next week, marking the sixth rate hike since March 2022.
If history is any guide, there is a chance prices could drop even more, as the crash takes on a life of its own and investors abandon a tanking market, propelling house prices down longer and further than many expect.
“The housing crash in the late 1980s and 1990s was painful because house prices fell substantially and didn’t recover for a decade. Toronto’s market will crash, the question is for how long? That determines how bad it will be,” said Ben Rabidoux, founder of Edge Realty Analytics, a real estate data firm.
The UBS Global Real Estate Bubble Index 2022 placed Toronto in the top spot out of 25 cities, calling it the riskiest housing bubble in the world. A housing bubble is a run up in housing prices fuelled by demand, which reaches unsustainable levels to the point of collapse.
The report found that home price levels in Toronto have more than tripled in the last 25 years fuelled by strong population growth, a housing shortage, and falling mortgage rates. High investor demand has also added significantly to the price increase.
During the pandemic, prices accelerated even more due to the Bank of Canada’s ultra low overnight rate, which drove mortgage rates as low as 1.5 per cent. Because of this, households have been leveraging up at the fastest pace since before the 2008 financial crisis, the report said.
“Toronto has strong risk signals,” said Mattias Holzhey, co-author of the UBS report. “Prices are moving faster than peoples’ income. More people are leveraged, prices have tripled in a short time frame, outstanding mortgages are up … it’s an overheated market.”
Canada’s housing market had steadily gained steam for years before the pandemic, kicking off in 2015 due to the oil price crash, said Philip Cross, senior fellow at the Macdonald-Laurier Institute and former chief economist at Statistics Canada.
The oil dependent economy weakened as oil prices dropped and inflation fell below the Bank of Canada’s two per cent target. The bank, therefore, lowered its overnight rate to half a per cent in 2016 to stimulate spending in the economy, according to Cross.
“That’s when prices really took off in Toronto and Vancouver, and that’s now where we’re seeing the biggest drop in demand. They’re the most vulnerable and we’re already seeing cracks in the market,” Cross said.
Since the market first showed signs of breakage in early 2022, uncertainty has taken hold. Unit sales plunged by more than 44 per cent in Toronto from September 2021 to September 2022, and the average selling price dropped to $1.09 million, down from the February peak of $1.33 million, according to the Toronto Regional Real Estate Board.
This sales slump is “a major correction,” said Cross, and prices will decline further as sellers realize the market sales price will not reach the February market peak again for a long time. Right now, sellers are holding off on lowering home prices, waiting to see if prices will rise again, which is why prices aren’t falling as drastically as sales.
A 30 per cent drop in Toronto prices would bring prices back down to where they were in December 2020. For Cross, a 40 to 50 per cent home price decline — which would take prices back to where they were in 2015 — is needed in the country’s major markets to make real estate sustainable again.
Tony Stillo, director of Canada Economics at Oxford Economics, said the housing bubble in Toronto is already starting to burst as sales and prices drop sharply.
But home prices in Canada are still 35 per cent higher than what buyers making a median household income can afford, he said. Despite the more than 15 per cent drop in house prices since the February peak, the real cost of buying a home for a Toronto buyer taking out a typical mortgage is still higher than it was at the housing peak, due to the run-up in borrowing rates.
“Prices can only outpace household income for so long,” Stillo added.
In 1990, the average Canadian home was 19 per cent above what a typical household could afford. It took about three years of rising interest rates to lower house prices, along with higher incomes to restore affordability, Stillo said.
“People have factored in interest rates and the stress test to see if they can qualify for a mortgage and it’s soured the market,” he said. “This will continue to push buyers on the sidelines.”
There are already worrying signs that investors, who helped produce the bubble in Toronto’s housing market, are in serious trouble. Stillo noted evidence of buyers backing out of assignment sales. An assignment sale is the sale of contract to purchase a pre-construction condominium unit. Typically, investors are interested in assignment sales, as they attempt to sell the condo for a higher price. But as prices continue to drop, investors are trying to back out of the deals, placing downward pressure on condo prices.
There is little hope that the current trajectory will change any time soon. The latest inflation numbers were down slightly in September, but not as much as economists expected, so rates are likely to keep rising.
Bank of Canada Governor Tiff Macklem recently said he’s laser focused on bringing inflation down, meaning further rate hikes are needed. In Canada, inflation has dropped from the June peak of 8.1 per cent to 6.9 per cent in September. Far off from the two per cent inflation target set by the Bank of Canada.
Economists predict the Bank of Canada’s overnight rate will reach 4.25 per cent by the end of the year — up a quarter of a percentage point from earlier forecasts. The current overnight rate is 3.25 per cent.
A 4.25 per cent overnight rate will result in major banks setting their prime lending rate to 6.45 per cent. The stress test, which adds two per cent to the qualifying mortgage rate, means people will need to qualify for a mortgage with an interest rate of eight to nine per cent, real estate experts say.
However, even if interest rates remain at the 3.25 per cent for the next year it’s “plenty sufficient to cause a lot of pain,” said Rabidoux.
Rising debt servicing costs are rekindling concerns about the vulnerability of heavily indebted Canadian households.
“People will be facing the fastest interest rate increase since the 1990s, it’s been an incredibly fast move (from the Bank of Canada),” he said. “It will stress a lot of homeowners.”
Mary’s Sialtsis, a mortgage broker based in Toronto, said she’s doing more refinancing for homeowners as opposed to arranging finances for purchases.
The problem is more than just mortgages. Canadians consumer debt has risen to $2.32 trillion with an average debt load of approximately $21,000, excluding mortgages, according to a new report from Equifax. That’s an 8.4 per cent increase over the last year and a 6.4 increase from the first to second quarter of 2022.
Canadians have been piling on debt for years, so much so, that the debt to income ratio is now over 180 per cent, meaning that for every dollar earned, $1.80 is owed.
Even those who don’t have debt troubles will begin to feel the squeeze. A homeowner who bought five years ago when a five-year fixed rate mortgage was 2.69 per cent is facing an interest rate renewal of 4.89 per cent, which could see monthly costs go up by 21 per cent.
Sialtsis is helping clients refinance their mortgages, to use the equity of their home to help pay off the rising debt on their credit cards, personal lines of credit and home equity lines of credit, as many are struggling to meet their baseline payments, she says. But, the problem arises when they refinance and the value of their home isn’t where they need it be.
“That’s the big issue,” Sialtsis said. “So far in my career I haven’t seen refinancing to this degree since I began in 2011.”
