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.