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Chandra Dindyal

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Historic loss of value in the residential market

2/1/2023

From National Bank of Canada The Teranet-National Bank HPI continued to decline in December so that the cumulative drop in prices since their peak in May 2022 totaled 10.0%, the largest contraction in the index ever recorded. The current decline in prices has even surpassed the 9.2% loss in value that occurred during the 2008 financial crisis. However, there is some consolation in that the seasonally adjusted monthly decrease in prices in December was less significant than in November, going from -1.0% to -0.3%. With the Bank of Canada raising its key interest rate again in December and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we still expect the total correction to be limited to about 15% nationally by the end of 2023, but this assumes that policy rate hikes are coming to an end and that declines occur in the second half of 2023. Although corrections are occurring in all markets covered by the index (except Lethbridge), the CMAs that have experienced the largest price growth over the past two years are also the ones that have experienced the largest declines to date. Ontario, British Columbia and the Maritimes therefore appear to be more vulnerable, while the Prairie markets are less so, helped by a buoyant economic environment. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased by 0.3% in December compared to the previous month and after adjusting for seasonal effects, the sixth consecutive monthly decrease. After adjusting for seasonal effects, 6 of the 11 markets in the composite index were down during the month: Winnipeg (-1.8%), Calgary (-1.1%), Ottawa-Gatineau (-1.1%), Edmonton (-0.9%), Montreal (-0.5%) and Toronto (-0.4%). Conversely, the Quebec City (+1.3%), Victoria (+1.1%), Hamilton (+0.8%), Halifax (+0.4%) and Vancouver (+0.1%) markets were up. From December 2021 to December 2022, the composite index remained stable, the first time since the financial crisis of 2008-09 that the index did not increase over one year. Price increases in Calgary (12.4%), Edmonton (6.3%), Halifax (4.7%), Quebec City (4.7%} and Montreal (2.5%) were entirely offset by decreases in Victoria (-0.1%), Ottawa-Gatineau (-1.0%), Vancouver (-1.5%), Toronto (-1.9%), Winnipeg (-2.0%) and Hamilton (-2.9%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf
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Bank of Canada increases policy interest rate by 25 basis points, continues quantitative tightening

1/25/2023

The Bank of Canada today increased its target for the overnight rate to 4%, with the Bank Rate at 4% and the deposit rate at 4%. The Bank is also continuing its policy of quantitative tightening. Global inflation remains high and broad-based. Inflation is coming down in many countries, largely reflecting lower energy prices as well as improvements in global supply chains. In the United States and Europe, economies are slowing but proving more resilient than was expected at the time of the Banks October Monetary Policy Report (MPR). Chinas abrupt lifting of COVID-19 restrictions has prompted an upward revision to the growth forecast for China and poses an upside risk to commodity prices. Russias war on Ukraine remains a significant source of uncertainty. Financial conditions remain restrictive but have eased since October, and the Canadian dollar has been relatively stable against the US dollar. The Bank estimates the global economy grew by about 3% in 2022, and will slow to about 2% in 2023 and 2% in 2024. This projection is slightly higher than Octobers. In Canada, recent economic growth has been stronger than expected and the economy remains in excess demand. Labour markets are still tight: the unemployment rate is near historic lows and businesses are reporting ongoing difficulty finding workers. However, there is growing evidence that restrictive monetary policy is slowing activity, especially household spending. Consumption growth has moderated from the first half of 2022 and housing market activity has declined substantially. As the effects of interest rate increases continue to work through the economy, spending on consumer services and business investment are expected to slow. Meanwhile, weaker foreign demand will likely weigh on exports. This overall slowdown in activity will allow supply to catch up with demand. https://www.bankofcanada.ca/2023/01/fad-press-release-2023-01-25/
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Slight increase in home sales in December

