The housing market is always a hotly discussed topic, but the conversation around April’s headlines was deafening. From homebuyers employing emotional new tactics to Ontario’s foreign buyer tax bombshell, here’s this month’s most important real estate news items.
A Heartfelt Letter Wins the Home
(March 30) In the Golden Horseshoe’s blistering market, homes selling for hundreds of thousands of dollars over asking is practically commonplace; so an Oakville couple really turned heads when they accepted an offer $150,000 below their top bid – all because of a letter written by the buyer.
Michelle Croft and her husband couldn’t help but be moved by the personal touch from Joo-Meg and Rosanna Soh, who wanted to downsize to the 1,983-square-foot home with their four children, become mortgage free, and have more time to embark on missionary work. Despite 14 other offers, the family won the home because they would cherish the neighbourhood, Croft told the Toronto Star.
But is this a standalone instance, or does appealing to a seller’s emotional side really work? You bet it does, says Carlos Moniz, an agent with Zoocasa Realty. He’s taken the strategy multiple times with his buyer clients, and has seen it “six or seven” times as a listing agent. “You really try to make that emotional connection and try to make it not just about the dollars and cents,” he says.
“Obviously in this market it’s very competitive, so if I think that will make a difference with the sellers then I’ll have my buyer put together something along those lines.”
Vancouver Bounces Back
(April 4) The Vancouver real estate market has stalled over the past months, as it absorbed the implementation of last August’s 15-per-cent foreign buyer tax – but buyers are tepidly re-entering the market, reveal the latest numbers from the Real Estate Board of Greater Vancouver. A total of 3,579 units changed hands in March, reports the board – while that’s 30.8 per cent below last year’s numbers, it’s a whopping 47.6 per cent from February, indicating the market is reacting the usual spring trends and perhaps signaling short-term recovery.
While the greatest downturn in demand has been in the detached home market, buyers are still clamouring for townhouses and condos, says REBGV President Jill Oudil, who adds that sellers remain hesitant to list, further tightening market conditions.
“Sellers still seem reluctant to put their homes on the market, making for stiff competition among home buyers,” she stated.
New listings for al home types were down 24.1 per cent year over year, though recovered 29.9 per cent from the previous month.
“Home prices will likely continue to increase until we see more housing supply coming to market,” Oudil adds.
The Home Price Index for the region in March was $9191,300 – up 1.4 per cent month over month. Detached homes sold for an average of $1,489,400, condos for $537,400, and townhouses sold for an average of $685,100.
Huge GTA Price Growth Sparks Federal Concern
(April 5) The Toronto Real Estate Board releases its March numbers for the Greater Toronto Area, revealing prices have grown a scorching 33.2 per cent year over year to an average of $916,567. The news captures the attention of the federal Department of Finance, and prompts finance minister Bill Morneau to call a meeting with both Toronto Mayor John Tory, and provincial minister Charles Sousa to discuss affordability challenges for buyers in the region.
“I believe we must take a closer look at these evolving market conditions and take stock of (the) implications for our largest urban area,” he wrote in two separate letters to Sousa and Tory. He also referenced low interest rates and overvaluation warnings released by the Canada Mortgage and Housing Corporation as cause for concern. The “Big Three” schedule a face-to-face for April 18.
No Changes from the Bank of Canada
(April 12) Canada’s central bank has opted once again to leave monetary policy as is, maintaining its trend-setting interest rate at 0.5 per cent, where it has been since July 2015.
What is interesting, however, is the BoC’s dropping of references to a potential rate cut, which it has alluded to in previous announcements this year. A strengthening economy, further fueled by growth and rate hikes in the U.S., continues to put upward pressure on the BoC to raise interest rates, though Governor Stephen Poloz remains adamant that inflation doesn’t support such a move, and won’t until 2018.
In its accompanying Monetary Policy Report, the BoC weighed in on the health of the housing market, saying it’s likely the government will implement additional rules to cool demand.
