Canada's Condominium Magazine
The Toronto Real Estate Board is blaming the Ontario government for an 18 per cent drop in sales. The board insists that the Greater Toronto Area’s home sales dropped 18.3 per cent in 2017 from the previous year’s all-time high.
Toronto Real Estate Board released a statement on January 4th, wherein the board’s president Tim Syrianos states, “Much of the sales volatility in 2017 was brought about by government policy decisions. Research from TREB, the provincial government and Statistics Canada showed that foreign home buying was not a major driver of sales in the GTA. However. The Ontario Fair Housing Plan, which included a foreign buyer tax, had a marked psychological impact on the marketplace.”
TREB’s Director of Market Analysis Jason Mercer added that “home price growth in the second half of 2017 differed substantially depending on market segment. The detached market segment – the most expensive on average – experienced the slowest pace of growth as many buyers looked to less expensive options. Conversely, the condominium apartment segment experience double-digit growth, as condos accounted for a growing share of transactions.”
Ontario’s Fair Housing Plan includes a 15 per cent tax on non-resident purchases of homes, expanded rent controls, and other measures that were designed to cool an overheated market. The housing plan led to reduced prices for detached homes in the Greater Toronto Area in mid-2017, though condo prices were not similarly affected.
Ontario’s Office of the Superintendent of Financial Institutions (OFSI) also implemented stress tests for borrowers, which began on the 1st of this month. Banks are required to test borrowers to ensure that they can handle mortgage rate increases. The stress test was intended to ensure responsible lending, though some foresee a negative effect on the housing market, which could include a loss of approximately 21 per cent of buyers’ purchasing power. Furthermore, 10 per cent of prospective buyers will be disqualified, according to the Bank of Canada. The Canadian Real Estate Association also forecasts an additional 2.2 per cent drop in home prices in 2018.
Syrianos stated that “TREB will have much more to say about the year to come on January 30 when we will release our third annual Market Year in Review and Outlook Report. The report will feature an outlook for home sales and prices; new Ipsos consumer survey results covering buying intentions, including insights on new federal mortgage lending guidelines; new research on housing supply options surrounding the ‘missing middle,’ and important new reports on the movement of people and goods throughout the GTA.”
According to Syrianos, the price drop’s end is not yet in sight. He foresees continued government policy influence throughout the next year. “Looking forward, government policy could continue to influence consumer behaviour in 2018, as changes to federal mortgage lending guidelines come into effect,” he said.