Inside the Toronto Real Estate Market – May 2017
With the news stories flying rampant about the proposed regulatory changes in real estate and housing, we thought it was high time to talk about what’s actually happening in the market right now.
Generally speaking, there is definitely a shift in the market, albeit not a massive one. Before anyone hits the panic button, let’s consider a few things…
1) Inventory – FINALLY there are more listings out there. Overall this is a good thing. While this may not be the best news for sellers it does make for a more balanced market. Buyers are now seeing they don’t need to blow their brains out bidding on the first thing they see…they are taking more time and that’s ok. It might take more than a week or even a day to sell compared to a year ago but the market is still moving.
2) Regulatory changes – Whenever the government implements anything of this nature or when there is political uncertainty, there is always a ‘wait and see’ factor – this is usually a temporary psychological effect – not a long term market effect.
3) Buyers finally have an edge. Buyers now have some choice and the sense of urgency has subsided for the time being. So perhaps we’re back to the good old days for a bit where you might actually get to see 10-15 homes before you choose to invest in what might possibly be your biggest financial asset. That’s not to say that some properties aren’t flying off the shelves but for every story like that, there are just as many that are missing offer date and taking longer to sell.
4) Global events. Then there is the question of global influence. While there is some uncertainty in the U.S. and global events, that is only going to increase demand for real estate in the Canadian market.
So what does this mean for you?
Our advice to sellers is to price very strategically – the market isn’t tolerant to low-ball pricing in the hopes of driving a bidding war…and buyers are still licking their wounds from lost opportunities.
Now that they are getting back in the driver’s seat they aren’t going to dance with the first one that asks.
We’re advising to price at value…but what does that mean today? The comparables that we pull from the past few months are not going to be a clear indicator..we have to go further back to see what happened even a year ago and balance that with current market conditions.
This is where a true expert comes in – experienced agents who know their market cold can analyze the conditions, comparables and determine the best possible pricing strategy.
For buyers, there are some great opportunities out there – it’s a funny market right now where we’re seeing some fabulous listings that haven’t sold and there is no rhyme or reason – it could just be dependent on the psychology of what happening and the timing.
It’s like the opposite effect – if no one is bidding then there must be something wrong. Well, generally speaking there isn’t so don’t get caught up in the head games. Remember your goals, remember why you are buying and if it fits for you and the number is right, make the move. Most buyers are not short term flippers so keep your eye on the long game.
Again, an agent that knows the market, inventory and history is going be to able to tell you if the value is on point and if there are any potential red flags.
If you are buying and selling in the same market, this is all relative. While you’re at a better advantage selling for more and buying for less (perfect time to kick the kids out and live that condo fantasy) it’s rare to see someone perfectly timing the market and if they did, it’s usually by accident.
If you’re not planning on selling, sit back and enjoy the entertainment. Don’t blow your brains out leveraging your home but if the opportunity affords, consider expanding your real estate holdings.
While we don’t have a crystal ball, our opinion is that, like Vancouver, any effect from the regulatory influences will be temporary as they don’t have much bite anyway. (see below for a bit more in depth review of the actual regulations).
We still have a shortage of inventory relative to demand, we are at approximately 2.5 months of inventory whereas double that qualifies as a true market shift away from a seller’s market. While inventory is way up from a couple of months ago, and up 33% from April of last year, active listings in April were only up 3% year over year. This is the peak of the spring market so we typically see more listings anyhow – sellers just looking to capitalize who are overpricing will be disappointed to realize we’re not in that market anymore…..for the time being.
Once that phenomenon clears out we expect to still see a healthy market in our future with more demand than ever for homes in our incredible city. Probably not 30% year over year gains but our bet is still for strong market for years to come.
So, how can the proposed provincial regulations impact our market?
The general opinion out there is that foreign buyers do not make up enough our our market for the tax to have a major impact and even if they did, there are so many exceptions to the tax that it just doesn’t have the teeth to make a fundamental difference.
As with any government involvement there is always the fundamental question of what are the consequences of intervening in the free market? Can regulations aimed to help actually harm? Or can they help make the market a fairer place for all? Time will tell. In the meantime, here is what’s on deck:
- Expanding rent control to all private rental units as condos were exempt
- Introduce legislation to standardize language in rental leases and make other changes to the Residential Tenancies Act
- Making sure multi-residential apartment buildings are charged property taxes at similar rates to other residential properties
- A $125-million program over five years “to further encourage the construction of new rental apartment buildings”
- Introducing a 15-per-cent “Non-Resident Speculation Tax” in the Greater Golden Horseshoe region
- Partnering with the Canada Revenue Agency to strengthen reporting requirements and make sure taxes are paid on real-estate purchases and sales
- Working to understand and tackle real-estate practices that allow “paper flipping” and other speculation
- Reviewing rules for real-estate agents to ensure that consumers are fairly represented
- Introducing legislation to let Toronto “and potentially other municipalities” introduce vacancy taxes
- Create new market housing and affordable-housing units with surplus provincial land
- Creating a “Housing Supply Team” to identify obstacles to housing developments and work with developers and municipalities to address them
- Establishing a group to advise the government on the housing market and the effects of the newly announced changes
- Educating consumers on their rights in real-estate transactions
- Giving municipalities “flexibility” to use property taxes to fuel development
- Overhauling standards for elevator repair
- An updated Growth Plan with municipalities to address density and “an appropriate range of unit sizes”
* Source: Globe and Mail April 22, 2017