While the end of 2017 saw an all-time high for Toronto's white-hot housing market, the start of 2018 has seen sales plummet, dragging prices with them. Sales have fallen by up to a massive 46% compared to this time last year, with average prices dropping by 17% - the most prominent decrease seen in Toronto since 1991. The plunge in sales can be observed across all types of homes, with the most substantial difference in detached houses.
Even the previously flaming condo market has seen a decrease of around 31% compared to the start of last year. The number of new listings of homes for sale has increased by 7%, while the total number of active listings has skyrocketed 147% year-on-year.
The decline began around the time of the introduction of the Fair Housing Plan in April 2017, which included a 15% foreign buyer’s tax. A decrease in price was observed at this time; however prices then slowly increased in the months that followed.
It is probable that rising mortgage rates and stricter lending rules have also contributed to the decline. As of January 1, 2018, the government regulator known as the Office of the Superintendent of Financial Institutions (OSFI) have implemented several new regulations which have made buying a home more expensive. One such rule requires all homebuyers planning to take out a mortgage to meet a ‘stress test.' This means that buyers will have to prove that they can afford the Bank of Canada prime interest rate, even if their lenders plan to give them a lower rate. As a result of this, many potential buyers will have been forced to put their plans on hold. Others may be holding off in the hope that the current market will scare sellers into reducing prices even further.
The buying frenzy observed during this time last year led to a sharp increase in prices of around 30%, making it difficult for potential buyers to afford the type of home they desired, and for some to afford to buy at all. Therefore, it can be argued that the decline in sales was necessary to bring prices down to a level which Torontonians can actually afford. It also means that current trends are being compared to a period which saw an all-time boom in prices. When compared to previous years, this year’s statistics are much less shocking, with current prices high than this time two years ago.
Experts predict that any possible recovery for the housing market is some time away. However, many believe that by the end of the year we will see an improvement in the annual rate of price growth, as sales will begin to increase relative to the level of listings, in the second half of this year. Many experts are predicting that home sales are expected to be up in the second half of this year, compared to the second half of 2017. All that we can say for certain about this rollercoaster of a market is that it’s simply unpredictable.
For more key insights like this see our homepage.
Leave a comment