Oliver Foote

Can You Time The Market(s)?

Update Dec 14, 2024: Added Newsletter Email Archive at End of Post.

This is an interesting question. In the current day as of November 2024 the Toronto Real Estate Market looks like it’s in of the best times to buy in decades. It’s been a buyers market for a few months and with rates coming down I don’t expect this to last much longer with signs pointing towards Spring 2025 being a sellers market again. But this begs the question, are you able to time the market? Many people say you shouldn’t bother trying, and honestly I mostly agree with that sentiment, especially with something like real estate that is an illiquid asset. If you plan a purchase or sale of real estate down to the day or week, your plan will likely fall apart pretty quickly. Real estate is unlike the stock market; where you can sell and find a buyer same day. You need to build in some timeline flexibility and think about an investment in real estate on the scale of decades and not just months or years.

However, even though we should be using long time horizons when thinking about any type of investing, is there a way to time the market? Now you know that since I’m writing a post about timing the market, my goal is likely to tell you that there is a way to do so. But that it’s not the only thing you should be considering when investing. Most people move and purchase new homes simply because their lives are changing in some significant way, maybe a child is on the way, a divorce is happening, aging (comes for everyone), or some other big shift has caused a homeowner to have to change their living situation. If this is you, and life is forcing you to make a change, there’s really not a lot to be gained from trying to time the market in search of a profit. But there is something to be lost with bad timing. I would suggest trying to time your move in such a way where you are buying and selling into similar market economics.

Essentially, try to time your move when things are relatively stable and there aren’t likely to be huge rate cuts or rate increases like we are seeing now. Many people sold in April 2020 after being laid off, simply to find that if they had decided to hold on just a few more months they may have been able to get much more money for their home. Of course sometimes a crisis is a crisis and there’s not much you can do. But selling during high volatility and then hoping to repurchase in a few months could lead to some nasty surprises. A real estate market can change very quickly. For example April 2020 was a buyers market and prices were plummeting while April 2021 was a sellers market and prices were going to the moon, just 1 year apart. People often forget that a house, while often their biggest asset, is also a place to live which can lead to different priorities than investors. The story if you’re a real estate investor can be quite different.

Investing in real estate for the purposes of turning a profit (as with any business venture) relies a bit more on timing than my discussion about a primary residence. For example, this past year was an absolute generational time to invest in real estate, so much inventory to choose from, many sellers willing to negotiate, if you throw in enough lowball offers some sellers were actually willing to bite, not a chance of doing that even a year ago. With rates coming down people will begin returning to the market relatively quickly, but there will still be a short period of time maybe a couple months with lots of supply available while people who have been waiting on the sidelines begin to realize that their buying power has improved significantly.

From a strategy point of view, I’ve been telling people to take open or variable rate mortgages for the past year or so because with inflation coming down steadily and the Bank of Canada making it clear that they will be cutting interest rates, taking a variable or open mortgage can allow an investor to get into a house, albeit maybe a bit heavy on the monthly payments when your first buy. But as rates come down you can lock in a much lower fixed rate, or even break your variable mortgage and pay the penalty when you think the time is right in order to get a significant discount on your monthly payment. It’s a bit of short-term pain that could pay off hugely.

I’m certain that there are investors out there who have been doing this exact strategy, and you’ll hear a lot about them in a year or two once they’ve locked in a lower rate and had their home equity increase like crazy with the return of the sellers market I’m expecting in 2025. This type of principle of buying when rates are high but anticipated to come down is not anything crazy fancy or sophisticated, you just need to have a plan of action, confidence that your projections will be correct (it helps if you read up on these things and know a bit about how markets and economies work) and have the means and people available to you in order to execute this kind of plan.

The layers of complication of real estate investing can go very deep and I’ve written some posts on the topic before, but I think that a lot of people overcomplicate things for themselves and get in their own way maybe due to uncertainty, or lack of education, or an information overload. Talk to investors, learn from them, and try doing it yourself. Learn, ask questions, do it yourself. Repeat. As with anything in life it is important to take calculated risks if you want to earn some kind of reward. If you think about it, spending 4 years (or more) of your life at a university is also a calculated risk, it costs lots of money and lots of time where you could have been working instead. But the thinking is that once you exit your university degree you will be more employable and be able to get a higher paying job than if you had the equivalent 4 year experience learning a trade or some other skill.

