On a day when Mayor John Tory was to meet with federal Minister of Finance Bill Morneau and Ontario Minister of Finance Charles Sousa to discuss the scorching Toronto real estate market, the Canadian Real Estate Association’s (CREA) latest statistics underline that Toronto is, in fact, the centre of the Canadian real estate universe.
Separate news from Royal LePage confirms the craziness continues; in the first quarter of 2017, home price growth in the GTA shot up by 20 per cent year-over-year to $759,241.
National home sales edged up 1.1 per cent in March 2017, CREA says, with sales up from the previous month in more than half of all local markets, led by the Lower Mainland of British Columbia, London & St. Thomas and Montreal.
Actual (not seasonally adjusted) activity in March was up 6.6 per cent year-over-year, with gains in close to 75 per cent of local markets. Sales in the GTA posted the biggest increase, which offset a decline in the number of homes changing hands in Greater Vancouver.
“The current strength in national home sales mainly speaks to what’s going on in and around Toronto,” says CREA President Andrew Peck. “Elsewhere, sales either remain slow or well below previous heights.”
“The latest Canadian housing market statistics suggest that the drum-tight housing market balance in Toronto and nearby cities stands in contrast to housing market trends elsewhere in Ontario and other provinces,” adds Gregory Klump, CREA chief economist. “Because housing market balance varies by location, federal or provincial policy measures aimed at cooling demand in Toronto risk destabilizing housing markets elsewhere.”
This last point might give pause to Tory, Morneau and Sousa, who were to discuss what, if any, measures need to be taken to keep Toronto real estate from overheating
The Bank of Canada last week warned of growing speculation in the Toronto housing market, saying a correction could reverberate across other parts of the country.
On the one hand you have the CREA saying any new policies intended to cool the Toronto market could destabilize markets elsewhere. On the other, the Bank of Canada and others say if no action is taken, a local correction could spell trouble elsewhere in the country.
Good luck, Mr. Tory, Morneau and Sousa.
“Any measures that are introduced should be implemented slowly and thoughtfully, so as to best monitor their impact and ensure that appropriate adjustments can be made over time,” Christopher Alexander, regional director at Re/Max Ontario-Atlantic Canada, told YPNextHome. “If policies are too drastic, they risk causing undue anxiety on the GTA’s housing market in the short-term.
“There is a lot of buyer demand in the GTA right now, and if new rules or restrictions are put in place to cool the market in the short-term, it may simply delay demand for six months. We saw this last fall when new mortgage rules were announced and buyers simply hit pause, but in reality, nothing changed and we saw the market hit new highs in early 2017.”
Indeed, the GTA is having a huge influence over the national picture.
The MLS Home Price Index for Canada rose by 18.6 per cent, year-over-year, in March 2017. Prices for two-storey single-family homes posted the strongest (21 per cent), followed closely by townhouse/row units (17.9 per cent ), one-storey single-family homes (16.6 per cent ) and apartment units (16.3 per cent).
Year-over-year benchmark price increases in the GTA and Oakville-Milton, Ont. were in the 30-per-cent range in March, and about 20 per cent in Victoria, elsewhere on Vancouver Island and in Guelph, Ont.
In the Fraser Valley and Greater Vancouver, prices have been recovering in recent months after having dipped in the second half of last year. On a year-over-year basis, home prices in the Fraser Valley and Greater Vancouver remain well above year-ago levels (up 19.4 per cent and 12.7 per cent, respectively).
By comparison, home prices eased by 1.2 per cent in Calgary and by 1.5 per cent in Saskatoon.
Home prices were up modestly from year-ago levels in Regina (1.7 per cent), Ottawa (four per cent), Greater Montreal (3.3 per cent) and Greater Moncton (4.7 per cent).
The national average price continues to be pulled upward by sales activity in Greater Vancouver and GTA – two of Canada’s tightest, most active and expensive housing markets.
Greater Vancouver’s share of national sales activity has diminished considerably over the past year, giving it less upward influence on the national average price. Still, the average price is reduced by more than $150,000 to $389,726 if Vancouver and Toronto sales are excluded from calculations.
As for possible policy measures to wrest control of the GTA market – be they taxes on foreign buyers, speculators or owners of vacant homes – ReMax’s Alexander urges caution, and the need for more data.
The true impact of the foreign buyer tax in Vancouver is yet to be determined; however, it did have an impact on consumer confidence as many buyers waited to see how it would take effect, causing less activity in the market overall,” he says.
“It’s important to note that Toronto and Vancouver are very different markets, as both Vancouver’s population and its geography are much smaller. It is fair to assume that such a tax would impact the middle-class and not just buyers in the upper-end of the market. In the short-term, potential sales may fall through as buyers adjust to the changes, which in turn could create a ripple effect throughout the market. It is critical that any decision around such a tax take into consideration how many foreign buyers there actually are and how buyers and sellers across the market may be impacted.”