BY: MAURICE ANDERSON
First-time buyers, young families, couples, singles, millennials and foreign buyers are all vying for homes. New provincial government regulations are expected to cool the market, but they aren’t expected to have a lasting impact. Canada Mortgage and Housing Corporation (CMHC) says evidence of overvaluation at the national level has been downgraded to moderate, from strong. CMHC says overvaluation, which occurs when house prices are not fully supported by economic fundamentals such as incomes, is now present. The agency first raised its risk rating for the national housing market to strong from moderate last October, citing growing evidence of overvaluation. CMHC’s housing market assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country’s real estate markets. Ontario’s proposed legislation aimed at cooling home prices in the GTA (Greater Toronto Area) should help slow price growth and possibly lead to a stabilization to decrease the rapid rising costs of homes. Toronto home prices are up more than 40% in the past three years, far outpacing the supporting economic fundamentals in the area. The provincial government announced new measures in April to cool the market after the Toronto Real Estate Board reported average resale prices in the GTA rose 33% in March from a year ago. The average detached home is now selling for about $1.78 million, climbing 70% over the last year.
Mayor John Tory and the Ontario Finance Minister hinted that changes to the real estate industry practices could be a part of the solution to cooling, without killing, the over-heated Toronto housing market. Meanwhile, the Ontario government is promising to announce affordable measures soon. Some buyers are delaying their purchase in anticipation of possible fixes. Buyers have been in such a stressful situation for so long that now they think somebody is going to save them. They’ve dug their heels in, they’re tired of competition and then there are those that are still proceeding, but there’s been quite a big pullback from buyers. The Toronto market has been astonishing, with the average sale in the Greater Toronto Area skyrocketing last month to $916,567. That’s up 33.2% from a year ago. With strong demand and limited supply, it wasn’t uncommon for bidding wars to result in sales hundreds of thousands of dollars above asking. And a lot of those sellers took those dollars out of the Greater Toronto Area where they can get more acreage, less congestion and still pocket a fair bit of cash. There’s always a shift coming in,” she says of this hot market. Sell before the momentum slows down. Many would like to see a crackdown on real estate “speculators” in Toronto, citing one buyer who bought 15 properties in the last two years.
There have been people who have cashed out and have regretted it because they’ve seen what the market has (done)—they’ve never been able to rebuy the houses that they’ve sold.” The buyers’ malaise that permeated Toronto’s real estate market last week appears to be deepening. Sellers in some cases are vociferously demanding more cash if bids don’t match their expectations. The shifting dynamics are creating tension in a market where properties in some pockets sell for insane amounts while others don’t sell at all. Premier Kathleen Wynne wants us to know she is taking action on housing including expanded rent control. Amid all this frantic activity, much of it pointless or counterproductive, it’s worth remembering that, sometimes, the best thing that governments can do to be helpful is to simply get out of the way.