Real estate works the same way, the risk will likely have some kind of future pay off in 5+ years when you go to sell. Generally Canadian real estate purchased in good, growing areas has been worth the risk. In investing time is your best friend. The longer your time horizon, generally, the higher the likelihood that your investment will work out. Same goes for education, following the same example as before. In todays era everyone has a Bachelors Degree. So often you can’t do much with it and you’ll have to dedicate a further 2 years and more money in order to get your masters, at which point you may learn enough practical skills to be employable. Some people may even choose to do a PhD. So really the time commitment is quite a bit longer than it originally seemed, but the longer you commit to the concept of schooling, or holding your investment, the bigger the payoff tends to be. Real estate investing nowadays works in a similar way, the “arbitrage” opportunities of the market are much harder to find these days with the flow of information out there, and getting a positively cash flowing asset from the day you buy real estate just doesn’t happen anymore, so you have to build that into your plan and find a way to make the asset work for you. Not sure how I managed to draw a comparison between education and being a real estate investor, but I guess apples and oranges can in-fact be compared.

A general rule of thumb when you are buying an investment is buying with a 5+ year time horizon. If you’re buying something because you think that some event in the next week will make your penny stock take off and go to the moon, you’ve been sadly misled and will likely have to learn some lessons the hard way (like I did). Real estate works similarly; there have been times in the Toronto real estate market if you bought and then sold 2 or 3 years later you would have lost money. But if you take almost any 10-year time period in the history of the Toronto real estate market. Even if you bought at what was thought to be the absolute highest peak in history and you feel like an absolute idiot for doing so, 10 years later, without fail, you will have made a positive return on investment (the US stock market tells a similar story).

The elephant in the room is inflation, so even if you “made money” it’s possible that on inflation adjusted terms you still lost money, but even that scenario is EXTREMELY unlikely in a 10-year time horizon. BUY AND HOLD. The most important 3 words in investing. Do whatever you possibly can to avoid selling an asset that is expected to make you money. Especially if you’re trading it for something (like a car) that will cost you money. Obviously there are times where selling an investment is a good idea. Such as if you find another, better investing opportunity.

As mentioned a bit earlier, this post isn’t going to have any earth shattering, super secret, never heard before method of investing. This post is more about the philosophy that I believe in when it comes to investing. One of the most important principles that people often forget about when investing and budgeting is “pay yourself first”. The first line in your budget MUST be savings. If you are not saving a penny from your work, no matter how prestigious or not the work is, one day you’ll get old and maybe want to, at the very least, work a bit less. The only way that I’m aware of maintaining a lifestyle without working is by very diligently saving and investing, you must be selfish for the good of your future self. I am genuinely scared for people who spend everything they make, especially when it’s just “stuff”. Who cares about the car you drive, or what brands of clothes you wear. If you’re spending all your money to keep up an image you can’t afford, you may have slightly nicer things for a while, but you’ll end up in the same place as the next guy, broke.

I think sometimes my views on this savings thing are a bit extreme and there is something to an abundance mindset and viewing money as something fluid and obtainable. But there’s also truth to a dollar saved is a dollar earned and being prudent while you have the ability to work and save money, to ensure that saving is something you’re prioritizing, the time when you’ll probably be spending the most money is when you’re old, getting old is expensive. That being said, you don’t have to completely deprive yourself of fun and joy, just find ways to do it cheaply, honestly camping, hiking, and backpacking have been some of the best experiences of my life. This summer I finally took a bit of money and went on a vacation, which I’ll remember forever, it was absolutely incredible. But I still did it without breaking the bank. Hostels, discount airlines, grocery stores, no buying souvenirs that end up desolate in a box somewhere a year later. Took lots of pictures on the phone I already own (free!), went to free attractions, used and abused student discounts. You can have amazing experiences, without breaking the bank and still save aggressively. As another example, lets say you’re going out somewhere downtown, why not pick up some drinks from the liquor store beforehand, drink at home then go out so you don’t have to buy out the whole bar when you get there. Then wake up the next morning regretting your choices and come home with a $100 on top of it. Naturally, the best way to save money on alcohol is to not drink alcohol, but I’m not here to ruin your fun.

