Monthly Real Estate News Recap: January

2017 may have just begun, but real estate news is already off to a stiff clip, with new developments to report for 2016’s most pressing housing issues. From rising costs for first-time buyers, to a second look at taxes on foreigners, here are the top headlines affecting January homebuyers and sellers.

Toronto on Track for Another Record Year

Don’t expect any price relief in the big smoke this year – according to January sales data released by the Toronto Real Estate Board (TREB), listings have been flying off the figurative shelf. Sales are up 11.8% from last year, with 5,188 homes changing hands via TREB’s MLS system, with the average price rising 22.3% to $770,745. While all Toronto real estate home types experienced double-digit gains, condos are seeing a higher pace of growth than low-rise homes, due to simple lack of supply. In fact, says TREB’s Director of market analysis Jason Mercer, there are only half the number of homes available for sale compared to January 2016.

“That statistic on its own tells us that there is a serious supply problem in the GTA – a problem that will continue to play itself out in 2017,” he stated.

TREB President Larry Cerqua adds it will be a challenging year for anyone trying to enter the market, especially for first time buyers – but that won’t stop demand. “Homeownership continues to be a great investment and remains very important to the majority of GTA households. As we move through 2017, we expect the demand for ownership for housing to remain strong, including demand from first-time buyers, who, according to a recent Ipsos survey, could account for more than half of transactions this year,” he says. “However, many of these would-be buyers will have problems finding a home that meets their needs in a market with very little inventory.”

Sales Plunge 40% in Vancouver

Canada’s priciest market is clearly undergoing a correction reveals January data from the Real Estate Board of Greater Vancouver. There were only 1,523 sales made last month, compared to 2,519 in January 2016, and an 11.1% decline month over month from December.  Prices are also starting to slide, dropping 3.7% over a six-month period, to an MLS HPI Composite Benchmark of $869,000.

“From a real estate perspective, it’s a lukewarm start to the year compared to 2016,” stated REBGV President Dan Morrison. “While we saw near record-breaking sales at this time last year, home buyers and sellers are more reluctant to engage so far in 2017.”

While the market was showing slight signs of a slowdown in the first half of last year, the introduction of a 15% foreign investment tax in August has rapidly fast tracked the decline in sales. Only 44 detached houses sold in January, which analysts say reflects fewer overseas buyers in the west-coast market. The benchmark for those properties has dropped 6.6% to $1,474,800.

GO Transit Expansion to Boost GTA Values

Some good news for homebuyers looking beyond the city core for value – plans to improve GO Transit service for commuters is expected to boost home properties in some GTA markets by as much as 13%, finds a TREB report on housing and transit.

The plan would boost daily service to an all-day 15-minute frequency, servicing both directions. Not only will it make some communities more desirable, finds TREB, but there could be affordability savings of up to 18% for those who currently drive their car to work in Barrie, Guelph, Hamilton, and King. Not a bad argument for trading the car for the train!

Another Red Warning

The Canada Mortgage and Housing Corporation – the national agency that monitors the market and issue mortgage insurance – has again bestowed its most alarming of statuses on Canada’s housing market as a whole, citing the “spillover” effect, which is worsening affordability in markets close to city centres.

While CMHC has given individual markets the dubious “red” distinction in past assessments, last October was the first time the Canadian market as a whole fell into the category. The HMA is designed to act as an “early warning system”, calling out concerning conditions in 15 specific markets. Its most recent edition finds:

• Overvaluation and overbuilding remain the most prevalent problematic conditions observed across the 15 centres covered by the HMA.
• Overvaluation and overbuilding are detected in eight centres.
• Evidence of problematic conditions has increased in Victoria since the previous assessment due to moderate evidence of price acceleration and overvaluation.
• Evidence of problematic conditions has decreased in Calgary since the previous assessment as some housing markets in oil-dependent centres are now rebalancing.
• Strong evidence of problematic conditions continue to be detected in Vancouver, Toronto, Regina, Saskatoon and Hamilton.

Evidence of problematic conditions in Ottawa and Atlantic Canada remains weak.
Stated CMHC Chief Economist Bob Dugan in the institution’s Quarterly Housing Market Assessment (HMA), “We continue to detect strong evidence of problematic conditions in Canada. Price accumulation in Vancouver, Victoria, Toronto and Hamilton indicates that home price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support.”

BC Backpeddles on Foreign Buyer Tax

Seven months after introducing a controversial foreign buyer tax on Metro Vancouver real estate, the British Columbia government has made an amendment to exempt those with permits to work in the country.
The change was announced Sunday by B.C. Premier Christy Clarke, who stated to reporters, “We believe the best and the brightest should be able to come to British Columbia. We’re going to lift the foreign owners’ tax on people who have work permits, who are paying taxes and living in British Columbia, as a way to encourage more people to come.” Provincial communications staff also confirmed there are no plans to extend the existing 15% tax beyond the Metro Vancouver area.