Real Foreign Buyer Data, a Toronto Buyer’s Market and Banning Double Ending: Weekly Real Estate News Recap

“Calm, not Kill”

That’s what Ontario Premier Kathleen Wynne says is the intention of the Fair Housing Plan, a package of 16 new measures designed to cool the housing market, introduced on April 20. She made the comments to reporters at Queens Park.

“We’re monitoring it closely. It is a sophisticated response to an overheating of the market and we’ll see, over the coming months, what the impact has been.”

The rules, which include a tax on foreign buyers, real estate speculators, and potentially owners of empty homes, sparked a psychological shift in the market, as buyers choose to wait out the impact, and sellers worry they’ve missed the most profitable boat. Toronto real estate sales plunged 37.3 per cent year over year in June, a result closely linked to the changes.

These effects, combined with last week’s interest rate hike from the Bank of Canada, have industry pundits concerned it’s too much meddling at once. “Let’s hit the brakes here,” stated Tim Hudak, president of the Ontario Real Estate Association. “Let’s take a wait-and-see approach before any more demand interventions.”

Toronto Mayor Weighs in on Market

Toronto mayor John Tory is also in support of the province’s cooling measures, saying the city’s market is still healthy, despite the 15.1-per-cent year over year sales decline recorded last month. Speaking to Metro, he said, “Toronto real estate investment is still, I think, an excellent investment for people, so those who bought a house sometime in the last year and a half, I don’t think need to feel that they made a mistake.

“They didn’t. They’ve invested in a dynamic, growing city and I think that over time that will prove to be a very good investment, even though it’s a huge amount of money for them to afford to buy a house in Toronto.”

He feels the Fair Housing Plan has effectively calmed the market without “unduly” disrupting it, and improved conditions for buyers as price increases have slowed.

Tory’s positive sentiments were echoed in separate comments made by Federal Finance Minister Bill Morneau, who told the Canadian Press that action had to be taken in the country’s biggest markets, where conditions were unsustainable.

“What we’ve put in place has had some impact – and some impact in having a slight cooling in the market, which of course was our objective,” he said.

Ottawa Market Seeing “Toronto-Like” Conditions

Our nation’s capital has long been a sleepy real estate destination – but that has drastically changed, as increased buyer demand and tight supply put the squeeze on prices. The average cost of an Ottawa home rose 8.2 per cent to $432,864 in the second quarter, reports Royal LePage, a dynamic not experienced in the city in recent years.

“Inventory levels across Ottawa have radically changed of late, reaching three-year lows and dropping by more than 20 per cent compared to last year. In recent months, we have seen a Toronto-like effect with many buyers and not enough listings to go around. This dynamic is putting a lot of pressure on the region’s home prices, in what is now decidedly a seller’s market,” said Hanna Browne, an Ottawa-based Royal Le page Team Realty broker.

The brokerage forecasts Ottawa prices will continue their ascent, to rise an additional 6 per cent to $439,332 by the end of 2017.

GTA Now a Buyer’s Market: CREA

The June numbers from the Canadian Real Estate Association reveal the Greater Toronto Area housing market’s sales-to-active-listings ratio has dipped below 40 per cent – indicative of buyer’s market conditions. A ratio between 40 – 50 per cent is considered balanced, while over 60 is a seller’s market.

Nationally, sales across Canada fell 6.7 per cent from May, and a full 11.4 per cent year over year. And, while the national sales price rose 0.4 per cent to $504,458, it is the smallest monthly increase recorded in seven years.

CREA President Andrew Peck says buyers are clearly hesitating to enter the market, choosing instead to observe how changes from the Ontario Fair Housing Plan, and newly hiked interest rates, will play out.

“Canadian economic and job growth have been improving, which is good news for housing demand. However, it also means that interest rates have begun to rise, which may impact home buyer confidence – particularly in pricier markets like Toronto and Vancouver, where recent housing policies had already moved potential buyers to the sidelines,” he stated.

He adds that in lower-priced markets, such as the Hamilton condos market, with already balanced affordability, the impact will be less felt.

How Bad is Canadian Mortgage Debt?

Are Canadian homeowners drowning in their mortgage debt obligations? The Canada Mortgage and Housing Corporation intends to find out, with a new quarterly report on the state of credit and mortgage trends across the country. Based on data from Equifax, the first iteration reveals a positive trend in homeownership credit – though it’s important to continue taking a “vigilant” approach.