My last bit of investing advice is the classic, buy when other people are selling and sell when times are good, that is the wisdom of the markets. When times are good it’s easy to think they’ll last forever, if you plan to hold on for decades the best advice is to not touch your investments at all. If you are slightly more active and want to be smart about when to allocate funds it’s not a bad idea to increase cash (sell) as markets are going up so you can take advantage of those opportunities in a down market. Another method to have gain access to more opportunities is to simply keep your expenses very low, and find a way to make a (comparatively) high income so that you have good “cash flow”. I’m not a fan of ever selling investments, so if you’re able to keep buying in any market, you’ll generally be a net winner. However, as I’m learning, anything that results in a good income also comes with a lot of stress and hard work. Being successful is not easy, don’t let the internet and stories of people hitting it big make you think it’s easy. There’s always a component of luck, but there’s also a much bigger component of being opportunistic and taking full advantage of an opportunity when maybe an average person would let it slip. 95% execution 5% luck, getting that much luck is a great ratio. Anyway, that’s all I have time for this week hope you found this insight into how I think interesting or useful. As always thank you for reading and remember.

Keep Investing,

-Oliver

Newsletter #25: Real Estate Returns, Should You Time Markets?

This Weeks Blog Post:

Can You Time the Markets?:

Should you bother timing the market? The answer is: it depends.
My philosophy on saving money and investing and why you should always be saving.
Talk about market wisdom and how time is your best friend in investing.

Read the full article here: https://oliverfoote.ca/can-you-time-the-markets/

Real Estate Market Talk:

Greater Toronto Area home sales have picked-up this past October with a strong year-over year increase. There were 6,658 home sales through TRREB’s System in October 2024, up by 44.4% per cent compared to 4,611 sales reported in October 2023. The pace of which homes are selling also increased with inventory levels of available homes for sale of all types dropping to 3.5 months from just over 5. This is a significant drop as the market is now trending back towards a sellers market.

Even with the pace at which homes are selling, prices remained relatively flat, up only 1.1% compared to October of last year to $1,135,215 and up slightly compared to this past September. The numbers tell us that it appears more buyers have moved off the sidelines and back into the marketplace in October. The positive affordability brought about by lower borrowing costs and relatively flat home prices, prompted an improvement in market activity.

Chief Market Analyst for the Toronto Regional Real Estate Board, Jason Mercer, reported that market conditions did tighten in October but there is still a lot of inventory, over 24,400 of available homes of all types, and therefore providing choice for home buyers. This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed, selling price growth will accelerate, most likely as we move through the spring of 2025.

The condominium market also saw a rebound in October with sales up 33% across the GTA compared to October 2023. Prices, however, still softened slightly, down 2% respectively. With the completion of a large number of new construction units over the next couple of years, prices are expected to stay relatively flat for the time being.

Please never hesitate to reach out to me with any of your real estate related questions, I am here to help. Enjoy the fall season and I look forward to connecting with you soon.

Stock Market Performance as of Friday November 8, 2024:

S&P 500: 5,995.54 (+26.41% YTD)
NASDAQ: 19,286.78 (+30.62% YTD)
S&P/TSX Composite: 24,759.40 (+18.62% YTD)

Macroeconomics Statistics:

Canada’s CPI Inflation Sep 2024: 1.6% (0.4% Decrease from August 2024)
Current BoC Benchmark Interest Rate: 3.75% (0.5% Decrease on Oct 23, 2024)
Unemployment Rate August 2024: 6.6% (0.2% Increase from July 2024)

Greater Toronto Area (GTA) Real Estate Stats – October 2024:

YTD Average Selling Price: $1,121,871
YTD % Change in Average Selling Price: -1.0%
Y-o-Y (comparing Octobers) % Change in Average Selling Price: +1.1%

YTD Number of MLS Sales: 58,435
YTD % Change in MLS Sales: +0.1%
Number of MLS Sales in October: 6,658

Y-o-Y (comparing Octobers) % Change in MLS Sales: +44.4%
Number of Active Listings in October: 24,481
Y-o-Y (comparing Octobers) % Change in Active Listings: +25.3%

Inventory Available: 3.5 Months (Decrease from 5.0 Months in Sept 2024)

Hope you have an amazing week! Chat soon!

Keep Investing,
Oliver Foote

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Canada’s New Capital Gains Tax ($77,000 per year increase)

Update Dec 14, 2024: Added Newsletter Email Archive at End of Post.

