Looking Beyond Tomorrow

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Looking Beyond Tomorrow

With 6 weeks left in 2017, we look back and see that the GTA real estate market shifted from a hyper aggressive seller’s market to a more normalized and balanced market.

In April 2017, the average property in Markham was selling for $1,204,092, 111% above the asking price and in 9 days. In Stouffville, the average selling price for a property was $1,260,868, 106% above the asking price and in 17 days.There were a limited number of homes for sale and buyers were consistently heading into bidding wars to purchase their dream home. At the end of April, the Ontario provincial government instituted the Fair Housing Plan which caused a shift in the market place. By the end of October, the average property in Markham was selling for $1,034,384, 97% of the asking price and in 26 days. Stouffville’s average property was selling for $826,911, 96% of the asking price and in 30 days. As well, since the Fair Housing Plan announcement, inventory levels have increased (46%) dramatically and buyers seemed hesitant to purchase a home. It is only recently that we have observed buyers getting off the fence and into the game.

What Does This Mean In The Short Term?
The Ontario provincial government introduced 16 new measures to cool the housing markets in and around Toronto. One of the new measures introduced was a 15% Foreign Buyers Tax. In addition, Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), recently announced new mortgage stress-testing rules that will make it harder to qualify for new mortgages. Both of these announcements will prove to be just a speed-bump in housing demand for the GTA in the next 6-12 months.

Buyers have already found loopholes around the 15% Foreign Buyers Tax established within the Fair Housing Plan and many will find ways around the OSFI rule changes also, such as: extending amortization periods, selecting variable rate mortgages or by turning to non-bank lenders because they are not covered by OSFI’s banking regulations.

Reviewing the policy changes set out by the provincial government, we consider that both plans are temporary solutions and will have little effect on long term real estate results.

What Does This Mean In The Long Term?
The housing market in the GTA is poised for major long-term price growth as booming demand and inadequate supply overwhelm recent policy efforts to cool the market. Ontario’s Places to Grow Act, which sets out land-use planning and development rules for the Toronto region up to 2031, is running 7 to 10 years behind schedule in terms of the anticipated release of land for development, so supply cannot keep up with demand.

Of the 338,000 hectares of land available:

  • 16,000 hectares is vacant land where housing development could occur
    • 3,000 hectares of that land has development applications in process
    • 13,000 hectares of that land is not remotely close to being designated or approved

Toronto remains a world-class city that attracts individuals from all over the world. With immigration growing in and around the City of Toronto the demand for housing will increase. If you are looking to invest in real estate, all the fundamentals point to an even tighter market. Real estate remains one of, if not the best place to invest.

Overall, we can see home sales in the GTA flatten or even soften in the short term, but the slowdown will be limited as the strong demand will drive sales higher in the long term.

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