The Frantic GTA Market – Have we plateaued?
Good morning friends,
The last 5 months have been unprecedented in the GTA real estate market. A sharp spike in pricing (not really rooted in any logical past sales) has led to all levels of government to seriously look at implementing “cooling measures”. Over the last 15-20 years the market has been increasing at roughly 5-8% annually. We are now seeing a 28%- 33% price increase year over year. The average price of a Toronto (416) detached home is now just under $1.6 million. This type of market activity is truly concerning. Sales volumes also increased by 18% vs same time last year.
Despite the public’s perception, realtors are not enjoying the ride. I have not spoken to one other realtor that is a fan of this market. . Like any other professional, we pride ourselves on giving sound, logical advise based on real analysis on any sale or purchase. When I advise a client that a home is worth $900,000 and it sells for $1.3 million what can I possibly say? By the 6th bidding war with the same buying client all I can say is “Offer what is doable and what the home is worth to you but don’t go crazy!”
Where I am still very optimistic – I don’t think we will have a market crash. Most purchasers have or intend to move into their homes. Most purchasers have mortgage terms for 4-5 years. I think the market will (or may have already) plateau. Keep in mind that even a price drop of 33% brings us back to last year pricing which was still very strong. Over the next few months the market will sort through these new measures and by this time next year we will still have a strong market.
Vancouver has gone through the same ride and the real estate market there has almost picked up from where it left off last year.
Ontario Government Announcing 16 New housing Measures in all – A few of highlights.
- 15% Speculation Tax – Foreign Buyers’ Tax in Golden Horseshoe Region
- Rent Control to ALL rental units (not just units built before 1991)
- Ontario Government will allow Toronto to implement a “Vacancy Tax”
Wynne to slap 15 per cent tax on foreign real estate speculators
Robert Benzie – Queen’s Park Bureau Chief – Toronto Star April 20th
Kathleen Wynne is slapping a 15 per cent “non-resident speculation” tax on foreign investors to help cool down southern Ontario’s scorching real estate market, the Star has learned.
Wynne will join Finance Minister Charles Sousa and Housing Minister Chris Ballard on Thursday against a backdrop of condo towers in booming Liberty Village to launch a massive plan to improve housing affordability.
A key plank in that would be the 15 per cent surcharge on offshore speculators, who are estimated to make up just 5 per cent of the current market.
Modelled on British Columbia’s “foreign buyers’ tax” in Vancouver, the levy would apply to home purchasers in the so-called Greater Golden Horseshoe who are not citizens or permanent residents.
It would affect sales in and around the Greater Toronto and Hamilton Area, Niagara, Kitchener-Waterloo, and encompass everywhere north to Barrie and Orillia and east to Peterborough.
Speaking in Ottawa on Wednesday, Wynne indicated there wouldn’t be a one-size-fits-all solution for real estate throughout Ontario.
“One of the things that we have talked about within caucus is . . . the interaction between the housing market in the Greater Golden Horseshoe and in Ottawa or London,” the premier said.
“The circumstances are different. Just as when this conversation began and we looked at what was happening in Vancouver, it was a different situation than in Toronto.”
“Now I think there are maybe some more similarities there than there were but we have to look at the evidence. We have to look at what’s actually happening in each of the communities and make a determination,” Wynne said.
“Right now in terms of the purchasing of a home, the really hot, frantic market is in the Greater Golden Horseshoe and . . . we have to consistently assess what happens when we bring in the package of initiatives and what happens going forward.”
Among more than a dozen measures in the government’s housing affordability plan will be some kind of clampdown on domestic housing speculators — though they will not face a 15 per cent tax.
As well , with house prices in Greater Toronto up 33 per cent year over year, the government plans to work with realtors to boost the transparency surrounding bidding wars to protect buyers.
Also, there will be an expansion of rent controls to all buildings. Currently, only those built before 1991 are protected from massive increases.
Under the amendment developed by Ballard, rent hikes on all newer units would be limited to the inflation rate, which was at 2 per cent in February.
There would be some exemptions for landlords doing capital improvements to properties.
That’s more palatable for tenants than the doubling of rents that have been seen this year in some Toronto condos just steps from Thursday’s announcement.
Sousa, for his part, said he is not worried that capping rent increases will discourage developers from building new housing.
