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A WILD RIDE FOR 18 MONTHS, AND NOW WHAT FOR HOUSING?

A WILD RIDE FOR 18 MONTHS, AND NOW WHAT FOR HOUSING?

The Background

Housing prices have been on the upswing for many years and those who own real estate have enjoyed a remarkable ride, seeing house prices rally to unprecedented levels. This surge in prices came to an abrupt end on April 20, 2017 with the provincial government announced the Fair Housing Plan and one of its largest components, the 15% Non-Resident Speculation Tax. Since then, the Bank of Canada has increased the overnight lending rate twice- once on July 12 and the other on September 6 – bringing it to 1% and thereby pushing interest rates to consumers along with it. In addition to these changes, the federal government has been tightening mortgage rules and lending criteria, making it increasingly challenging to obtain a mortgage, most notably the increase in qualification levels for new mortgages.

The History
If we look at a snapshot of what happened to housing prices in York Region particularly this past 18 months, we can see the dramatic changes which have occurred. For all housing types (detached, semis, condos, link homes) the average selling price in York Region surged by 28.4% from $988,648 to $1,269,821 from April 2016 to April 2017. Since that peak and the instituting of government and Bank of Canada policy changes, prices have fallen in all of York Region by 17.3%, reaching an average selling price of $991,339 for September. The impact on Newmarket has been more substantial with prices declining by 23.9% on average, less so in Aurora at -14.2%. When we compare average prices for all home types sold in September 2016 against September 2017, however, we see that there is virtually no change in prices in York Region or Newmarket specifically, while prices in Aurora are still about 5.9% higher than one year ago.

Where From Here?

Policy changes have significantly impacted the foreign buyers of York Region property, where they represented around 15% of total home sales (more by some other estimates) while in the City of Toronto, it is believed that those buyers represented about 5%. These policy changes certainly dampened the appetite for homes in our area. Additionally, having to qualify 2% or 200 basis points above the market rate offered by traditional lenders will impact how much money people can actually access for their home purchase. The surge in listings in May and again in September has done little to support the notion that we are in a robust and balanced market. Almost overnight we have seen the market shift from a sellers’ market to a buyers’ market, however the number of sales and the prices paid in the last month suggest something of a stalemate between both, and perhaps indicative of a market that is leveling off.
If you are a buyer, you should look at the long term and consider that you will own the property for long enough to see it as a great investment. If you are a seller, you will know that whatever you choose to purchase, it most likely has also fallen in value and become more affordable. Trying to time the market, regardless of what you are trying to buy or sell, has never been easy. Choosing to act when it best suits your needs and those of your family and to do so with the help of a real estate professional makes a lot of sense in both the long and the short run.

Every person’s needs are unique and complex, and there is no situation that is the same. If you want to explore options and opportunities and have the time to consider and weigh those choices, this is a wonderful time to do so, as the frenetic pace of the housing market earlier in the year has disappeared, and calmer and more rational minds prevail.

Statistics complements of the Toronto Real Estate Board.

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