The recent slew of measures designed to cool the Vancouver real estate market continue to be controversial – and Royal LePage President and CEO Phil Soper hasn’t been shy to voice his thoughts on whether they’ve done more harm than good.
He states the “series of uncoordinated moves by all three levels of government” have mostly confused consumers, leading to their hesitation to list their homes, and are the real reason behind the widening gap between conditions in the west coast city and Toronto. The changes, which have been introduced by both the provincial and municipal governments, include foreign buyer and empty homes taxes.
“For the first time in several years, real estate markets in Vancouver and Toronto are headed in opposite directions,” he states in Royal LePage’s quarterly House Price Survey.
“With the housing shortage becoming more acute, Toronto easily stepped forward to assume the title of Canada’s most overheated real estate market.”
Foreign Buyer Tax was Misguided: Soper
The report is especially scathing in regards to the 15% tax levied on the home purchases of foreign buyers, a surprise move implemented in August 2016, and has since led to double-digit declines in B.C. home sales.
“The principal victims of the B.C. government’s foreign buyer tax were Canadians who had planned to sell or buy a home and were frightened away by unsubstantiated rhetoric which the Chinese were entirely to blame for Vancouver’s housing shortage,” the report states, adding that the region may be in for “market whiplash”, as a resulting six month’s-worth of pent-up demand spurs buyers and sellers to finally take action.
“The reality is that as much as 90 per cent of the housing activity that disappeared overnight in the Lower Mainland after the tax was introduced was from Canadian residents, not foreign investors. Home buyers are waking up to this reality and may be ready to rush back into the market.”
Already, prices have rebounded to just under $1.2 million in the first quarter in Metro Vancouver, a 12.3% year-over-year increase.
12.3 per cent year-over-year to nearly $1.2 million in the first three months of 2017, according to a report from Royal LePage released Tuesday.
Warnings Against Toronto Market Mistakes
Concerns over runaway demand and sales growth in Ontario was also hotly discussed, as the province outpaced activity in all other markets. Rampant demand has spilled over from the Greater Toronto Area and is now impacting the whole “Golden Horseshoe”, driving prices as far as the Windsor and London. In fact, Ontario accounts for nearly half of Canada’s total aggregate price increase in the first quarter; other regions saw an average of 6.4% growth, compared to 20% in markets within a two-hour drive radius of Toronto, to an average of $759,241.
The scorching activity has drawn attention from all levels of government, prompting the “big three” – Toronto mayor John Tory, provincial finance minister Charles Sousa and federal finance minister Bill Morneau – to meet face to face this week to discuss housing affordability solutions. Sousa has been particularly proactive, announcing a suite of 10 measures to come in the upcoming provincial budget on April 27.
Related Read: Ontario Government to Consider Foreign Buyer Tax
It’s a coordinated approach that should have been undertaken when assessing Vancouver’s market challenges, Soper alludes, and a rushed solution could spell disaster for Toronto. “The hasty introduction of new real estate-related regulations or taxes in Ontario, in absence of data and analysis to support these policy moves, could lead to sharp price correction, impacting not only household wealth, but damaging the broader Canadian economy as well,” he says.
“We applaud the Canadian government’s federal budget commitment to partner with the provinces and municipalities to create a national housing strategy.”
Balanced Conditions in Other Markets
Outside of the Toronto and Vancouver markets, Canada’s housing landscape is relatively drama-free.
According to Soper: “Elsewhere in the country, housing markets are in balance. Fairly-priced homes are selling within a reasonable amount of time. Bidding wars are rare and buyers have an opportunity to make conditional offers.”
He points to improving conditions in Alberta, as oil prices strengthen, forecasting it to be the fastest-growing province, with home prices to rise 0.6% in Calgary to an average of $461,635m and 0.3% to $381,733 in Edmonton.
Quebec is also anticipated to be an “economic star”, due to robust business investment, and housing growth slated for string mid-single digit appreciation.
For the country as a whole, the Royal LePage National House Price Composite finds national home prices are up 12.6% to $574,575. Two-storey homes saw the greatest growth at 13.9%, to an average of $681,728, bungalows up 10.9% to $490,018, and condos up 8.9% to $373,768.