Toronto Mayor John Tory, who met with Sousa and federal Finance Minister Bill Morneau on Tuesday to discuss housing affordability, welcomed an expansion of rent controls.
“There are a lot of tenants who are finding it hard to make ends meet and there are some who have faced these extraordinary increases which are, in my view, kind of ridiculous,” said Tory.
“I encourage the landlords to voluntarily come forward and say they would voluntarily comply with the kind of limit . . . around the rate of inflation,” he said.
“I hope anything the government of Ontario does will be accompanied by measures that substantially encourage the construction of affordable rental housing. That will mean incentives they will have to provide at the same time as they announce whatever it is they are going to do about rent control to encourage people to build this housing.”
2 Weeks Earlier! (See full Market Report)
April 5, 2017 — Toronto Real Estate Board President Larry Cerqua announced that Greater Toronto Area REALTORS® reported 12,077 residential sales through TREB’s MLS® System in March 2017. This result represented a 17.7 per cent increase compared to the 10,260 sales reported in March 2016. For the TREB market area as a whole, annual sales growth was strongest for condominium apartments and detached houses.
The number of new listings also increased on a year-over-year basis, at 17,051 – a 15.2 per cent increase compared to March 2016. The strongest growth in new listings was experienced in the detached market segment. While new listings were up strongly compared to last year, the rate new listings growth was still lower than the rate of sales growth. As a result, GTA market conditions continued to tighten.
“It has been encouraging to see that policymakers have not implemented any knee-jerk policies regarding the GTA housing market. Different levels of government are holding consultations with market stakeholders and TREB has participated and will continue to participate in these discussions. Policy makers must remember that it is the interplay between the demand for and supply of listings that influences price growth,” said Mr. Cerqua.
Strong competition between buyers continued to cause high levels of price growth in all major market segments. The MLS® Home Price Index (HPI) Composite Benchmark Price was up by 28.6 per cent year-over-year. For the TREB market area as a whole, the average selling price was up by 33.2 per cent, with similar annual rates of growth in the low-rise and condominium apartment segments.
“Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings. A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance. As policy makers seek to achieve this balance, it is important that an evidence-based approach is followed,” said Jason Mercer, TREB’s Director of Market Analysis.
Canadians ready to cash in on their property, poll finds; problem is, where to go next?
Gary Marr – Financial Post April 10th / 2017
A new poll finds 41 per cent of Canadian with plans to sell their property are doing so to cash in and make a profit.
But the problem, according to the survey released Monday by Canadian Imperial Bank of Commerce, is 62 per cent say the cost of buying another house is making them “reluctant to sell” and move out of their current home.
“In today’s market, homeowners are facing a conundrum as to whether to buy, sell or stay put,” says David Nicholson, vice-president of CIBC Imperial Service.
The survey, conducted March 16-20 online with a margin of error of plus or minus 1.7 per cent points, 19 times out of 20, comes as the Greater Toronto Area housing market shows very few signs of slowing down.
The Toronto Real Estate Board reported last week that overall prices for the GTA were up 33 per cent in March from a year ago with the average detached home in the city of Toronto selling for $1.56 million.
Rising values, which comes as some parts of the country are still watching their housing markets struggle, has policy makers grappling for a solution. Finance Minister Bill Morneau has pledged to speak with provincial and municipal officials in Canada’s largest city to work on a joint solution.
The poll finds that Canadians are worried about what the so-called solutions to the housing market might be with 48 per cent of homeowners, who are planning to sell, concerned that government tax and policy changes will lower housing prices.
Tougher rent controls continue to be discussed in the province, supported by a New Democrat private members bill, and the CIBC poll finds 28 per cent think that renting is a better option given current house prices.
More housing product could find its way into supply as the polls also finds 67 per cent of baby boomers, those 55 and over, plan to sell their homes with the top reason being to downsize at 63 per cent. Buying is also making baby boomers nervous about selling.
“Your home is where your heart is, but it’s also likely your biggest financial asset, so there is a lot to consider as you enter or near retirement that can affect your decision to sell or not,” said Mr. Nicholson.
In the millennial category, 39 per cent of those aged 18-34 are now homeowners, the rest renting or living with family. Another 23 per cent of millennials believe they will never own a home.
Overall, 62 per cent of those surveyed were homeowners, 31 per cent rented and seven per cent lived with parents or family.
Have a great weekend,