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In the weeks since the provincial government introduced Ontario's Fair Housing Plan to curb an overheated housing market, the effects of the new policy are being felt in the Greater Toronto Area (GTA) housing industry. With home-flipping apparently curbed, foreign purchasers now representing less than 5% of new home sales, and the wager among home owners that prices are reaching a plateau, year-over-year sales have dropped significantly while there has been a spike in new residential listings during the same period.
A 37.3% decline in sales was recorded by the Toronto Real Estate Board's (TREB) MLS system compared to June 2016's figures, with June 2017's sales sitting at 7,974 homes. In contrast, new listings rose by 15.9% year-over-year, with a total of 19,614 new listings. While still significant, these figures are nowhere near the frenetic level of new listings witnessed a month before, when new listings jumped 48.9% year-over-year.
In his first prepared statement as TREB President—filling the shoes of previous president Larry Cerqua—Tim Syrianos said that the market has entered into what can be described as a "period of flux", attributed largely to the new provincial policy changes. “On one hand, consumer survey results tell us many households are very interested in purchasing a home in the near future, but some of these would-be buyers seem to be temporarily on the sidelines waiting to see the real impact of the Ontario Fair Housing Plan," said Syrianos, adding that "we have existing home owners who are listing their home because they feel price growth may have peaked. The end result has been a better supplied market and a moderating annual pace of price growth.”
While there have been far-reaching impacts since the new housing policy was introduced, average home prices continued to appreciate through June, rising 6.3% year-over-year to $793,915. This continues an upward trend witnessed during the first half of 2017, which saw average selling prices rise by a total of 20.9% to reach $870,016. A correction in the supply/demand disparity that was driving speculation appears to be in progress, with a better supplied market helping to curb unchecked price growth.
In the wake of the provincial government's launch of the Ontario Fair Housing Plan, TREB hired market research firm Ipsos to conduct two surveys focusing on both buyers and sellers. Results of these polls provide insight into the mindset of these two groups, comparing their similarities and differences. According to the results, 30% of households surveyed expect to list their homes during the next year, with 12% responding as "likely" and 18% as "very likely". 15% of those surveyed list the new Fair Housing Plan as the main reason why they would consider listing their home, while nearly 80% of those interested in listing their home stating that they would also be purchasing a new home.
In contrast, 35% of households surveyed said that they would be likely (22%) or very likely (13%) to purchase a home during the same period. Of these likely buyers, only 40% would be first-time home buyers, representing a significant 53% decline over numbers recorded in a similar survey conducted last fall. Mirroring the 15% who listed the Fair Housing Plan as a motivating factor in listing their homes, 10% of households who said they wouldn't purchase a home in the next year also list the new housing policy as either a key or contributing factor.
"The year-over-year dip in home sales we have experienced over the last two months seem to be the result of would-be buyers putting their decision to purchase temporarily on hold while they monitor the impact of the Fair Housing Plan," said Jason Mercer, TREB’s Director of Market Analysis and Service Channels. "On the supply side of the market, it certainly looks as though buyers will benefit from more choice in the second half of 2017 compared to the same period in 2016”.
Results from the survey suggest that many households are awaiting in a holding pattern to ride out market fluctuations in the wake of the new housing act, and are expected to return to the market within the next year. In addition to the uncertainly created by the housing policy, it is expected that the Bank of Canada will raise interest rates at least once in the second half of the year. Considering these factors, TREB is predicting a decline to a level between 89,000 to 100,000 transactions in 2017. While transactions are expected to decline, listings are forecasted to grow throughout the year, with a predicted range of 175,000 and 190,000 listings for 2017.