1/20/2023

Summary On a seasonally adjusted basis, home sales increased 1.3% from November to December, a second monthly gain in ten months. Despite this relative stabilization of the market in December, sales were still down 37.8% from their February 2022 level. New listings were down 6.4% from November to December, a fifth contraction in six months which shows that both buyers and sellers remain on the sidelines in the current market environment. It should also be noted there is still a high proportion of sellers who are changing their minds, as we estimate that about one in five listings are withdrawn during the month. The low level of sales is still allowing supply to rebuild, with the number of months of inventory increasing from 4.1 to 4.2 in December. While easing, market conditions are still pointing in the direction of a favourable to sellers market with supply still very low on a historical basis. Housing starts fell 14.4K in December to a 9-month low of 248.6K (seasonally adjusted and annualized). Urban starts dropped 12.9K to 227.7K on declines in both the single-family (-5.5K to a post-pandemic low of 44.9K) and the multi-family segment (-7.4K to 182.9K). The Teranet-National Bank Composite National House Price Index decreased by 0.3% in December compared to the previous month and after adjusting for seasonal effects, the sixth consecutive monthly decrease. After adjusting for seasonal effects, 6 of the 11 markets in the composite index were down during the month: Winnipeg (-1.8%), Calgary (-1.1%), Ottawa-Gatineau (-1.1%), Edmonton (-0.9%). Montreal (-0.5%) and Toronto (-0.4%). Conversely, the Quebec City (+1.3%), Victoria (+1.1%). Hamilton (+0.8%), Halifax (+0.4%) and Vancouver (+0.1%) markets were up. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-resale-market.pdf
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What’s Happening in Canadian Housing Markets as We Head into 2023?

1/11/2023

Sales in November were down 3.3% on a month-over-month basis, rejoining the trend of moderating sales that began back in February. The Aggregate Composite MLS Home Price Index (HPI) edged down 1.4% on a month-over-month basis in November, which, as with sales activity, continues the trend that began in the spring. The national MLS HPI now sits about 11.5% below its peak level but there are considerable regional differences. While prices are down more in Ontario and parts of British Columbia, they have softened to some degree almost everywhere. Calgary, Regina and Saskatoon stand out as markets where home prices are barely off their peaks. https://www.creacafe.ca/whats-happening-in-canadian-housing-markets-as-we-head-into-2023/
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Canada: Prices down from their peak across the country

1/5/2023

From National Bank of Canada For the first time since the financial crisis of 2008, all of the cities covered by the Teranet-National Bank HPI have seen prices decline from their peak reached over the past 12 months, marking the end of a prosperous period for the Canadian real estate market. Indeed, price declines were observed in all markets covered, with the last cities on the list to experience contractions being Calgary, Edmonton, Lethbridge and Trois-Rivieres. Since its peak in May 2022, the national composite index has already fallen by 9.0%, almost as much as during the last financial crisis (-9.2%). With the Bank of Canada raising its key interest rate again in December and mortgage rates remaining high, we believe that the impact on property prices should continue to be felt in the coming months. All in all, we still anticipate a total correction of about 15% in house prices nationally by the end of 2023, assuming that the policy rate does not increase further and begins to decline in the second half of 2023. Although corrections are being observed in the vast majority of markets covered by the index, the CMAs that have experienced the most significant price growth over the past two years are also those that have recorded the sharpest declines to date. Ontario, British Columbia, and the Maritimes therefore appear to be more vulnerable, while the Prairie markets are less so, helped by a buoyant economic context. HIGHLIGHTS: The Teranet-National Bank Composite National House Price Index decreased by 1.1% in November compared to the previous month and after adjusting for seasonal effects, a fifth consecutive monthly decrease. After adjusting for seasonal effects, 8 of the 11 markets in the composite index were down during the month: Montreal (-2.2%), Hamilton (-1.9%), Vancouver (-1.5%), Ottawa-Gatineau (-1.3%), Winnipeg (-1.1%), Quebec City (-1.1%), Toronto (-0.9%) and Calgary (-0.8%). Conversely, the Halifax (+1.6%), Victoria (+0.9%) and Edmonton (+0.3%) markets were up. From November 2021 to November 2022, the composite index increased by 2.0%, the lowest annual growth since November 2019. This growth was driven by Calgary (14.6%), Edmonton (7.6%), Halifax (6.2%), Quebec City (5.7%), Montreal (4.7%) and Victoria (3.0%). Growth was lower than average in Winnipeg (1.2%), Vancouver (0.7%) and Ottawa-Gatineau (0.4%), while it remained stable in Toronto and was down in Hamilton (-0.9%). https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/economic-news-teranet.pdf
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