Much has been written about the Canadian housing market. Even more about greater Toronto and Vancouver. The pessimists are waiting for a collapse. The optimists are hoping the prices keep going up. Then there’s the realists. They would like to see the market slow and maybe even for prices to go down, so that we don’t have a housing bubble. Which one are you?
When it comes to the housing market, I’m a realist.
Every Spring, for the last 10+ years, the real estate market in Canada heats up. Prices increase, they sell faster, and supply can’t keep up with demand. It’s become the norm. In June, July and August, the market gets very quiet and prices go down. That’s right, they actually go down.
This year was no different except for 2 things.. Supply was very low in January, February and March, causing selling prices to jump as much as 20% over last year in some markets. Now, let’s look more closely..
Cue the govt intervention. Ontario brings in a 15% foreign tax for Toronto along with new rent control laws that now affect ALL rental properties in Ontario. And, of course, we can’t forget the Trudeau Federal govt’s further tightening of mortgage rules (unprecedented changes that came into effect last November but really only having impact from March 2017 onwards).
THE RESULTS? Just like Vancouver’s 2016 15% foreign tax, it has slowed the real estate market in the GTA. And we are starting to see fewer sales and even prices decline. DON’T PANIC OR MISINTERPRET this. The summer months are always quieter. This is normal.
If we study Vancouver after the 15% foreign tax announcement, we see the market went quiet. Sales went way down (media loved to sound the alarm bell and were calling for housing bubble or collapse). But as I had predicted, the market went soft for around 6 months while the media noise went away and the house sales rebounded. Markets outside Vancouver and Toronto have benefited by seeing more active markets and prices increase.
- We’re seeing fewer listings with ‘No offers until (3 days later)’ come up.
- Fewer bidding wars.
- Prices are becoming more realistic.
- This is a good thing for the market. We can’t expect 20% increases. This isn’t sustainable. It isn’t good for the long-term market.
- Interest rates will drive the market. As long as they remain low, we will have an active and healthy housing market.
- Trudeau Federal govt rule changes have made it more expensive and impossible for certain buyers to qualify for a mortgage.. this could result in even fewer sales and we could see prices fall more than expected.
- housing bubble? I’m not convinced of this. I think the demand is very high in major urban centers across Canada.
Enjoy the summer. Watch for some price decreases but don’t read too much into this yet. I’ll be watching closely and will report on any factual data.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis 416 224 0114 firstname.lastname@example.org