And for those who bought at the peak of the pandemic, interest rates have tripled as they look for new lenders. “I told two homeowners that they needed to sell,” she said. “There was not enough equity in the homes or enough income coming in.”
Canadians who bought homes near the housing peak and those who need to renew their mortgage in the next year or two will be hit hardest by a housing crash and retirees looking to live off the equity of their home sale will also take a hit.
But the biggest question remains whether the housing crash will be long and drawn out like it was in the 1990s, or whether there will be quick recovery.
If the fall in prices bottoms out in spring 2023 and manages to bounce back later that year, the crash will cause limited damage.
But if interest rates remain elevated for a long period of time, which seems increasingly likely, the housing market — and the larger economy — will be impacted heavily, said Cross.
The real estate market accounts for a staggering 14 per cent of Canada’s economic growth. If it falters there is “tremendous collateral damage,” Rabidoux added.
What happens in this distressing scenario?
People will be saving more and spending less as mortgage payments increase, dampening consumer spending, which is what happened during the 1990s housing crash. Jobs in real estate will be lost. Already, full-time employment in the Ontario real estate sector is down at least 34,000 jobs from the peak in June 2022.
Homeowners will hold off on major spending projects, such as renovations, impacting construction jobs. Falling house prices are also a major deterrent to new construction, Cross says. Already, more than 30,000 construction job losses have taken place in Canada since July 2022.
While home defaults are still relatively low, Stillo said the impending recession will trigger a rise in defaults (those who can no longer afford to pay their mortgages). The Canadian banking system has, however, kept delinquencies low (loans that are 90 days or more past due) during rocky economic periods, he noted.
No matter how painful it gets, the housing correction will run its course.
In the 1990s the economy began to recover towards the end of the decade. Toronto home prices regained strength in 1997, continuing to rise steadily from the ashes. Unemployment fell from the 12 per cent peak to just below seven per cent in 1999 — a healthy unemployment rate is between three to five per cent. The country’s overall debt fell substantially and economic growth and output returned.
“At some point prices eventually do realign with household borrowing capacity,” Stillo said. “We saw that change eventually in the ’90s. We’ll have to see that again in the current market. Home prices need to be lower and income growth needs to be steady.”
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\n”,”heading”:””,”fullWindow”:false,”fullBleed”:false,”showFullBleedOnMobile”:false,”headColor”:””,”type”:”html5mobile”,”textColor”:””,”mobileImageUrl”:””,”bgColor”:””,”imageUrl”:””,”registeredOnly”:false,”linkUrl”:””,”aodaTitle”:”Average rent for a one-bedroom apartment in the Toronto area”,”internalScroll”:false,”displayStyle”:”small-up”},{“text”:”Meanwhile, the same experts warn that these rental deposit demands, largely targeting foreign nationals and quietly enabled by realtors, are harming both Toronto’s numerous post-secondary institutions and its reputation as a welcoming place for international students pursuing higher education. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”stn-smart-player”},{“text”:”“It’s very common,” Laurent Levesque, executive director of Unité de travail pour l’implantation de lodgement étudiant (UTILE), a Québec affordable student housing non-profit organization. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“International students, not only do they not know their rights or the law that protects tenants, but they also don’t have much leverage or ability to negotiate,” he said. “So they’re basically being extorted in some cases by landlords.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”slimcut”},{“snippet”:”“,”heading”:””,”fullWindow”:false,”fullBleed”:false,”showFullBleedOnMobile”:false,”headColor”:””,”type”:”html5mobile”,”textColor”:””,”mobileImageUrl”:””,”bgColor”:””,”imageUrl”:””,”registeredOnly”:false,”linkUrl”:””,”aodaTitle”:”Number of post-secondary international students in Ontario by school year”,”internalScroll”:false,”displayStyle”:”small-up”},{“text”:”Tim Hudak, CEO of the Ontario Real Estate Association, said its important for all parties — renters, landlords and realtors — to know their rights and responsibilities.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“Where the Residential Tenancies Act, 2006 applies, a landlord is breaking the rules by requiring more than one month’s worth of rent and prospective tenants should file a complaint with the Landlord and Tenant Board,” he said in a statement to the Star. “Even in instances where a prospective tenant is offering more than one month’s rent upfront, a landlord is legally not permitted to accept the offer as per the rules of RTA.” “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”ad”,”heading”:”ARTICLE CONTINUES BELOW”,”name”:”ArticleThirdBigBox”,”display”:”medium-down”,”pos”:”3″,”interstitial”:true,”sizes”:[[300,250]]},{“text”:”Joseph Richer, registrar at the Real Estate Council of Ontario, which oversees and enforces all rules governing real estate professionals in the province, said realtors and salespeople must comply with all sections of the Real Estate and Business Brokers Act, including both the Residential Tenancies Act and the Commercial Tenancies Act. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“There is a shared responsibility between the landlord and the registrant. The only rent a property owner can request is the first and last month’s rent and a refundable key deposit,” said Richer in a statement to the Star. “Anyone with evidence that a RECO registrant is violating these rules should file a complaint with RECO.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”RECO said it receives, on average, fewer than 10 complaints of that nature each year, though it has increased slightly over the past two years. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Dania Majid, a staff lawyer with the Advocacy Centre for Tenants Ontario (ACTO), said, anecdotally, the practice of landlords requiring multiple rent payments upfront has gained traction this year, as the rental market heated up, leading to fewer vacancies. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”In the second quarter of 2022, vacancies in purpose-built rentals hit 1.4 per cent, down from 5.1 per cent in the same period last year, according to an analysis from market research firm Urbanation. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“Vacancies are at a very low level, which means tenants are desperate and landlords have their pick of tenant,” she said. “There’s a huge power imbalance for tenants and they’re generally in a position where they’re forced to take it or leave it, because if they don’t comply with the demand, even if it is illegal, they might not get the unit.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”textBreakPoint”,”insertAt”:”contentLongBreakPoint”},{“text”:”Hemashri Ramachandra Maheshkumar, a graduate student from India, said she was almost scammed by a landlord, whom she believes was targeting foreign students on Facebook. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Maheshkumar, like Wutt, arrived in Toronto earlier this summer without any permanent housing. While staying at an Airbnb, she joined several Facebook groups for off-campus student housing. When she reached out to a landlord of an available unit, the owner asked Maheshkumar to pay a $400 security deposit upfront — just to view the apartment. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“You can view it anytime once you fill the form and secured it by paying the refundable security deposit for you to have your receipt with the electronic code to access the mailbox,” wrote the landlord in a message to Maheshkumar. The owner said the security deposit was needed because they did not live in the area and could not accompany potential tenants to the apartment for tours. The landlord has since deleted the Facebook profile and is unreachable for comment.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Certain that her $400 would not be returned, Maheshkumar didn’t fall for the potential scam. “A couple of my friends who moved to the U.S. told me to be very, very aware of these people,” she said. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”However, she feels other international students, desperate for housing and perhaps unaware of local rental laws, could easily fall for the trap. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”cta”,”buttonText”:”Sign Up Now”,”buttonLink”:”/emails.html?nsrc=article-inline-realestate”,”description”:”Find out more about owning, renting and just getting by in Toronto and beyond with our weekly Real Estate email newsletter.”,”title”:”Get more housing news in your inbox”},{“text”:”For Wutt, some of the rental deposit requests for a single-room apartment amounted to $12,000. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“Would you be able to give (a) deposit of three month(s) now and three month once (you) land here?” reads a text from a realtor Wutt shared with the Star. “I talk(ed) to other realtor but he said he can (only) look into it if you can do it. Please let me know asap,” the text continued.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“Just to be clear, most landlords would want first and last months rent and then the extra four months,” reads another text exchange from another realtor.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Unwilling to agree to the rental deposit requests, Wutt turned down each unit. When she stepped onto her flight to Canada, Wutt didn’t have a place to call home. She ended up crashing at a friend’s house in North York, while desperately continuing her search for housing before the school year began. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“It was so hard for me to get a room, I was really stressed out and I didn’t have anywhere to stay,” she said. “It feels like no one cares about us (international students). So, unless we can pay that six months’ rent upfront, we can’t get a room,” she said.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”It was only when Wutt found a roommate — a Canadian student with a parent in the country who could act as a guarantor — that she was able to find a unit that didn’t require an exorbitant rental deposit.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“The only reason I got this room is because my roommate is Canadian,” said Wutt.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Majid, the tenant rights lawyer with ACTO, believes Wutt’s experience is a “textbook” case of discrimination. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Under the Ontario Human Rights Commission’s policy on human rights and rental housing, prospective tenants cannot be refused an apartment based on factors such as their race, citizenship, place of origin or age. Although a landlord may ask for a tenant’s rental history, credit references and credit checks, “a lack of rental or credit history should not be viewed negatively,” the commission states on its website. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”relatedStories”,”relatedStories”:[{“url”:”https://www.thestar.com/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds.html”,”assetId”:”304dec69-1ced-4d3e-814e-13eb4bac189f”,”headline”:”Students are now paying 25% more for housing than the average Canadian renter — and that’s pushing rents up for everyone”,”abstract”:”Student housing crisis is drastically increasing student debt and threatening the accessibility of higher education, housing experts and financial…”,”image”:{“origImageSize”:”1200×800″,”cropthumb”:”0,0,1200,800″,”lastmodified”:1663017286768,”alt”:”Ivana Perkucin, a graduate student at U of T, says the cost of rent in Toronto adds additional mental and financial stress.”,”url”:”/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”,”sizes”:{“1:1”:{“small”:”https://images.thestar.com/kNgrWzmS7LgQXqfVM_cig05xn3U=/0x0:1200×800/100×100/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”},”3:2″:{“small”:”https://images.thestar.com/-E7Sv_2EhN4Hz3zYjlwvQnHq7f4=/0x0:1200×800/114×76/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”,”medium”:”https://images.thestar.com/wWoqPRj2MJSW99DffIKSN99rbUk=/0x0:1200×800/330×220/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”,”large”:”https://images.thestar.com/SEvo1xS5SP5BEhEfGh1gIGrJJRU=/0x0:1200×800/690×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”},”21:9″:{“large”:”https://images.thestar.com/ass02xcqTyHERLL7Qa8itOrfDE4=/0x0:1200×800/1080×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”}},”nonWebPSizes”:{“1:1”:{“small”:”https://images.thestar.com/l04UarE1r4S-DG5b3Hhu_56yzac=/0x0:1200×800/100×100/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”},”3:2″:{“small”:”https://images.thestar.com/7Oq77y3M9qgCT2pnytgaKiWhpg0=/0x0:1200×800/114×76/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”,”medium”:”https://images.thestar.com/z3txI5v8t4hjNJXqsZvOCi3Sb4w=/0x0:1200×800/330×220/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”,”large”:”https://images.thestar.com/enipi3lhuoJll-JhZuM8OvHWh2Y=/0x0:1200×800/690×460/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”},”21:9″:{“large”:”https://images.thestar.com/zcWnJEoCZ5NB-tPuAfFlbEFWiOQ=/0x0:1200×800/1080×460/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/students-are-paying-25-per-cent-more-for-housing-than-the-average-canadian-renter-report-finds/ivana_perkucin.jpg”}}},”labels”:{“section”:”Business”,”trust”:null,”special”:null},”enableConversations”:true,”enableLivechat”:false,”publishedepoch”:1662976800000},{“url”:”https://www.thestar.com/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto.html”,”assetId”:”e06553d7-eefc-4c63-a42e-cc4de2fa16bc”,”headline”:”Five tips for students looking to rent in Toronto”,”abstract”:”Housing experts and seasoned student renters say these tips will make the process smoother.”,”image”:{“origImageSize”:”1200×800″,”cropthumb”:”0,0,1200,800″,”lastmodified”:1663023122073,”alt”:”Housing experts and seasoned student renters have advise for post-secondary students looking for afordable accomodations in