Short Term Gain or Long Term Pain? Will the New Rules Really Cool the Market in the Long Run?
It’s been over a month now since the Provincial Ministry of Finance introduced their 16 Point Fair Housing Plan designed to cool the real estate frenzy which has gripped Toronto and the entire Golden Horseshoe over these past few months.
The craziness prevailed through April as the average price in the GTA soared upwards of 25% compared to April of 2016.
However, the market has showed signs of correcting and is primed for more balanced growth through 2017.
Does this mean prices are going to fall as fast as Humpty Dumpty fell off the wall? Hmmm not quite. First of all, it’s really too soon to tell whether taxing foreign buyers with the 15% NRST will have a dramatic impact. Think about it…these people have $$$ and if they want to invest in our fair city and environs, they most certainly will suck up and pay the extra 15%.
Didn’t we all pay the GST and then the harmonized HST? What about the double Land Transfer Tax here in Toronto? Don’t get me going….if it didn’t cost so much for people to upsize, there might have been more homes on the market all along instead of people digging in their heels and choosing to stay put and renovate. Ever think about that?
As far as a rent control restriction…I’m all for affordable housing but will developers build the desperately needed rental units we need to satisfy the demands of immigration and population growth if rent control is imposed on all builds including those built after 1991?
Will these rules dig an even deeper hole of unaffordability than we already have? Well…my friends, only time will tell.
In the meantime, here’s what I’ve been seeing and experiencing:
1) There are way more listings on the market now than before. Whether that’s simply because it’s spring and that’s when people “traditionally” list their homes or whether Sellers are trying to maximize the strength of the market…who knows?
2) Offer nights come and offer nights go often with no offers or only a few offers. So for Buyers, it is certainly an opportunity to have more choice, less competition and more negotiating power than back in March or early April.
3) Are there deals out there? Hmm I’m not so sure. Maybe if you think that by paying what you might have paid back in January or February (if you could find anything to buy that is) is a deal, then yes. But in the long run, no – because if anything prices will stabilize and remain at the benchmark of earlier this year. Face it, 33% year over year growth isn’t sustainable but single digit price gains are.
4) Can Sellers be greedy? No No No. If you think that expecting a higher price than ever will do the trick, think again and get real.
If anything, these rules have caused Buyers to step back and take a “wait and see” attitude. It’s completely psychological. If for one moment, I thought that foreign buyers were fuelling this strong market, I’d eat my MacBook..right now.
What’s fuelling this market is the desirability of living in the best city in North America, if not the world coupled with a low Canadian dollar and of course cheap money aka low interest rates. It’s not brain surgery people and it’s certainly not foreign buyers. People from other countries send their kids to school here and they buy condos for them. As such they’re exempt from paying the tax. And investors help spruce up the inventory of rental units by renovating them. What’s wrong with that?
I think people are going to have to ditch their “provincial” attitude (no pun intended) and recognize that this is a world class city in one of the safest and most stable countries in the world.
Prices may be stabilizing but I don’t think it’s going to last forever. Nothing does right?
Average 416 Prices for *May 1-15 2017
Detached $1,550,873 up 19.1% from *2016
Semi-Detached $1,064,260 up 29.1% from *2016
Townhouse $722,928 up 16.4% from *2016
Condominium $579,589 up 28.1% from *2016
