The State of The Greater Toronto Real Estate Market

Real estate values in the Greater Toronto Area appear to have stabilized after a period of turmoil for most of 2017. In fact, there appears to be healthy demand these days as many buyers try to solidify their purchases before the new, tougher mortgage qualification rules kick in January 2018. Here is a little look back at this past year in real estate…

January to April, 2017 saw crazy bidding wars and a kind of buying frenzy as people competed for and mostly lost the houses they wanted to buy. There were very few listings and lots of pent up demand.

April to September saw a sudden reversal as listings flooded the market and would-be sellers came out of the woodwork. Rising interest rates and a new 15% foreign buyers provincial tax, as well as other measures of “The Fair Housing Act”, also contributed to the uncertainty.

During this period, hundreds of buyers found themselves in precarious situations where their current homes were not selling and the value of all real estate was dropping rapidly. Appraisal companies nervously brought back values far below expectations.

Pretty much all of the price gains from the first few months of 2017 were given back, but overall prices have remained slightly higher year over year.

In October, the federal government announced tougher mortgage borrowing guidelines to kick in no later than January 1, 2018. Regardless of whether you have a small or a large down payment, you will be qualified not at the rate you contract for, but rather two percent higher than that.

This may seem overly cautious for homeowners with lots of equity, or for those seeking five-year mortgages, but it’s all designed to ensure health and stability in the years ahead. And it’s the same for everyone, so we might as well accept it.

Meanwhile, October 2017 sales in Greater Toronto and Vancouver are definitely up again from September.

Roger Gallibois, owner of Real Estate Homeward in Toronto says “please keep the following in mind:

(a) Most millennials seem to be buying with 20% or more down
(b) Most baby boomers that are downsizing are purchasing with cash
(c) Most foreign buyers are purchasing with substantial cash and
(d) Our move-up buyers have a ton of equity in their homes.

Therefore many people can still easily BUY property in Toronto at current market prices while being subjected to the 2% stress test. 
 
Consequently, we’re expecting the months of October, November and December to be busier than usual, and January and February of 2018 to be slightly slower. I believe, that by March or April, the real estate market will have adapted to the changes and be back to normal.
 
My expectation for 2018 is that prices will increase between 2%-8%. Furthermore, I feel that 2017 and 2018 will be the first two years in the GTA where condos will appreciate faster than single-family detached homes.

Importantly, the Government of Canada announced this week that they are planning to attract one million newcomers to Canada within the next three years.

Approximately 600,000 of these newcomers will be economic migrants, with Toronto as their destination for many. Therefore, the demand for real estate in the GTA will continue to be very high.

Regardless of changes in government policy, people always need a place to live. Properties will continue to be bought and sold, or leased. Now is the time to prepare for the coming year.”

Myself, I find it difficult to make short term predictions–as circumstances can change quickly, but I do agree with Roger that the condo market remains strong and healthy and this will continue to be the case.

Back in 2014 I was referring to condos as the new starter home — at a time when lenders were concerned the condo market was over-heated. I feel this is even more the case now, and many other experts have since jumped on this bandwagon.

I also see fence-sitters finally ready to take the plunge to either buy a new home or refinance their current home ahead of the mortgage rule changes. This article on refinancing from a year ago still rings true today.

As consumers, we have never had access to so much free, good quality information as we do now. It can be overwhelming trying to decide what is right and wrong. More than ever, it pays to have one or two trusted advisors in your court. At the risk of sounding like a broken record and inserting a shameless plug… I mean your real estate agent and your Mortgage Broker… of course!

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