Toronto.”,”url”:”/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”,”sizes”:{“1:1”:{“small”:”https://images.thestar.com/BQxs56wChB4OblS9PrhXOU00fnI=/0x0:1200×800/100×100/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”},”3:2″:{“small”:”https://images.thestar.com/gUE494fMWx_96avVmbYrXuugqJI=/0x0:1200×800/114×76/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”,”medium”:”https://images.thestar.com/poaeV-Ckt4QrlBfyhVr5pBXdUJU=/0x0:1200×800/330×220/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”,”large”:”https://images.thestar.com/C3LBxHXb3gu3bFP2weLpCeRzRBs=/0x0:1200×800/690×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”},”21:9″:{“large”:”https://images.thestar.com/Uic-5Q85GwD5IcLecg5Onn1QYWQ=/0x0:1200×800/1080×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”}},”nonWebPSizes”:{“1:1”:{“small”:”https://images.thestar.com/CnOE4Boeg8vPG0tcQf_papGLx8U=/0x0:1200×800/100×100/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”},”3:2″:{“small”:”https://images.thestar.com/B9kYQTDdCBvWpC_OCYEj9pHiZo4=/0x0:1200×800/114×76/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”,”medium”:”https://images.thestar.com/15ol2fD03w3y_F0RNBr4q_L_zcc=/0x0:1200×800/330×220/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”,”large”:”https://images.thestar.com/8vkmnhqXJUAEJagyZyCdVkX7zEM=/0x0:1200×800/690×460/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”},”21:9″:{“large”:”https://images.thestar.com/Gs6qWbVvxNJA8ZzIX6CL1xZdSbE=/0x0:1200×800/1080×460/smart/https://www.thestar.com/content/dam/thestar/business/2022/09/12/five-tips-for-students-looking-to-rent-in-toronto/students_at_uni.jpg”}}},”labels”:{“section”:”Business”,”trust”:null,”special”:null},”enableConversations”:true,”enableLivechat”:false,”publishedepoch”:1662976800000},{“url”:”https://www.thestar.com/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students.html”,”assetId”:”9836a9ec-0273-4db2-8e13-b0cf3069961f”,”headline”:”Toronto Metropolitan University scraps plans to build residence for nearly 600 students”,”abstract”:”The local councillor for the area calls that decision “short-sighted” and a disappointment. The university is blaming construction costs.”,”image”:{“origImageSize”:”1200×800″,”cropthumb”:”0,0,1200,800″,”lastmodified”:1657809050858,”alt”:”In a statement to the Star from the university’s facilities management and development services, the university said it had previously submitted an application to rezone a surface parking lot at 202 Jarvis St. and build on the site “when funding became available.” But the school is now seeking permission from city council to submit a minor variance application that no longer includes the residence, the statement added.”,”url”:”/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”,”sizes”:{“1:1”:{“small”:”https://images.thestar.com/qByvdmiTtFLhxwh5Aiy18xfPbMk=/0x0:1200×800/100×100/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”},”3:2″:{“small”:”https://images.thestar.com/8HGQPyHUXcf3rexHrwN3IiyOf4s=/0x0:1200×800/114×76/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”,”medium”:”https://images.thestar.com/eXvJg5wO8ns2IxhRw4OFu7DM5uc=/0x0:1200×800/330×220/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”,”large”:”https://images.thestar.com/DPq3gLC5zugukaYOqqHYhS2uVZk=/0x0:1200×800/690×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”},”21:9″:{“large”:”https://images.thestar.com/-EbaYEpwPsnvWzTTxrM_kTif0vM=/0x0:1200×800/1080×460/smart/filters:format(webp)/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”}},”nonWebPSizes”:{“1:1”:{“small”:”https://images.thestar.com/zmQ_WNBC2gehtAZsG6EqXtavX6Q=/0x0:1200×800/100×100/smart/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”},”3:2″:{“small”:”https://images.thestar.com/hxemVc555nEEypS2JZyLtkEmPRI=/0x0:1200×800/114×76/smart/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”,”medium”:”https://images.thestar.com/6WOkfMsknUxLBI_2ar5Cq7wjCfE=/0x0:1200×800/330×220/smart/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”,”large”:”https://images.thestar.com/Kky8pCY946LcN5wHLAOnEa1gGbw=/0x0:1200×800/690×460/smart/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”},”21:9″:{“large”:”https://images.thestar.com/lOdaB8Vy-qLxStqDsOjQVs7d8Sw=/0x0:1200×800/1080×460/smart/https://www.thestar.com/content/dam/thestar/news/gta/2022/07/13/toronto-metropolitan-university-scraps-plans-to-build-residence-for-nearly-600-students/rpj_metroryerson03.jpg”}}},”labels”:{“section”:”GTA”,”trust”:null,”special”:null},”enableConversations”:true,”enableLivechat”:false,”publishedepoch”:1657753200000}]},{“text”:”Majid said she’s seen many cases of international students, especially newcomers, who have been discriminated against by landlords. She’s heard of students with an accent or a non-Caucasian name being told by landlords over the phone that a unit is no longer available, only to have a white friend call the next day and find the unit is still, in fact, available for viewing. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Some settlement agencies for newcomers have resorted to employing white, male staff members to call landlords and realtors to schedule apartment viewings due to this bias, Majid said.”,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“When racialized clients make that phone call, especially if they have an accent from a country in the Global South, they may not even get to the viewing stage,” she said. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Nemoy Lewis, an assistant professor at Toronto Metropolitan University’s school of urban and regional planning, said according to his research, renters who are Black or South Asian face the most discrimination in the market. Often, racialized renters will successfully proceed through the application phase up until landlords ask for photo identification, which is when applicants from certain demographic backgrounds will be declined, he said. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“I’ve seen that myself, firsthand,” said Lewis, who is Black. “When I presented my documents, presented income, everything was great. But once I was requested for my ID, the deal just fell apart.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Lewis fears the discrimination in the rental market and lack of affordable student housing will impact Toronto’s reputation as a centre for higher education, particularly among groups of working-class foreign students who may not otherwise have the means to afford more expensive housing options in the city. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“We’ve been trying to encourage and attract more international students to the country and yet we don’t have a whole lot of affordable housing options to support them,” he said. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”After her experience looking for housing and seeing the lack of affordable rental units in the city, Maheshkumar said there are days she regrets moving to Canada. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”“I can’t tell you how much I wanted to go back,” said Maheshkumar, who now lives in a basement unit in Scarborough and commutes 90 minutes each way to Humber College. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Lewis believes the onus is on both governments and post-secondary institutions to build more dedicated student housing. But ultimately, there needs to be more protections and enforced laws that prevent illegal behaviour from landlords and realtors, he said. “,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“type”:”textBreakPoint”,”insertAt”:”contentEndBreakPoint”},{“text”:”“We need to revisit some of the rules and oversights that govern the rental process to ensure there’s greater transparency, and that we’re discouraging these discriminatory practices and penalizing those who engage in it.””,”type”:”text”,”isParagraph”:true,”isHeading”:false},{“text”:”Joshua Chong is a Toronto-based staff reporter for the Star. Reach Joshua via email: jchong@torstar.ca“,”author”:{“author”:”Joshua 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‘They’re basically being extorted.’ Scams and illegal demands by agents and landlords are harming Toronto’s post-secondary institutions and the city’s reputation, critics say.
When Thancharin Wutt landed at Pearson International Airport on Aug. 19, two weeks before the start of college classes, she was, essentially, homeless.
