Where are the million dollar buyers coming from?

By Lindsay Smith/Real Estate Columnist

It doesn’t take much to see that the prices of homes in Oshawa are hitting all-time highs. I review the numbers daily, and at times, I find myself surprised by what is happening. Here is a statistic that will shock some and make others thrilled – in the past week, 22 homes in Oshawa sold for over $1 million. Not only that, each and every one of those properties sold for more than they were asking. It seems buying a home over a million dollars in Oshawa has become as challenging as it is for a first-time buyer purchasing an entry level home. So, who is it that is buying these homes over $1M? It appears that many of the buyers who are buying locally in the higher price ranges are moving here from other parts of the Greater Toronto Area. With no real data on where people are leaving to make Oshawa their home, let’s look at what it takes to buy a home here.

To purchase a home, you need a few financial items to jump through the “hoops” the banks and government have put in place for you to qualify. Buyers need a down-payment, a good credit score, a stable income, and a sense of humour when they see how difficult is has become to get into the housing market. Here is what it takes to buy a few select homes in Oshawa using a 10 per cent down-payment, assuming no debts:

Detached Home: Average price – $871,000 Down-payment $87,100. Mortgage amount $783,900. CMHC insurance fee $24,300 Total Mortgage $808,200. Combined Income needed to qualify $163,500. Mortgage payment with taxes $3,880/mth (average price based on past 14 days)

Semi-Detached Home: Average price – $682,000 Down-payment $68,200. Mortgage amount $613,800. CMHC insurance fee $19,027 Total Mortgage $632,830. Combined Income needed to qualify $133,314. Mortgage payment with taxes $3,000/mth

Attached Townhome: Average price – $691,500 Down-payment $69,000. Mortgage amount $622,500. CMHC insurance fee $19,297 Total Mortgage $641,797. Combined Income needed to qualify $137,600. Mortgage payment with taxes $3,108/mth

Home Sale at $1,000,000: Down-payment $200,000. Mortgage amount $800,000. CMHC insurance fee Zero Total. Mortgage $800,000. Combined Income needed to qualify $176,525. Mortgage payment with taxes $4,095/mth

This illustrates how the range of homes in Oshawa are in the $3,000 to $3,800 monthly payment range when a buyer is looking to purchase a home. A quick look at homes rented recently reveal that entire homes (not apartments or accessory apartments) range in rent from $2,600 to $3,300 and basement/ main floor apartments range from $1,500 to $2,200. These rental prices may seem alarmingly high, however, they are in line with what is happening in Markham and Richmond Hill.

Will the market get more challenging as we move into 2022? We can only guess; however, we do know there are some changes coming that will add more hurdles for some buyers. The federal government is implementing changes to the stress test in June. What they are planning on doing is make qualifying for a mortgage more challenging for buyers (or homeowners looking to re-finance their current mortgage) who have down-payments of more than 20 per cent. Currently, a buyer with more than 20 per cent to put down on a home must qualify on a rate much higher than what is available. (This is referred to as the stress test.) The reasoning is to protect the buyer if the rates jump up. (Let’s be clear, it is really to lessen the bank’s risk.) Currently all buyers must qualify at 4.79 per cent when applying for a mortgage. They still get the current rates of about 2.1 per cent, but by qualifying on a higher amount, they are protected if the rates increase when they go to renew their mortgages. This new rule will only apply to those who put more than 20 per cent down. They will now need to qualify at 5.25 per cent, still getting the lower rate, however, what they can afford will drop in value. This will mostly affect investors, homeowners re-financing, or buyers who have saved a large amount to use as a down-payment.

My recommendation if you are considering buying and have 20 per cent or more as a down-payment, or if you are planning on re-financing your home, get the process started as soon as possible. It is best to take advantage of the current rules prior to the rules becoming more restrictive and punitive.

If you have any questions about the above information, or if you can see a real estate emergency on the horizon, I can be reached at lindsay@buyselllove.ca.