According to the CMHC:

  • There were 1.03 million new mortgage loans in 2016, a 9 per cent increase year over year, and representing $269 billion
  • Those with mortgages are generally in a better credit position than those without
  • The overall trend of mortgage delinquencies is declining

“Household debt is a key concern for Canada’s housing and finance systems,” said CMHC Senior Statistical Researcher Maxim Armstrong. “Using data collected by Equifax, CMHC is able to provide reliable, impartial and timely information on credit trends and developments in Canada.”

Statistics Canada to Build Massive Home Database

In the Federal Budget this past March, the Liberal government divulged it will commit $39.9 million over five years for StatsCan to undertake a foreign buyer study, as well as the creation of the Housing Statistics Framework, a database to collect in-depth data on homeownership and demographics.

Those efforts are finally underway, as a team of “more than 15 people” has been assembled to create the database – and it’s no small undertaking.

“It is a very challenging task,” said Haig McCarrell, director of the Investment, Science and Technology Division at Statistics Canada. “There is data on the real estate market, but the problem is that it is inconsistent. A number of studies had been done, but with no conclusions, because of missing information.”

The team will use existing census records as well as private and public partner sources to fill in those gaps. The resulting National Property Register will have information on every property in Canada, as well as who owns them. StatsCan will then leverage that data to create hard numbers on foreign buyers, average home prices, mortgage holders, vacant homes, and more.

The Federal government has come under sharp rebuke in the past for its lack of comprehensive housing and buyer data. Policy makers and critics have argued that without this information, it’s impossible to regulate the market.

The database is scheduled for completion by the end of 2017, with priority for the Toronto and Vancouver real estate markets.

Canadians Double Spending on U.S. Real Estate

An American report from the National Association of Realtors finds that the number of Canadians buying U.S. real estate is on the rise, and that they’re buying increasingly expensive properties in sunny vacation destinations like California, Arizona, and especially Florida. A total of US$19 billion was spent by Canucks south of the border between April 2016 to March 2017 – a doubled increase year over year.

According to the report, Canadian buyers, many of whom have downsized their family homes and are pursuing the snowbird lifestyle and investment properties, scored an unexpectedly large windfall from the sale of their home.

“We’ve had such a dial up in prices. Canadians are selling homes for prices they never could have imagined and that’s allowing them to buy vacation homes for prices they never could have imagined. They just have tons of free capital,” said Janice Fox, broker at Hazelton Real Estate, to Mansion Global.

Should Double Ending Be Banned? Have Your Say

A proposal to outright ban the practice of “double ending” – when an agent represents both buyer and seller in a real estate transaction and nets both commissions – has been opened up for public review by the Real Estate Council of Ontario. It is the first of two phases to “modernize” the rules for agents in the province, which critics say don’t go nearly far enough to regulate unethical behaviour.

Double ending in particular has come under heavy scrutiny this year. A CBC Marketplace investigation revealed some agents were using the method in a way that broke professional decorum, such as promising to disclose offers, shutting out other buyers, and even guaranteeing the sale of a home to a particular buyer – all of which is prohibited under REBBA 2002. While double ending itself is legal, all buyer and seller parties must be informed, and agree to it, in writing.

Lauren Haw, Broker of Record at Zoocasa Realty, has been a strong advocate for removing the practice altogether, saying it’s impossible for agents to act ethically when they have such monetary gain. “Agents – including those that are on the same team – who have any monetary connection to the sale whatsoever should not be able to represent both the buyer and seller of a property, ever. Anything less than a blanket restriction on multiple representation is not enough,” she says.

“The moral issue is that the practice is in the worst interest of the seller… anyone working in the best interest of their sellers would put the home on the open market.”

Joseph Richer, RECO Registrar, states buyers and sellers rightfully expect greater protections from the industry. “Today’s consumers are demanding more transparency in real estate transactions which, for most of us, are the biggest financial transactions of our lives,” he says, adding that more should be done to penalize agents to act unethically. “RECO welcomes additional tools to punish and discourage misbehavior.”

Currently, agents can be fined up to $50,000, and in extreme cases, stripped of their license. RECO recommends the following actions:

  • Higher fines
  • Disgorgement (paying back commissions)
  • And empowering RECO to suspend or revoke registrations.

The proposal will be open for public review until July 24.

About Penelope Graham

Penelope Graham is the Managing Editor at Zoocasa, and has over a decade of experience covering real estate, mortgage, and personal finance topics. Her commentary on the housing market is frequently featured on both national and local media outlets including BNN Bloomberg, CBC, The Toronto Star, National Post, and The Huffington Post. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods, travelling abroad, or in the dance studio.

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