It wasn’t for a lack of trying.
The 20-year-old from Thailand started house-hunting soon after she received her acceptance letter from Toronto’s George Brown College in May. She found seven one-bedroom units available to rent near her campus, just north of the Annex.
Securing one of those units would prove problematic.
Landlords and real estate agents told Wutt that because she was an international student she was considered a high-risk tenant as she didn’t have a guarantor in the country to pay her rent if she fell behind. It didn’t matter that Wutt could produce documents proving she had more than $50,000 in her bank account. Those documents were from Thailand, and the realtors told Wutt they couldn’t recognize them, Wutt said.
Entering Toronto’s red hot rental market, Wutt was competing on an uneven playing field with domestic students and working professionals who had credit and employment histories in Canada, lowering her chance of securing a unit.
One by one, each of seven realtors she contacted told Wutt that to allay landlords’ concerns — and even be considered as a potential tenant — she would need to pay an upfront deposit equivalent to six months’ rent.
This practice is illegal in Ontario. Under the province’s Residential Tenancies Act, the rent deposit a landlord may collect must not be more than one month’s rent or the rent for one rental period, whichever is less. The money must be applied to the last period of the tenancy.
But as Toronto’s rental housing sector continues to tighten, more landlords are employing the illegal tactic, often engaging in discriminatory practices and exploiting international students, who are unfamiliar with Ontario’s rental laws and for whom English is not their first language, housing experts and advocates say.
Meanwhile, the same experts warn that these rental deposit demands, largely targeting foreign nationals and quietly enabled by realtors, are harming both Toronto’s numerous post-secondary institutions and its reputation as a welcoming place for international students pursuing higher education.
“It’s very common,” Laurent Levesque, executive director of Unité de travail pour l’implantation de lodgement étudiant (UTILE), a Québec affordable student housing non-profit organization.
“International students, not only do they not know their rights or the law that protects tenants, but they also don’t have much leverage or ability to negotiate,” he said. “So they’re basically being extorted in some cases by landlords.”
Tim Hudak, CEO of the Ontario Real Estate Association, said its important for all parties — renters, landlords and realtors — to know their rights and responsibilities.
“Where the Residential Tenancies Act, 2006 applies, a landlord is breaking the rules by requiring more than one month’s worth of rent and prospective tenants should file a complaint with the Landlord and Tenant Board,” he said in a statement to the Star. “Even in instances where a prospective tenant is offering more than one month’s rent upfront, a landlord is legally not permitted to accept the offer as per the rules of RTA.”
Joseph Richer, registrar at the Real Estate Council of Ontario, which oversees and enforces all rules governing real estate professionals in the province, said realtors and salespeople must comply with all sections of the Real Estate and Business Brokers Act, including both the Residential Tenancies Act and the Commercial Tenancies Act.
“There is a shared responsibility between the landlord and the registrant. The only rent a property owner can request is the first and last month’s rent and a refundable key deposit,” said Richer in a statement to the Star. “Anyone with evidence that a RECO registrant is violating these rules should file a complaint with RECO.”
RECO said it receives, on average, fewer than 10 complaints of that nature each year, though it has increased slightly over the past two years.
Dania Majid, a staff lawyer with the Advocacy Centre for Tenants Ontario (ACTO), said, anecdotally, the practice of landlords requiring multiple rent payments upfront has gained traction this year, as the rental market heated up, leading to fewer vacancies.
In the second quarter of 2022, vacancies in purpose-built rentals hit 1.4 per cent, down from 5.1 per cent in the same period last year, according to an analysis from market research firm Urbanation.
“Vacancies are at a very low level, which means tenants are desperate and landlords have their pick of tenant,” she said. “There’s a huge power imbalance for tenants and they’re generally in a position where they’re forced to take it or leave it, because if they don’t comply with the demand, even if it is illegal, they might not get the unit.”
Hemashri Ramachandra Maheshkumar, a graduate student from India, said she was almost scammed by a landlord, whom she believes was targeting foreign students on Facebook.
Maheshkumar, like Wutt, arrived in Toronto earlier this summer without any permanent housing. While staying at an Airbnb, she joined several Facebook groups for off-campus student housing. When she reached out to a landlord of an available unit, the owner asked Maheshkumar to pay a $400 security deposit upfront — just to view the apartment.
“You can view it anytime once you fill the form and secured it by paying the refundable security deposit for you to have your receipt with the electronic code to access the mailbox,” wrote the landlord in a message to Maheshkumar. The owner said the security deposit was needed because they did not live in the area and could not accompany potential tenants to the apartment for tours. The landlord has since deleted the Facebook profile and is unreachable for comment.
Certain that her $400 would not be returned, Maheshkumar didn’t fall for the potential scam. “A couple of my friends who moved to the U.S. told me to be very, very aware of these people,” she said.
However, she feels other international students, desperate for housing and perhaps unaware of local rental laws, could easily fall for the trap.
For Wutt, some of the rental deposit requests for a single-room apartment amounted to $12,000.
“Would you be able to give (a) deposit of three month(s) now and three month once (you) land here?” reads a text from a realtor Wutt shared with the Star. “I talk(ed) to other realtor but he said he can (only) look into it if you can do it. Please let me know asap,” the text continued.
“Just to be clear, most landlords would want first and last months rent and then the extra four months,” reads another text exchange from another realtor.
Unwilling to agree to the rental deposit requests, Wutt turned down each unit. When she stepped onto her flight to Canada, Wutt didn’t have a place to call home. She ended up crashing at a friend’s house in North York, while desperately continuing her search for housing before the school year began.
“It was so hard for me to get a room, I was really stressed out and I didn’t have anywhere to stay,” she said. “It feels like no one cares about us (international students). So, unless we can pay that six months’ rent upfront, we can’t get a room,” she said.
It was only when Wutt found a roommate — a Canadian student with a parent in the country who could act as a guarantor — that she was able to find a unit that didn’t require an exorbitant rental deposit.
“The only reason I got this room is because my roommate is Canadian,” said Wutt.
Majid, the tenant rights lawyer with ACTO, believes Wutt’s experience is a “textbook” case of discrimination.
Under the Ontario Human Rights Commission’s policy on human rights and rental housing, prospective tenants cannot be refused an apartment based on factors such as their race, citizenship, place of origin or age. Although a landlord may ask for a tenant’s rental history, credit references and credit checks, “a lack of rental or credit history should not be viewed negatively,” the commission states on its website.
