The Canada Mortgage and Housing Corporation is predicting that the fall in sales and property prices for the Greater Toronto Area will soon come to an end. CMHC pointed to the recent history of the Vancouver market, where a foreign buyer tax had a strong impact in reducing prices and sales volume but where the market quickly recovered. Prices and sales in Vancouver are now higher than before the foreign buyer tax was implemented. The CMHC believes Toronto prices and sales will also rebound in the medium term.
Interest rate increases have exacerbated the slight slowdown in the GTA market but were expected and anticipated. Further interest rate increases before the end of the year and next year are also being factored in by consumers and real estate professionals, and have been hinted at repeatedly by the business press. Canadian banks already have very high standards for issuing mortgages, and so interest rate increases should not come as a shock and are unlikely to dissuade the best prospective home buyers from being approved. Canadian banks’ strict regulations and tight monitoring see them enjoy exceedingly low default rates on multi-billion dollar mortgage portfolios.
In terms of prices, the average condominium cost in Toronto has now hit $500,000.00. While overall prices have declined slightly, the picture is not uniform throughout the city, with some neighbourhoods recording slight price drops and others recording price increases. Realtors are still reporting a tough environment in which to sell but also continue to remain optimistic for the long term. The factors which saw the Vancouver market recover so strongly were its strong, underlying fundamentals. A strong economy, limited space for building, a robust international reputation and great weather all propelled the real estate market back. Toronto enjoys many of the same strengths; limited supply, a strong economy, and a solid international reputation.
If the Vancouver story unfolds in Toronto, prices and sales will recover and potentially exceed pre-foreign buyer tax levels.