It’s now almost two months since the Ontario government introduced its Fair Housing Plan, and it appears the measures are having their desired effect. The latest release from the Toronto Real Estate Board showed that housing sales were down by 20.3 per cent compared to May of 2016. In addition, the number of new listings is up considerably over the same period – an increase of 42.9 per cent year over year. It’s welcome news for home buyers that have faced somewhat of a feeding frenzy when it comes to GTA property over the past year. However, some who purchase at the top of the expensive market may now be feeling buyers’ remorse.
Still No Sign of a Buyers’ Market
However, increased listings and slower sales don’t mean buyers are not facing one of the most expensive real estate markets in North America. As outlined by TREB President Larry Cerqua, “Even with the robust increase in active listings, inventory levels remain low.
“At the end of May, we had less than two months of inventory. This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year.”
In May, the average selling price for all home types combined for the TREB Market Area was up by 14.9 per cent year-over-year to $863,910, but that is significantly down from the annual price gain of 25 per cent in April and 33 per cent in March. Detached home sale fell 26.1 per cent in the 416, and Toronto condos by 4.3 per cent. As a result, more and more buyers are adopting a wait-and-see attitude to the market, and are much less likely to find themselves caught up in a bidding war.
“It is definitely being felt,” reveals Zoocasa sales agent Carlos Moniz. “For a long time people felt that if they didn’t buy it would cost them money as prices were going up so fast. I think buyers now don’t have that same mentality; they are waiting to see if prices go down.”
Walking Away From a Peak-Market Purchase
Another development since the introduction of the Plan, and particularly the 15 per cent speculation tax on foreign investors, has been buyers electing to forego their deposit in order to get out of deals. This is a complete turnaround from what was happening in the early part of 2017, explains Moniz.
“In January and February, if anyone ran into trouble with financing, some sellers were looking to get out of the sale because they thought they could get substantially more if they got out and resold,” he says. “Now some buyers are trying to get out to try and see if they can buy for less.”
Related Read: Bought but Can’t Sell? 7 Tips for Homeowners in a Hurry
With the average selling price of a home in Toronto above $860,000, that would mean walking away on a deposit of at least $43,000 – not an amount most buyers could stomach.
“Walking away from a deposit, it can be a substantial amount of money, so I really think that depends on the end user,” says Moniz. “If it’s a family buying a property, I don’t think they are walking away. If it’s a speculative investor that is trying to flip the property, it may make sense for them, but that depends on the amount of the deposit.”
To protect against such an outcome, Moniz advises most of his clients that are selling a home to seek a higher deposit than 5 per cent. This lessens the likelihood of a buyer deciding to walk away from a deal with expectations of the market dipping further in the months ahead.
Related Read: Is 5% Down Still Enough In Toronto’s Hot Housing Market?
Will the Housing Market Continue to Soften?
In enacting its legislation, the Ontario government clearly took BC and its efforts to cool the Vancouver market as a guideline. In Moniz’ opinion, the cooling we have experienced in the GTA over the past two months is similar to what occurred on the West Coast, and the prospects of a full-blown correction are slim, he believes.
“When we look at Vancouver, sales were flat for an eight to 10-month period,” he says. “But it wasn’t double digit decreases or anything. The bubble bursting that the media talks about with prices decreases 30-40 per cent, I don’t see that happening.”