Majid said she’s seen many cases of international students, especially newcomers, who have been discriminated against by landlords. She’s heard of students with an accent or a non-Caucasian name being told by landlords over the phone that a unit is no longer available, only to have a white friend call the next day and find the unit is still, in fact, available for viewing.
Some settlement agencies for newcomers have resorted to employing white, male staff members to call landlords and realtors to schedule apartment viewings due to this bias, Majid said.
“When racialized clients make that phone call, especially if they have an accent from a country in the Global South, they may not even get to the viewing stage,” she said.
Nemoy Lewis, an assistant professor at Toronto Metropolitan University’s school of urban and regional planning, said according to his research, renters who are Black or South Asian face the most discrimination in the market. Often, racialized renters will successfully proceed through the application phase up until landlords ask for photo identification, which is when applicants from certain demographic backgrounds will be declined, he said.
“I’ve seen that myself, firsthand,” said Lewis, who is Black. “When I presented my documents, presented income, everything was great. But once I was requested for my ID, the deal just fell apart.”
Lewis fears the discrimination in the rental market and lack of affordable student housing will impact Toronto’s reputation as a centre for higher education, particularly among groups of working-class foreign students who may not otherwise have the means to afford more expensive housing options in the city.
“We’ve been trying to encourage and attract more international students to the country and yet we don’t have a whole lot of affordable housing options to support them,” he said.
After her experience looking for housing and seeing the lack of affordable rental units in the city, Maheshkumar said there are days she regrets moving to Canada.
“I can’t tell you how much I wanted to go back,” said Maheshkumar, who now lives in a basement unit in Scarborough and commutes 90 minutes each way to Humber College.
Lewis believes the onus is on both governments and post-secondary institutions to build more dedicated student housing. But ultimately, there needs to be more protections and enforced laws that prevent illegal behaviour from landlords and realtors, he said.
“We need to revisit some of the rules and oversights that govern the rental process to ensure there’s greater transparency, and that we’re discouraging these discriminatory practices and penalizing those who engage in it.”
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Toronto real estate sales are plummeting and home prices are dropping as interest rates continue to climb, pushing buyers and sellers to wait on the sidelines.
But where are the investors?
The pandemic market of the last two years resulted in a feeding frenzy for investors drawn to lower borrowing costs, experts say. For those who decided to sell, they were able to make substantial profit as prices soared. In recent years, those who own multiple properties became the biggest slice of Toronto’s home-purchasing market, overtaking first-time homebuyers, according to Teranet.
But the market has changed drastically — and while some real estate experts believe it’s ripe for investors to scoop up more property, with less competition, rising rental demand and falling prices, others say rising interest rates are also keeping investors on the sidelines, waiting for prices to drop further.
There are two main types of investors: those who buy property to rent out, adding more rental supply to the market, and those who speculate — buying a property to flip it, sell it, and put it back on the market to make a profit, said Murtaza Haider, professor of data science and real estate management at Toronto Metropolitan University.
“One in three Canadians rent and with demand back up, this is the time for the rental supplier (investor),” Haider said. “But for speculators, because homes are on the market for longer it will take more time to sell a property and by the time the closing date arrives, they could be losing tens of thousands of dollars, so it’s not worth it.”
Phil Soper, CEO and president of Royal LePage, said rental demand is back as Canada aims to bring in a record 431,600 immigrants this year with many choosing to rent for the first three years of settling. And, many choose to live in the Golden Horseshoe, resulting in greater demand especially in the condominium market, which has been increasing in value after seeing a drop as people sought larger spaces during the pandemic.
Rents are climbing in the Toronto area at their fastest rate in more than a decade with an increase of 16.7 per cent now compared to the same time last year, showing that “there’s a lot of demand for renting condos that wasn’t there before, and it’s pent-up demand,” Soper said.
Another fallout from the pandemic is hybrid work; as more people go back to the office part-time living far from the city isn’t practical, bolstering demand in urban centres, he said.
In June, year-over-year home sales plunged by 41 per cent and the average sale price for all houses and condos decreased to $1.15 million from the February peak of $1.33 million. With fewer transactions it’s one of the best times in years for investors to negotiate, said Christopher Alexander, president and CEO of Re/Max Canada.
“The reality is investors love when they can secure a property at a discounted price and for so long it wasn’t an option,” he said.
Even with the changing market, it’s still worth buying property to rent, if it’s a long-term investment, said Alexander. “Most investors hold (onto the property) for a long time,” he added.
But not all real estate experts agree, with some seeing investor activity substantially lessen as interest rate hikes continue — especially after the Bank of Canada’s one per cent increase on July 13, the biggest hike since 1998.
“When that hike happened it startled people,” said Ron Butler, one of the founders of Butler Mortgages. “It’s a desert out there, everyone is on the sidelines.”
In October 2021, the interest on a five-year fixed mortgage was 1.79 per cent and now it’s 5.09 per cent. In December 2021, interest on a variable rate mortgage was sitting at 1.45 per cent, now it’s 3.45 per cent, he said.
“It’s a big difference and it’s happened very quickly. During the pandemic with incredibly low interest rates people could pay their monthly payments, but now they can’t,” Butler said.
For investors who want to buy two or more homes, they often use a home equity line of credit, or HELOC — a line of credit secured by the person’s home that provides a revolving line of credit to use for large expenses.
Many homeowners have used HELOCs to make investments on a second property — allowing a homeowner to take out a second mortgage. But often times it uses a variable rate mortgage, not fixed, meaning it’s vulnerable to rising rates.
If the Bank of Canada raises the rate by another 0.5 per cent in September the interest rate on a HELOC could reach 5.95 per cent.
“All the formulas to finance another property become more difficult,” Butler said.
Those who are buying right now are typically homebuyers who can afford higher mortgage payments as well as those who have no choice but to buy now as part of a long-term investment, and can’t wait further, Haider said.
John Pasalis, president of real estate brokerage Realosophy, also doesn’t see active interest from investors. Because mortgage payments are up 50 per cent compared to a year ago, even if rents are raised it won’t help cover the higher mortgage payments needed.
“Rents are unable to cover carrying costs, which have escalated significantly. Now borrowing costs are much higher, which is the biggest barrier for investors right now,” he said. In addition, investors are also waiting for property prices to drop further.
Once interest rates have peaked, and the Bank of Canada lowers rates because inflation is under control, investors will be ready to jump into the market again but the numbers will still be less than the pandemic as rates were exceptionally low, Pasalis added.
However, with strong rental demand and rising rents, Royal LePage’s Soper said it’s less risky for investors to act now, especially in the condo market.