If you’ve purchased stocks or own some real estate then you’ve likely heard about what changes the federal government has proposed to the capital gains tax. I thought I would go through and talk about this and in a future post I may go over some of the other changes proposed. There was talk of millions of homes getting built which might be what we need to work through our housing problem. But will we have to manpower to accomplish these lofty targets? I’m not so certain.

Let’s begin with the big headline. The changes to capital gains tax. Under the proposed 2024 budget the capital gains inclusion rate, which is the percentage of the gain that is taxed, will stay at 50% for gains under $250,000. However, beyond $250,000, 2/3rds of the gain will be taxable at your marginal tax rate. This would most likely be taxed at the highest tax rate since the gain itself will almost produces enough income to put you in the highest tax bracket.

So lets take an example. You sell a real estate asset and it produces a gain of $500,000 under the current system where 50% of the gains are taxable, you would owe tax on $250,000. If you’re in Ontario the combined federal and provincial tax rate is 33+13.16 = 46.16%. So you would owe approximately 250,000*.4616 = $115,400 total on the gain.

Under the proposed change, your first $250,000 would produce $125,000 of taxable income. I’m going to assume this is still taxed at the highest tax bracket. This means you would owe $57,700. Then on the next $250,000 gain, you would have an inclusion rate of 2/3rds which is $166,666.67 of taxable income. This means you would owe $76,933.33 in taxes. The total tax amount is $76,933.33+$57,700 = $134,633.33.

So the change in taxes owed is approximately 134,633-115,400 = $19,233 increase. As you get into higher gains this number does increase quite a bit. Another way to look at this is as an “effective” tax rate. If you get taxed on 50% of the income at a 46.16% tax rate your effective rate on all this income is .5*.4616 = 23.08%. The effective rate of 2/3rd’s is 0.6667*0.4616 = 30.77%. So this is an increase of around 7.69% in taxes on any capital gains beyond $250,000.

If you are an investor, and you are buying and selling many stocks, real estate, or businesses and making millions of dollars a year doing so, you’re going to owe approximately an additional $76,900 in taxes per $1,000,000 in capital gains. That would be a total of around $307,700 per $1,000,000. Where under the current system it’s closer to $230,800 per $1,000,000 gain. The increase is the equivalent of a pretty decent salary for the average Canadian. Crucially, primary residences remain tax free, which is the majority of Canadian’s largest asset and many Canadians retirement plans.

Many people in the business community are arguing that this change could do a few things. It could disincentivize venture capital from investing in Canada, disincentivize general investment in new businesses, and cause investment money to leave Canada altogether and put us into a further state of stagnation. Our per capita economic output has actually declined over the past year due to our recent population influx combined with higher interest rates. Interest rates impact borrowing costs which is how a lot of business invest, less investment equals less economic growth; generally speaking. Additionally, if companies who are mobile choose to leave the country altogether, depending on the nature of their work, they may or may not be able to keep a Canadian workforce. Which could also negatively impact the Canadian jobs market.

Regardless of your stance on this I do believe that a change of this nature (some type of tax increase) was likely to be proposed at some point as more and more people feel they cannot get ahead for one reason or another and politicians hear about peoples problems and look for someone to come after. With the higher interest rates impacting food, gas, and other essentials. The cost of purchasing a home having outpaced wage growth by almost 4x. It is likely to put a target on the backs of people who have already found their success as governments search for a solution to these issues and try to find people to help pay for their programs and chosen investments.

So if this change does pass what will happen? I think this change most likely won’t cause any major exoduses out of capital markets. It’s unlikely that people with strong ties to their families and communities will end up jumping ship. After this change, capital gains are still going to be taxed at a lower rate than equivalent earned income theoretically still making it a good idea to invest. I also doubt that it will cause any investors to change their long-term plans and sell all their investments this year. Investment is a long-term game and takes detailed planning. So even with this change I don’t see it having an outsized impact on the markets.

