Housing prices in Ontario are declining due to new policies implemented by the Ontario Liberal government. Real estate agents in Ontario report more listings posted in Ontario and fewer people bidding for homes. According to the statistics, home prices in Toronto are 20% lower than they were one year ago. In June of last year, there were 40% fewer homes listed for sale in Ontario. A greater supply means lower prices as sellers try to compete for a deal before a further decline. Buyers are in no rush to make a decision as there are plenty properties on the market.
The primary reason for the sudden downturn seems to be the 15% foreign buyers tax. This was done against the advice of Toronto Real Estate Board (TREB) who claim there are very few foreign real estate owners in the province. They had reported that the average share of foreign real estate buyers in Ontario is under 2.3%, which shouldn’t necessitate such measures. A spokesperson for the ministry of finance has stated that they did not believe the data collected by TREB was an accurate representation of the level of foreign homeowners in Ontario.
Declining prices in Ontario are in line with the government’s desire to cool off prices that were skyrocketing. Overall house prices have been rising very rapidly relative to wages in the province. At the height of the market, houses were so expensive that only the most wealthy Canadians could afford to purchase a modest home in Toronto. Months previously the Canadian government made it more difficult to qualify for CMHC mortgage insurance which reduced the number of people who could qualify for a mortgage. The new CMHC regulations didn’t have the desired price cooling effect in Ontario, so the Ontario government looked to the solutions that had been implemented in British Columbia.
Vancouver housing prices had reached dizzying heights when the 15% tax on foreign buyers was introduced. While home prices in British Columbia have declined, other parts of the country still have to contend with rising housing prices. Economists predict a continued decline in Vancouver real estate prices as the B.C market continues to adjust to the foreign buyer tax policy. Effects of this policy have not been fully realised as poor affordability continues to be a problem. For the ordinary buyer, houses in Vancouver are still much costly than in other parts of Canada. Despite this, the B.C. foreign buyer tax is generally considered to be a successful policy to curb an overheated housing market.
In real estate, a buyer’s market is a situation where there is more supply than demand. There are more homes up for sale than there are buyers for them, the result of which; is a price decline as sellers try to sell off their real estate before their property lowers in price. The opposite is a seller’s market whereby the demand exceeds supply leading to an upsurge in housing prices. A buyer’s market means that sellers have to work harder to secure a deal as the competition is stiff. Potential buyers are not in a frenzy as they are aware of the availability of homes that they can buy at any time. While many Ontario house seekers were previously desperate, they are now increasingly wary to not purchase a property that will see its value quickly decline.
· Sell homes quickly before prices decline further. This countermeasure would reduce losses as housing prices continue to drop.
· Hold on to the house until prices go up again. If you are not under pressure to sell, it would be a good idea to wait until prices begin to increase before selling a property.
· Those looking to buy must hold off until prices go up one again and the markets stabilise. It might seem wise to buy homes when prices are declining but that is a risky move as continued decline might force you into selling at an even lower price.
Jonathan June 16th, 2017