“Prices right now are off their peak and look good, even if mortgage rates rise, the demand in the condo sector is exceeding supply and we’re seeing investors active in this space,” he said.
And, in Canada during times of economic uncertainty equity markets become more volatile than the housing market, making the latter a safer investment, said Toronto Metropolitan University’s Haider.
“Housing doesn’t disappear, it offers a flow of services,” he said. “Demand is always there for rentals. You’ll get a guaranteed rental income and build equity on the property.”
The premier may be selling his house, but he will still be going home.
With his own Etobicoke house expected to go on the market later this month, Doug Ford said he and wife Karla plan to move into the Ford family homestead, which has been the scene of fundraisers and the annual “Ford Fest,” and has sat empty since his mother died in January 2020.
“It was a family matter,” he said during a wide-ranging interview with the Star in Victoria, B.C., where Ford attended the two-day summer meeting of the country’s 13 premiers.
“My mother had told the other siblings, ‘Doug has the biggest family,’ and I’m not getting it for free by any means. It’s like any family situation.”
As for leaving his current house, Ford said he “thought that it was time, as my kids are getting older and they’re going to be getting married off and having grandchildren.”
The house where his late parents, Diane and Doug Ford Sr., lived “has been a great home,” he added. “Over 25 to 30 years, we’ve had over 250,000 people through our backyard. My parents were very generous, no matter if it was cancer fundraisers or Rotary fundraisers or political events or kids’ graduations.
“It was a home that my parents opened their doors for everyone to come in and enjoy it. And they were very generous, and we’ll continue on that tradition.”
The premier said while the numerous pandemic-related protests outside of his current home weren’t a factor in the decision to sell, they were a concern.
For two years during the pandemic, noisy and aggressive protesters targeted his residence, as well as the York Region abode of Education Minister Stephen Lecce and the Annex home where former health minister and deputy premier Christine Elliott lived with her adult son, who has a disability.
Last summer, a man was charged with possession of a weapon and 11 counts of mischief outside of Ford’s home after car tires in the area were slashed by a man who also yelled threats towards the premier’s front door.
“Thank goodness my wife wasn’t there,” Ford said. “But I’m grateful for the Toronto police and for the OPP. They do an incredible job. I’m just very, very grateful.”
He said Karla, as well as their adult daughters, were unsettled by the protesters and were left feeling “very, very nervous” — as were their neighbours.
“I always say, my family didn’t sign up for this,” Ford said. “But more importantly, our neighbours never signed up for this, and my heart broke for my neighbours. They were threatened with everything from baseball bats to hockey sticks to mace to switch blades to you name it.
“And no matter if you’re a medical officer of health that was being threatened, the mayor of Toronto, a minister or any premier, that’s unacceptable. We don’t operate that way — and in Canada, we shouldn’t.
“I’m a strong believer in protest. If you want to go out and protest, be it Queen’s Park or city hall, by all means. But don’t interrupt a community or a street that has numerous young kids on it. And that was unfortunate some people decided to do it.”
Ford’s home, which has not yet been listed, will be officially up for sale later this month. The asking price is not yet available, but its assessed value for property tax purposes is $1.84 million.
Property records show the couple bought the house — which sits on a lot measuring 63.85 feet by 120.47 feet — on July 30, 1998 for $535,000.
Last month, Ford’s office asked Etobicoke realtor Monica Thapar to stop using his name and image in her advertising brochures.
As first disclosed by the Star, Thapar distributed thousands of full-colour flyers around Toronto boasting that “we just listed Premier Doug Ford’s home in Princess Anne Manor!”
Along with a picture of the house, there was a snapshot of the premier and Karla apparently signing some documents in their dining room under a headline, “Moving Ontario!”
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Projections vary wildly when it comes to expert forecasts on how house prices in Canada will perform this year and next.
The Canada Mortgage and Housing Corporation predicts average house prices nationally will only drop between 3 per cent to 5 per cent, this year and the middle of next.
But other experts, including those with the TD Bank say there will be a steep decline by early next year — as much as 19 per cent.
Meanwhile, Royal LePage’s April forecast called for the aggregate price for homes in Canada to jump 15 per cent in the fourth quarter of this year compared to the same time last year — but that has since been revised down to a 5 per cent increase.
And in mid-June, the Canadian Real Estate Association called for national average home prices to jump 11 per cent to $762,386 this year — though in a statement yesterday, a spokesperson said interest rates have increased since that forecast, and a September revision by the association will “likely be downward.”
A lot of variety for house buyers and sellers to mull over before making a big decision.
CMHC, Canada’s national housing agency, released a report this week by their chief economist Bob Dugan with modelling showing that a “moderate” interest rate scenario — a policy rate increase by the Bank of Canada to 2.5 per cent early next year, (up from the 1.5 per cent rate, before Wednesday’s expected announcement from the Bank) — would result in a 3 per decline in house prices by mid-2023.
Dugan also said in a high interest rate environment — a Bank of Canada interest rate hike to 3.5 per cent — the national average house price would remain “elevated” but would decline by 5 per cent by mid next year.
Dugan adds that the high rates of house price increases seen in the last two years across Canada have been “unsustainable.”
The cost of housing has “reached levels that are unaffordable for a large share of new home buyers, translating into a slowdown in 2022,” Dugan stated.
But that said, Dugan argues that a key factor — a severe shortage of housing supply — will keep the demand for houses and house prices high, thus the 3 per cent to 5 per cent decrease he is predicting.
“The supply shortage will limit how much we believe house prices will fall.
“We think demand will remain fairly strong … and limit how much house prices correct,” he later added.
“We’re not building houses fast enough to keep up with the demand,” Dugan said, noting that Canada has aggressive immigration targets, and while a lot of those individuals will turn to rental accommodation, many will opt to buy a house.
On the upside, Dugan said the market correction is leading to a cooling off of “investment behaviour.” Speculators are backing out of the housing market and thus making room for end users — people who are actually living in the houses they purchase, he says.
Royal LePage is predicting that the “aggregate’’ price of a home nationally will go up by 5 per cent to about $818,000 by the fourth quarter of this year compared to last.
But that’s a significant revision down from the 15 per cent increase predicted in mid-April.
“The forecast has been revised downward from the previous quarter following more aggressive than expected interest rate hikes by the Bank of Canada, resulting in an expected temporary drop in demand in parts of southern Ontario and British Columbia,” Royal LePage said in a statement Wednesday.
