An ever-healthy housing market

Despite a fall in sales and a slowdown in prices, the fundamentals underpinning the Toronto housing market remain strong. The impact of a recent rate hike and a slew of measures at the provincial level, largely a 15% foreign buyer tax, have cooled what was once the most dynamic seller’s market in GTA and Southern Ontario history. New data released shows two important trends that underpin the stability and long term strength of the GTA housing market.

The first is that mortgage delinquencies are now at a record low and continue to fall. Data released by Equifax Canada shows that mortgage delinquencies have been falling in Canada, and large banks, like TD, report extremely low rates of default and delinquency. Another important and positive statistic has been the fact that home building has now been found to exceed demand in Toronto. For many years, industry groups, real estate professionals, and some politicians and economists have complained that not even housing stock was being built and that the government should be providing more incentives for builders to develop.

Recent data shows that between 2011 and 2016 there were 146,200 new households in Toronto, compared to the 175,825 homes that were built. This shows that housing supply exceeded established demand by over 30,000 units. While the supply of single detached homes in Toronto remains largely fixed due to space constraints, the latest census data shows that home supply has kept pace with home demand for many years. This proves that the GTA real estate market is adept at responding to the signals of demand and supply.

While having decreased month over month marginally, prices in Toronto are still significantly higher today than they were a year ago. The condominium market is on fire in Toronto, with double digit price and sale increases recorded in the last few weeks. Many realtors are predicting that the double whammy impact of a 15% foreign buyer tax and a small interest rate hike will temporarily cool the market before it heats up again, as was the case in Vancouver. Overall, the Toronto housing market remains rock solid.

Take advantage of a sizzling seller’s market

New taxes on foreign purchases, the start of the red hot Spring listing season, and continuously increasing demand for housing is reinforcing the GTA’s already rock solid seller’s market. The number of new listings has increased massively as of April 2017, with the latest figures showing a 33% upswing.

Homeowners who were previously reluctant to sell are now doing so in large numbers, recognizing the huge windfall potential of this historic market. For the time in many years realtors are reporting huge floods of new homes on the market which means more choice, flexibility, and less worry for buyers. Many buyers who have lost out on ferocious bidding wars and who have been waiting to buy will find it much easier to do so today and in the future.

As Tembo has previously written in a past blog, this is the best seller’s market in the history of the GTA. Never have low interest rates, a stable economy, and massive demand coincided with such force before.

If you are a homeowner looking to sell your home for a maximum return, this is time to do so. If you plan on closing a sale several months off into the future and need a deposit to purchase a new home or to downsize right away, Tembo can help. We provide equity advances on your sold property, so waiting for your closing date to get your money will now be a thing of the past. We do equity advances quickly, efficiently, and with the best customer service. We can have your funds ready in as little as 48 hours. Tembo takes the worry out of waiting for your money.

If you want to sell but realize your home could use a renovation to boost your sale price, Tembo can help. We offer short term loans for renovations, can provide the funds fast, and can help you see an even bigger return in this supercharged market. Studies show that a $25,000.00 renovation can increase the sale price of a house by over $100,000.00.

Have you sold your home, and now can use an advance on your equity before closing day, perhaps you need money for renovations?  Tembo Financial can help!  Tembo offers this unique service to homeowners in Ontario and the GTA. You could receive your money in as little as 48 hours with no credit check and no appraisal* for expenses that matter to you.  Don’t wait, start today!

Effects of the Foreign Buyer Tax

On April 20, the Ontario government announced a 16-point housing plan aimed at improving affordability, increasing supply, and protecting renters. The plan’s centerpiece was a 15% Vancouver style foreign buyer tax on properties in the Greater Golden Horseshoe region. In less than 2 weeks, the effects of this plan and the foreign buyer tax are already being felt.

Reactions from realtors have been numerous and strong. Some are saying that the market is beginning to cool and that buying has stalled, while others are reporting that demand is showing no signs of slowing down and that interest and energy remain strong.

The first effect has been a reduction of prices for some homes by a few points, particularly low rises, detached homes, and townhomes in Toronto. Sales were also down by 3.2%. Many new homes have been placed on the market and the supply of listings has soared. Nevertheless, prices generally continue to rise by double digit figures. The increase in April was 25% across the board. The new average selling price for a home in Toronto has now hit just over $920,000.00.

The Toronto Real Estate Board has said that the huge increase in new listings is a positive sign of the market reacting to pent up demand and that if the increases continue the market will become more balanced over the long term. Listings increased by over 33% in April. Although the broader impact of the Fair Housing Plan and the Foreign Buyer tax will take more time to materialize, a close examination of the Vancouver housing market reveals some of the potential long term implications.

Since August 2016, when British Columbia introduced the first Canadian foreign buyer tax in the Greater Vancouver area, prices fell strongly and sales fell by over 25%. However, as of April of this year, prices are again rebounding, with demand for all types of property still strong and increasing. Foreign sales, however, have dropped significantly and continue to fall.

If Vancouver is any indicator, foreign sales, however small, may decline long term in Toronto and the immediate effects on prices, if negative, could correct and rise again in the long run. What is clear is that many homeowners who were on the fence previously or who were waiting to sell are listing their homes now and increasing the supply for buyers.

A foreign-buyer tax for Toronto?

In August of last year, the Government of British Columbia implemented a 15% property transfer tax on foreign buyers solely in the Greater Vancouver area. The tax was implemented to cool the Vancouver housing market, reduce speculative buying, and to de-incentivize foreign buyers from purchasing homes for the sake of investing and leaving them vacant.

Housing prices in Vancouver had been rising quickly for years and increased media coverage of ‘empty mansions’ owned by foreigners for investment purposes led to the BC government deciding to act.

The effect of the tax was real and raw. Royal LePage, a major real estate brokerage, expects prices in Vancouver to fall by 8.5% in 2017 after overall home sales fell by 40% since the tax was implemented. In Victoria, where no foreign buyer tax was implemented, prices continue to rise and sales are staying strong.

On March 9th, Ontario Finance Minister Charles Sousa said that the provincial government was “open” to the idea of imposing a BC style tax in the Greater Toronto Area. Sousa voiced concern about ongoing bidding wars, high housing prices, and families being priced out of the market. In response, Toronto Mayor John Tory said he needed to see “more data” before committing support or opposition to the tax.

What the experts say

Many real estate groups are firmly opposed to the province taxing foreign buyers. The Ontario Real Estate Association and the Toronto Real Estate Board both say that the number of foreign buyers is a tiny sliver of less than 5% of the overall number of people trying to buy a house in Toronto, and that a tax would not cool high prices or do enough to decrease demand. The number of foreign buyers in the Vancouver market was at least 15% before the tax was implemented, with many realtors suggesting the actual number was much higher.

Some of the country’s biggest banks, however, are open to the tax. RBC CEO Dave McKay has said that “we may need actions that are similar to Vancouver.” Also, the National Bank of Canada has publicly stated that it believes a broad “re-think” is needed for the market and voiced support for looking into the tax.

Have you sold your home, and now can use an advance on your equity before closing day, perhaps you need money for renovations?  Tembo Financial can help!  Tembo offers this unique service to homeowners in Ontario and the GTA. You could receive your money in as little as 48 hours with no credit check and no appraisal* for expenses that matter to you.  Don’t wait, start today!

*Subject to qualification.