Government Taking Heat for GTA Real Estate Sales Drop

The Toronto Real Estate Board (TREB) have recently issued its monthly market figures, where it was revealed that the total number of Toronto real estate sales in 2017 had fallen quite dramatically in comparison to the record numbers in 2016. TREB has laid the blame on government policy decisions, which it maintains played heavily in influencing consumer behaviour throughout the year.

Real estate sales down from 2016 records

After a drop of 18.3 percent in Toronto area real estate sales, TREB President Tim Syrianos was quick to level the blame at the provincial government. This overall drop in sales comes after record sales in Q1 of 2017, and strong sales to cap off the year in Q4. Syrianos stated that policy decisions made by the Ontario government had a significant impact on prospective real estate investors, and that current policies would continue to have a “psychological impact” on the market.

Even though the overall amount of Toronto real estate sales were down in 2017, the average selling price was up 12.7 percent from 2016. The average price of a home sold in Toronto last year was $822,681, likely stemming from a hot housing market early on in the year and steadily high demand for housing. The final months of 2017 saw fewer sales and an increase in real estate listings, leading to a slowdown in average price growth. The latter half of the year also saw a major slump in the sales of luxury detached homes, with sales falling by up to 56 percent from the first half of the year.

Implementation of government regulations to blame for sales slump

While Statistics Canada found that foreign home ownership did not have a major influence on real estate sales, the Ontario Fair Housing Plan included a foreign buyer tax which may continue to influence investor behaviour over the coming year. The Fair Housing Plan also included rent control expansions, and a host of other measures in the name of cooling the then red hot Toronto housing market. Syrianos also said that the effects of the recent changes to Canada’s federal mortgage lending guidelines, which will have a major effect on first-time buyers, will be felt in 2018 and beyond.

New stress test rules will continue to slow the market

Canada’s new federal mortgage lending rules require a “stress test” as of January 1st, meaning that first-time real estate buyers will be required to pass rigorous borrowing tests to determine whether they can handle mortgage rate increases of up to two percent. While the new rules have been passed with the intention of promoting responsible mortgage lending, about one in ten new real estate investors will fail to pass the stress test, and many will lose up to 21 percent of their purchasing power – getting much less now than they would have in the previous year. With the presence of tighter mortgage lending rules, fewer incentives may exist for first time home buyers to explore the real estate market, possibly forcing many to put off their investments for quite some time.

The Canadian Real Estate Association (CREA) have predicted that Ontario homes will remain below the levels seen earlier in 2017, and that real estate prices are projected to fall by 2.2 percent in the coming year. Despite the presence of tighter government regulations that give fewer incentives for first time and foreign buyers to explore the market, demand in the Toronto area still remains high. The Toronto Real Estate Board will release their Year in Review report at the end of January, where the Board’s official sales and prices outlook will be featured.

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By |2018-06-05T16:04:50+00:00January 24th, 2018|Toronto Tenant/Landlord Relations|Comments Off on Government Taking Heat for GTA Real Estate Sales Drop
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