Karen Yolevski, chief operating officer for Royal LePage Real Estate Services, said there has been “tremendous growth” in house prices in the first quarter of this year and what we’re seeing now is a “moderation” from that.
“Prices just kept accelerating month after month. So, we’re just coming off of a peak, as opposed to — people like to throw around the word ‘crash’ and things like that. That’s not what we’re seeing.
“We’re seeing price deacceleration off of the peak of Q1, (this year) which was an unheard amount of growth,” Yolevski says.
She said house sales are down in the major markets like the GTA, because people are waiting to see how interest rates affect prices and affordability, but there a lot of buyers wanting to get in and many who already own and want to move up.
“Demand is not going to wane,’’ she said.
John Pasalis, president of Toronto real estate brokerage Realosophy Realty, says a 10 to 20 per cent drop nationally in house prices is “probably more realistic than CMHC’s prediction.
TD Bank is standing by its forecast of a 19 per cent “peak-to-trough” decline in house prices from the first quarter of this year to the same time in 2023, with modest growth after that.
But Rishi Sondhi, an economist with the bank, notes that house prices went up a little bit less than 50 per cent during the COVID-19 pandemic.
“We’re only retracing a portion of that gain. We’re framing the (forecast 19 per cent decrease in prices) as a recalibration of the market,” Sondhi says.
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Sleepless nights, emotional strain and difficult conversations are just some of the ramifications Ahmad Ghulami and May Serageldin have felt after enduring 20 bidding wars over three years in the GTA’s real estate market.
And, despite the recent cool-down, the North York couple says things haven’t gotten any easier, as decreasing prices in certain areas collides with some seller’s still-high expectations, leading to a market that’s hard to predict.
“There might not be as many bidders as there were before, but the sellers are greedy, wanting to ride the wave of the hot market,” said Serageldin.
Ghulami and Serageldin are among many prospective buyers facing a confusing and hard-to-predict housing market.
After a long period of rocketing prices and bidding wars, the market is finally levelling off. But while it’s cooling in some areas, others are still seeing prices rise, leaving homebuyers wondering — how am I supposed to bid?
That depends on where you’re looking and who the seller is, industry experts say, noting buyers and their agents need to do their homework to navigate this tricky market.
The average home price in Toronto has dropped by three per cent over the last three months — down to $1.21 million from $1.33 million in February’s peak — and sales have fallen drastically. But bidding wars still exist in pockets of the GTA and home prices are up by 9.4 per cent compared to this time last year.
Meanwhile, some sellers are pricing their properties to the February peak hoping to cash in high while others have aligned themselves with the reality of the market, said Rebecca Kopel, a Toronto-based real estate agent.
“This doesn’t help buyers as they don’t understand what the actual value of the property is,” she said.
Even if a bidding war doesn’t happen some sellers are refusing to sell until prices creep back up, Kopel said. “Sometimes you’ll see multiple offers on a home and it still won’t sell.”
Buyers are also nervous in the current climate about overpaying, she added.
“Buyers are often scared of overpaying, which has always been an issue but now it’s heightened as prices drop,” Kopel said. “And if prices continue to drop will the home get appraised properly come closing time?”
Kopel advises looking for homes that accept bids at anytime, meaning the seller is willing to accept an offer around the listing price. But if the home is accepting offers one night only then it’s typically underpriced to attract a bidding war.
Evan Patrick, who began looking to buy a home in the city’s east end and St. Clair West areas two months ago, says the markets in those area seems to be “same old, same old.”
He has been through four bidding wars, noting while some properties are accepting bids at any time many still have offer dates.
“The process has been awful because there’s no transparency, you just have no idea how much you’ve won or lost by,” he said.
That’s where Kopel says doing research is key.
She said it’s important for the real estate agent and buyer to look into the micromarket and evaluate comparables — “What are other homes in the area being sold for? How long were they on the market for? When did they sell? Look at the statistics in the neighbourhood to make sure you’re not overpaying.”
Real estate agents should be in touch with listing agents to better understand that property and the seller’s expectations, Kopel added.
Karen Yolevski, Royal LePage’s chief operating officer, corporate brokerages, said the demographic driving bidding wars are those who waited on the sidelines for the housing market to cool and have now jumped in hoping to find good deals or cheaper properties.
But that’s dependent on neighbourhood, as properties in less desirable locations are struggling to find buyers.
“There’s a real patchwork in terms of prices as some areas have appreciated, levelled off, or depreciated, dictating which areas are still seeing bidding wars and which aren’t,” Yolevski said.
In the 905 region, prices ran up rapidly during the pandemic as more people moved out of the city. In the pandemic recovery, the demand to live further out of the city has decreased causing prices to drop there more than in Toronto’s core.
“Mississauga, Oshawa, Oakville, Burlington, Milton, those places are seeing less demand and price drops, so bidding wars are definitely decreasing,” said Jordan Rasberry, co-founder of broker of Core Assets Real Estate. “But it’s a mix in Toronto. The other day a home in Riverdale had 11 offers.”
Depending on the seller, buyers do have better options when making a bid, he said. Some sellers are desperate to sell their property, especially if they bought a new home a few months ago, or if their home has been on the market for too long.
“They might drop their prices lower, have lower deposits, or allow more conditions,” he said.
In a hot market, when there can be 20 offers on a home, prospective buyers are more likely to go with a pre-emptive offer, meaning there are no, or very few, conditions attached. Now, people can have more conditions such as financing or a home inspection, and that’s alluring for some buyers.
Antonia (Smudgie) Swann said the market conditions right now are in her favour. She’s looking to buy an investment bachelor apartment to rent out. A big bank preapproved her mortgage and she’s saved up enough for a down payment.
“The fact that there are fewer bidding wars is definitely to my advantage. I don’t want much competition and want to get the best price,” Swann said. Her maximum budget is $550,000 in the downtown core.
Her only concern is interest rate increases. But she’s “cautiously optimistic” about her chances and isn’t deterred by the uncertain market.
For Ghulami and Serageldin, who moved to Toronto from Montreal five years ago, they’re not as hopeful about owning a home in the GTA, despite having raised their budget to $1 million from $500,000 over the three years they’ve been looking.
“Compared to a year ago we’re seeing houses that were on the market at $800,000 now in the market for over $1 million,” said Ghulami. “And as interest rates go up our purchasing power is not the same as it was a year ago.”
Now, moving out of province is on the table.
“We’ve heard of people moving to Alberta because it’s more affordable there,” Serageldin said. “It’s the Canadian dream to buy a house but if you work hard and save up it’s not enough.”
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