I’m not a politician, not an economist either, so I can’t say whether or not this new tax will actually provide a meaningful contribution to the deficit or if maybe the better approach is to simply spend less. There could also be a variety of other solutions out there that don’t require a tax like this. No one enjoys paying higher taxes. Another point I think is worth mentioning is that the current government has lost some popularity among constituents. Therefore, if I was a prudent politician looking at my odds to win the next election, I would likely try to be a bit more aggressive on what could be one of the last budgets I get to table to see if I can push through some final big changes before I get the boot. We’ll see how this pans out, and I will be following the news on this change closely. While I do have further thoughts on this topic it is a bit of a challenging one to discuss so I’ll leave it there for now. Feel free to let me know your thoughts via email or leaving a comment below.

All the best,

Oliver

Newsletter #13: The Proposed Capital Gains Change, Other Real Estate News.

April is coming to a close! The big news the past few weeks has been the federal governments 2024 budget. The big discussion in the business and real estate communities has been the proposed increase to capital gains tax. I write about that in my blog post. As far as real estate goes there were some proposed increases in spending on building new housing. The government also wants to introduce accelerated Capital Cost Allowance acceleration (faster depreciation) for certain purpose built rental housing, which could incentivize more builders to take on those projects. The home buyers plan for using RRSP towards a down payment has increased from $35,000 per person to $60,000 per person.

This Weeks Blog Post:

How the Proposed 2024 Federal Budget Could Impact Investors:

Discussing what financial impact the tax increase will have
Will the change cause lower investment? Maybe some people to leave the country?
If this changes goes through it could send an interesting signal to people who are well off and prompt them to get ahead of further changes by moving elsewhere.

Read the full blog post here: https://oliverfoote.ca/2024/04/28/how-the-proposed-2024-federal-budget-could-impact-investors/

Market Performance as of close Friday April 26, 2024:

S&P 500: 5,099.96 (+7.53% YTD)
NASDAQ: 15,927.90 (+7.87% YTD)
S&P/TSX Composite: 21,969.24 (+5.26% YTD)

Canada CPI Inflation Mar 2024: 2.9% (0.1% Increase from Feb 2024)
Current BoC Benchmark Interest Rate: 5% NC (Next Meeting: June 5, 2024)
Unemployment Rate Mar 2024: 6.1% (0.3% Increase from Feb 2023)

See you in two weeks! Oliver

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How To Add Secondary Units (or ADUs) in Ontario

Update Dec 14, 2024: Added Newsletter Email Archive at End of Post.

The New Legislation:

Back in 2019 the Ontario Government introduced a law that allows up to 3 units on a single property without a zoning bylaw amendment. It was up to municipalities to individually change their zoning bylaws and now in 2024, the majority, if not all municipalities across Ontario have implemented some version of this bylaw. Some municipalities are allowing up to 4 units without requiring a zoning bylaw amendment. This may not seem like anything special to an outsider, but this is a very big change in the status quo. If you’ve ever tried to change a zoning bylaw or know someone who has some form of development you’ll understand what I’m talking about.

How Things Used to Work:

Let’s talk about how things would have worked prior to this new law in order to give you a better idea about how these changes make building housing easier. For those who are unaware of how land planning works in Ontario here’s a brief synopsis. The Ontario government administers something called the Planning Act which is the overarching legislation of what Ontario as a province wants to achieve with respect the land use, housing, transportation, environmental concerns etc. The Planning Act provides the basis for each individual municipal government to come up with something known as an Official Plan for their city. This document outlines on a more granular level how the municipal government plans to use all of the land in their municipality. They administer things like building permits and enforce zoning bylaws. A zoning bylaw is effectively a list of requirements for each land use zone. For example you might have agricultural zoning, single family residential zoning, industrial zoning, retail zoning, or mixed commercial and residential zoning. Each of these zones will have rules like maximum building height, minimum setback from the lot lines, maximum buildable areas, parking requirements, etc. Most municipal websites have all of this documented and easily accessible so if you’re curious or you plan to build or develop land, it’s always advisable to get familiar with your zone. You can also find past city council decisions on the municipal website or the Ontario Land Tribunal website to learn what council tends to decide when people want to apply for special exceptions similar to one you might be considering. You can also call up the city and ask a city planner there if your proposed change would fall within the zoning bylaw.