It also issued a word of warning for the Golden Horseshoe region, which it says is showing evidence of speculative activity. “Price growth in the GTA has accelerated and seems to have entered a phase in which speculation is playing a larger role,” it writes.
The Big Three Meet on Housing
(April 18) As promised, Tory, Sousa and Morneau gather in Toronto to discuss possible ways to stabilize the GTA housing market, and improve affordability for buyers and renters in the region.
Stated Sousa following the meeting, “A strong housing market reflects Ontario’s strong economy. Canadians are moving to Ontario at the fastest rate in 29 years, and the Greater Golden Horseshoe continues to be one of the most attractive places in the country for newcomers. While this is good news, our government has become increasingly concerned about rapidly rising rents and housing prices, and their impact on the many people looking to find a home.”
He added that the meeting “was productive, as the three agreed to meet quarterly to collaborate on prices, speculative investment, vacant homes, and supply challenges.
However, it’s not anticipated at the time that any specific measures would be revealed prior to the upcoming provincial Liberal budget on April 27. That is, until…
Ontario Government Reveals Fair Housing Plan
(April 20) Two days later, in a semi-surprise move, the provincial Liberals unveil their 16-part Fair Housing Plan, a package of measures designed to cool runaway real estate price growth as well as protect renters. A centerpiece is the announcement of a foreign buyer tax in the Golden Horseshoe, as well as sweeping rent controls for unit, regardless of when they were built. The province also empowers the City of Toronto to implement an empty homes tax.
TREB responded with some criticism, saying more data should have been collected prior to making a move. Stated CEO John DiMichelle, “The Toronto Real Estate Board is encouraged that all levels of government are making the state of the housing market a priority. However, TREB strongly believes that public policy decisions with regard to the housing market should be evidence-based and supported by empirical data.
“In this regard, it is not clear that the issues targeted by the policies announced today are fully understood at this point, nor is it clear how effective these policies will be, or if they will have unintended consequences.”
New Builds Break Records
(April 21) The GTA resale market isn’t the only housing segment smashing records: The Building Industry and Land Development Association (BILD) reports that more brand-new homes were sold in March than ever before, with 4,500 changing hands. Prior, the most sold occurred in May 2016, at 3,820 units.
The average price for brand new condos and stacked townhouses rose 14 per cent year over year, to $532,792, while detached home prices rose to $1,786,417 – a whopping difference of $716,711.
Altus Group, which conducts research on BILD’s behalf, found that a scramble for several hot new project helped drive growth.
“The record number of condominium apartment sales in March was boosted by recent projects in prime locations,” said Patricia Arsenault, executive vice president of research consulting services. “More than half of March sales were in projects opened in February or March.
Toronto Condos Are on Fire
(April 25) GTA buyers, and especially those within the 416, poured into high-rise living options during the first three months of the year with 7,251 sales – a 21.7 per cent increase – according to TREB’s first quarter Condominium Report.
TREB reports that the growth is likely due to a surge of first-time buyers entering the market, despite recent mortgage rules that have limited affordability.
“Condominium apartments have historically been the housing type of choice for many first-time buyers, due to the relatively lower price point compared to ground-oriented housing options,” the board states.
“Given that more than half of intending home buyers are expected to be first-time buyers in 2017, according to a recent Ipsos poll conducted for TREB, it makes sense that demand for this housing type has remained strong.”
The average sale price for condos in the GTA grew 24.3 per cent in Q1, to $489,551. In the 416 proper, prices rose to $521,842.
A Third Red Warning
(April 26) The first quarterly Housing Market Assessment released by the CMHC reveals that there are some signs of improvement in Canada’s housing markets – but the Crown Corporation has opted to rank the national market with its third consecutive “red warning”. Overall, it graded the national market as having “strong evidence of problematic conditions”, though they did downgrade evidence of overvaluation from eight housing market centers, to six.
Toronto and Hamilton continue to face steep price acceleration, the report finds, as well as overheating and overvaluation risks, as price growth has intensified and demand outpaces supply in the rental, resale and new home markets.