When the Ontario government revealed the new Fair Housing Plan on April 20, they intended to shake up the market – and in that regard, they’ve certainly succeeded. New measures rolled out to discourage foreign buyer and speculative investor activity have been met with mixed response; while consumers have applauded efforts to improve housing affordability, analysts have expressed doubts whether the 16-part plan will have its desired effect on the market.
The dust has yet to settle, and it’s too soon to tell whether the changes have profoundly impacted buyer and seller behaviour. However, the April numbers from the Toronto Real Estate Board (TREB) and condo-data think tank Urbanation, offer glimpses of early market reaction.
TREB: House Sellers Looking to Cash In
While prices have yet to subside in the Greater Toronto Area – the average sale price in the region increased a blistering 31.7 per cent year over year, to an average of $920,791 – a notable surge of new listings came to market in April.
The number of Toronto homes for sale via MLS rose 33.6 per cent from 2016, with 21,630 homes up for grabs. While part of this can be attributed to the spring Toronto real estate market’s usual uptick, the vast majority of new homes coming to market are in the detached, semi-detached and townhome segments, while the number of new condo listings remained the same. This suggests house owners, who have enjoyed astronomical returns on their home investment, may now feel it’s time to cash in, alleviating years of extremely tight low-rise inventory in the city.
It’s possible the increase is due to the province’s new measures, says TREB President Larry Cerqua, though he points out such a trend would need to persist for many months to balance the GTA market.
“The fact that we experienced extremely strong growth in new listings in April means that buyers benefitted from considerably more choice in the marketplace,” he said. “It is too early to tell whether the increase in new listings was simply due to households reacting to the strong double-digit price growth reported over the past year, or if some of the increase was also a reaction to the Ontario government’s recently announced Fair Housing Plan.
“It will likely take a number of months to unwind the substantial pent-up demand that has built over the past two years.” He adds buyers and sellers can expect to see annual price growth to remain much higher than that of inflation, especially as the market enters the spring and summer real estate season.
In total, the GTA market saw a slight 3.2-per cent year-over-year dip in sales – which TREB attributes to the April Easter weekend – with 11,630 homes changing hands, 4,164 within the City of Toronto (at an average price of $943,947), and 7,466 within the 905 region ($907,877).
The price of a detached home remains above the $1-million mark, at $1,578,542 and $1,098,827 in the 416 and 905, respectively.
Condo sales rose 8 per cent in the city proper, to an average price of $578,280, and 6.9% to $449,792 in the ‘burbs.
Evidence Against Widespread Real Estate Speculation
TREB has been critical in its response to the province’s move, saying more empirical data should have been gathered before concrete changes were introduced, and they took the opportunity to release new study findings alongside last month’s numbers.
Using an assessment of land registry data in Ontario, residential data from the municipal Property Assessment Corporation, and info from Teranet from 2008 to 2017, they’ve found instances of foreign buying to be low throughout the Greater Golden Horseshoe. The number of buyers with a non-Canadian mailing address was “well-below” 1 per cent each year, with the majority of such buyers residing in the United States.
The average share of foreign buyers in the GGH was 2.3 per cent between 2008 – 2015, dipped to 2.2 per cent in 2016, and rose to 2.6 per cent between January and April of this year. TREB also finds 90-plus per cent of such buyers purchase homes to live in, not as investments.
The study also finds that home transactions that could be classified as speculation – those bought and sold within one year – totaled less than 5 per cent of all purchases in 2017, and that the ratio of homeowners with more than one property was only 6.2 per cent in the GGH.
UPDATE: The Ontario Ministry of Finance has countered TREB’s findings, claiming they’re off the mark, and defending their decision to tax foreigners purchasing property in Ontario. In a statement given to the CBC, the province wrote, “the residency of many individuals captured in the data set is unknown and, as a result, this is not a reliable way to determine the number of non-residents participating in the housing market.”
“There is also no strong correlation between the number of non-resident purchasers and the number of out-of-country mailing addresses attributed to buyers.”
Urbanation Data Paints a Different Picture
However, the first-quarter numbers released by Urbanation tell a different story regarding speculative activity.
Their report finds the GTA condo market continues to sizzle, with 2.5 months of inventory – a 15-year low – and sales up a huge 73 per cent (9,932 units) during the first three months of the year.
The average price for a unit rose to $733 per square foot within the 416, and $608 per square foot in the 905. Part of this is due to the rampant demand and boost in new launches – 6,293, compared to 3,061 units built and registered in 2016. Units not sold at the end of the quarter sat at $719 per square foot, a 20-per cent annual increase.
What’s most telling though, are more units are selling – sometimes multiple times – after just being built or coming to the resale market for the first time.
“Following the recent strength in condo price appreciation, (there was) an increase in resale activity within newly completed buildings as well as more units transacting twice within shorter timeframes,” said Shaun Hildebrand, senior vice president at Urbanation, who adds that while some activity could be due to outpriced buyers downsizing their real estate expectations, data supports speculative activity.
“The shortening of holding periods for some condo buyers is an outcome of the rapidly accelerating market. Although the share of short-term condo participants still appears relatively low, it will be important to monitor the situation closely going forward as market conditions evolve.”
The number of homes that sold within two years of being built and registered rose 69 per cent from 2016, while 249 resale units sold in Q1 for the second time within a one-year period – a 53-per cent increase.
Pre-concept condos also prove more popular than resale, with 6,203 units sold (+24 per cent).
The average price for all units in the GTA region is now $510,000.