Generally speaking if the change you want to make to your property is within the zoning bylaws rules, even if it’s a teardown and rebuild, you will have no trouble applying for a building permit. However, if you are proposing a change that falls just outside of the zoning bylaws you‘ll have to apply for a minor variance (e.g. taller building height than generally allowed). Depending on how big the change is and how reasonable the city views the change with respect to the surrounding properties you may or may not have your minor variance accepted. This process alone, can sometimes take multiple months depending on how back logged the city is. Then we get into the big scary monster of trying to re-zone a property. All I have to say is best of luck to you if you plan to re-zone something. I hope you have lots of time and lots of money ready to go. Changing zoning bylaws is a system that, in my opinion, was not very well thought out and now leads to significant delays in housing development.

Before this new law allowing up to 3 units on a single lot. If you wanted to change your “single-family residential” property to 3 or more units, that would usually fall well outside the current zoning bylaw and you would have to apply for a re-zoning. When you apply for this re-zoning, you have to hire planners and architects to prepare a proposal for the city, then once the city has received your proposal they put up a big sign on the property explaining the proposed change. Then they mail out a letter to all surrounding properties explaining the proposed change, and set a date allowing people to voice their concerns. Overall, I’m in favour of allowing people who have pre-existing homes to voice their concerns, especially if the proposed change could or would have an impact on the property owners quality of life or impede on their existing properties somehow.

However, like anything, you will get people who will simply disagree for the sake of disagreeing and will not allow ANY change to happen no matter how small. This is where this process falls apart in my opinion (and where the term NIMBY comes from). As cities grow and run out of land, the natural progression is to increase density. So as property values increase you will get developers or homeowners who would like to add a second or third unit legally to their property in order to help pay for the mortgage or simply to add more housing supply to an already suffocating city. But often times this means a re-zoning application. So instead of the city being able to simply approve the building permits and plans like they can now thanks to the updated legislation. There would be a whole rigamarole process that could often take multiple years and could even involve lawyers or paralegals to represent the arguing parties, which adds expense and delays to what often times could be a more simple process.

So effectively your options were, build a unit illegally and hope no one finds out (like a lot of Brampton, sorry Brampton), or spend multiple years and lots of money fighting for a simple change that at most will add a car or two to the street and probably won’t inconvenience your neighbours. I think that two things can be true at once, people having the right to voice their concerns, and the city looking out for the citizenry as a whole. They should consider the needs of the city and make decisions that help solve problems rather than exacerbate them.

Thoughts on a New System of Land Development:

Briefly, I want to discuss very big redevelopment projects and the problem with the way things are currently done. I think that the city requiring developers to submit a plan first and THEN allowing citizens to voice their concerns, and (usually) tear it top bits, is counter-productive and wastes everyone’s time and money. In my opinion a better approach could be allowing citizen to voice their opinions BEFORE tens of thousands of dollars have already been spent (sometimes more). This would allow community groups to consult on how land will be redeveloped alongside developers, architects, and city planners to come up with a plan that considers everyone’s interests BEFORE submitting the application and proposal to the city. I think this would ultimately speed up the city planning process and would make all parties much happier in the end rather than standoffish. With this model all stakeholders were considered and collaborated in the creation of this new development. I’m not sure how practical something like this would be but I think it’s worth considering as a better method of city planning.

What The New Legislation Makes Easier:

As mentioned the new rules allow up to 3 units per lot. Depending on your municipality their implementation of the rules might be a little bit different. For example in Toronto depending on your property you may have access to a laneway, which could allow for the construction of a laneway house or Accessory Dwelling Unit (ADU). There are already companies out there which specialize in developing plans for laneway suites. If you want to find out if your property is suitable for a laneway suite there is a very handy tool called adusearch.ca which allows you to looking up certain cities and determine if your property can have one. In Toronto a majority of the existing land can have an ADU built. There is potential for over 400,000 new units (either attached or accessory to the existing building). The website says that there are currently 126 permitted ADUs in Toronto, I’m not certain I believe that the number is so low. But it could be that most basement apartments in the city do not have permits or maybe don’t fall under their definition of ADU.

In other cities like Mississauga for example you would most likely be looking at building a basement apartment, garden suite, or garage conversion. This was approved very recently in Mississauga in November of 2023. I would recommend looking at proposed bylaw amendments that show how a potential garden suite could be constructed (it’s also just fun to look at the renders). You can find the meeting notes here (pg. 83-134, pg. 112 and beyond are the renders). Depending on the size of your particular lot the allowable garden suite size will vary up to a maximum of around 1000 sq ft. The Region of Peel also has a forgivable loan program which can provide around $20,000 to upgrade a pre-existing basement apartment to a legal basement apartment if certain conditions are met. There might be similar programs in your region or municipality and if you are considering developing a secondary unit I would highly recommend speaking to the city planners at the city and expressing your intentions to see if they might be able to help you with your planning process and make sure that it goes according to plan.

