Toronto’s Home Price Decline Is Not The New Normal
Here’s what everyone wants to know about Toronto’s housing market — are these price declines the new normal? If they are, will we soon actually be able to afford a home in Toronto?
If history is anything to go by, the answer to both those questions is a resounding no.
It’s been almost one year since the former B.C. provincial government imposed a 15 percent tax on all home purchases made by foreign nationals in the Metro Vancouver area (and a few other select suburbs which had seen extraordinary home price increases).
In the first few months upon the imposition of this tax, the market reacted strongly. Average home prices went from a high of $933,100 to $897,600 within just three months — a four percent decrease across the board.
That price decline wasn’t necessarily the result of foreign buyers backing out from the Vancouver market, it was more a psychological reaction by both domestic and foreign buyers that the rally they thought would never end, was now over.
“Whenever there’s an artificial change that is brought on by political factors, there’s a natural rest in the market that occurs. The human tendency is to pause and figure things out,” said Elton Ash, Regional Executive Vice-President of RE/MAX Western Canada.
But in early 2017, confidence started creeping back into the market — home prices in Vancouver picked back up, with the condo market, in particular, propelling the rally. By May 2017, the Teranet-National Bank of Canada Home Price Index showed that Vancouver home prices had gone up by 8.2 percent from May 2016.
The benchmark home price for all types of homes in Vancouver is now $998,700, up seven percent from July of last year, just before the housing rules were announced. Basically, nothing has changed. Prices are high, affordability is low, and we’re essentially back at square one.
“This whole tax thing was brought about in the guise of creating home affordability,” said Ash. “The reality of the situation is that it was politically motivated, given the looming spring election and the Liberals were under pressure by the NDP, so they put some sort of tax in place.”
Ash claims that the Vancouver market rebounded because of B.C.’s strong economy and the motivation of mainland Chinese, in particular, to get their money out of China in any way possible, undeterred by any form of tax. “They look worldwide — compared to L.A., Seattle, Sydney, San Francisco, Vancouver homes are still a good option.”
The latest housing data from the Toronto Real Estate Board shows a price trajectory similar to Vancouver’s in the immediate aftermath of the foreign buyers tax.
The Ontario government slapped a 15 percent tax on foreign buyers on April 20th this year — not only have home sales plunged for three consecutive months now, home prices have been steadily decreasing.
The average price of a home in the Greater Toronto Area was $746,218 in July, a far cry from the $921,000 in April.
“The typical month-over-month decline from June to July is 15 percent, this year we saw a 30 percent decline in the same period, indicating an increased velocity in the slowdown,” said Lauren Haw, CEO of real-estate listing site Zoocasa.
But the word out there is that this trend won’t last. “I’ve been tracking both Toronto and Vancouver for some time. Watch what happens in September — prices are going to shoot back up,” claims David Fleming, a Toronto-based realtor for Bosley Real Estate.
“Prices declined because of optics. We had Morneau, Trudeau, Tory stand at a podium and convince the people of Toronto that they were going to do something about housing affordability. That put buyers on hold. But foreign buyers are not just going to stop buying, they are going to just find a different way of doing it.”
Source: Vanmala Subramaniam With VICE News