It’s Still Not Enough:

While it’s great that all these changes are being made to add density. Quite honestly, all of these will be a drop in the bucket compared to the actual amount of housing that is needed across the province to help solve our housing crisis. Larger developments and purpose built rental housing will be more likely to put a real dent in the situation. While there is more funding at provincial and municipal levels to speed up development approvals and speed up timelines at the Ontario Land Tribunal we are still quite a ways away from building the housing that is going to be required to improve our current situation. We can’t solely rely on the private sector to develop all the housing the province needs as has become very apparent over the past few decades. There have been improvements to purpose built rental housing over the past few years after an almost 30 year lull in development thanks to different programs that assist larger developers in either redeveloping older properties or providing them HST breaks among other things to make the numbers actually make sense for this type of development. However, I do hope that many people decide to take advantage of the easier development and approval processes across Ontario because any amount of new housing is better than no new housing.

As always thank you for reading, feel free to let me know what you thought in the comments or via email. I’ll see you back here in two weeks.

All the best,

Oliver

Newsletter #11: Adding Secondary Units Legally, Renter Rights, Spring Market Predictions

Happy Easter long weekend! I hope that those of you who are able to take some time off do so. For those who haven’t yet started their taxes, this is your reminder to get on it! This week there is some interesting news articles that came out about the federal government and renters rights. I have a small analysis of what may be to come in this Spring real estate market. Spring is officially here and this is seasonally the busiest time of year for buying and selling homes, it will be interesting to see how many sales happen this Spring and through to the end of the year, many analyst are predict this to be a more active year than 2023 in that regard. Check out the blog post on ADUs and the new laws that Ontario passed allowing up to 3 units on (almost) any pre-existing lot without requiring a zoning change.

This Weeks Blog Post:

How to Add Secondary Units or ADUs in Ontario:

How different municipalities have implemented this legislation
Toronto’s new easy to build “laneway homes” and tool to see if your property is eligible
Some conversation about why this is overall a positive change and how the land planning and use process could be improved by involving the community earlier in the developmental process

Read the full blog post here: https://oliverfoote.ca/2024/03/31/how-to-add-secondary-units-or-adus-in-ontario/

Housing News:

Trudeau government to introduce new measures for Renters: https://globalnews.ca/news/10387043/trudeau-renter-reforms-2024-budget/
- Wants to make it standard to include rent payments into tenants credit scores. Rent tends to be a large payment and showing on time payments could help when looking for a mortgage
- Standardized national lease agreements
- Renters Bill of Rights, crack down on renovictions etc.

Spring Housing Market Discussion:

Some analysts believe that rates could be cut as early as June. Since real estate remains one of the CPI components that is holding inflation higher, I find it unlikely that the Spring market will be conducive to lower rates, since fixed rate mortgage borrowing costs continue to stay somewhat low.
Additionally, with the current stock market Bull Run, some investors may choose to put some of their cash towards purchase other assets (including real estate). This could mean that the real estate market will find itself in short supply once again with upward pressure on prices. There is a well studied psychological effect that an increase in investors assets tends to result in an increase in their overall “consumer sentiment” and thus their spending.
Owners with pandemic low 3-year fixed mortgages are likely to have their mortgages come up for renewal this year, and their cost of homeownership will likely go higher. This could cause people to be forced to sell and lead to increased supply. For others it will untether them from the past mortgage reality into the new one which could see an increased number of people looking to make a move either to downsize or upsize.

Market Performance as of close Thursday March 29, 2024:

S&P 500: 5,254.35 (+10.79% YTD)
NASDAQ: 16,379.46 (+10.93% YTD)
S&P/TSX Composite: 22,167.03 (+6.20% YTD)

Canada CPI Inflation Jan 2024: 2.8% (0.1% Decrease from Jan 2024)
Current BoC Benchmark Interest Rate: 5% NC (Next Meeting: April 10, 2024)
Unemployment Rate Feb 2024: 5.8% (0.1% Increase from Jan 2023)

Have a Great Week!

Best regards, Oliver Foote