MAY Market Stats 2017
June 7, 2017
Hi guys,
A lot has happened since the market peak of March/April followed by the provincial government announcement on April 21st. I wanted to take a moment to review what has happened since April 21st and share the changes I’ve witnessed in the real estate market over the last several weeks so you fully understand the current landscape.
– April 21st
The Wynn government announced a 16 point plan to curb foreign investment and further regulate the rental market.
– April 26th
Home Capital shares fell 65% as the non-bank lending institution had a run on deposits due to growing concerns that loan applications were falsified in order to qualify home purchasers for mortgages.
– April 27th
The Wynn government released Ontario’s budget. The budget is the largest in Ontario’s history and the only tax increase in the budget is to tobacco products. How is the budget balanced without tax increases? The answer is simple: Employment and corporate growth AND a projected 50% increase in land transfer tax revenues over the next 2 years.
– May
Although properties continued to sell multiple offers became less frequent with each passing day. Supply increased dramatically. Homes began selling below asking with conditions for financing and inspection. Properties that were holding back offers frequently cancelled and re-listed at higher prices only to be cancelled again and list lower than the original price. We are in a buyers market.
– June 1st
Lending institutions are assessing properties based on 2016 sales stats due to the 5-15% drop in property values witnessed in the last 30 days.
– June 5th
The Toronto Real Estate Board releases sales statistics for May 2017 showing a 20% drop in sales, a 43% increase in listings and a 29% increase in selling prices year to date. See stats PDF attached to this email.
– June 12th
Toronto is moving to ban Air B&B rentals.
– June 14th
The Federal Reserve raises interest rates by 25 basis points. Reuters publishes article regarding Bank of Canada’s hawkish stance on the housing market and potential rate hike within 30 minutes of Fed announcement.
Where are we now?
Prices are dropping and will continue to fall for the foreseeable future.
Any government regulation creates uncertainty at least until evidence is compiled regarding the impacts of the new legislation.
Home Capital added to the uncertainty. It appears Home Capital is recovering and it should be noted that Home Capital’s financial woes are not due to borrowers being unable to make their loan payments. Home Capital shares are up 15% today after reaching a settlement with the OSC and class action lawsuit. http://www.mortgagebr
The provincial budget can be viewed as positive news. Land Transfer Tax revenue is forecasted to rise by 50% over the next 24 months without a LTT rate increase which means prices, sales volume or both are set to increase unless… the Wynn government is lying – which is a distinct possibility.
Foreign investment has dried up in part due to the 15% tax, stricter capitol controls in China, and investor fears that we are at the beginning of a market correction.
May sales statistics point to a downward trend in prices and demand (month to month) while supply increased dramatically. People aren’t rushing to sell their principle residence but if you’re heavily leveraged on several properties or in the midst of a renovation/flip then you’re likely feeling pretty uncomfortable right now.
Banks are tightening lending policy. Properties that sold during peak March/April with closing dates in June/July are not getting the necessary financing to close because the current assessed value is below the purchase price. What will happen to the sold properties that failed to close? In many instances I suspect properties will be put back on the market at a lower price especially if the sale of one property facilitated the purchase of another – can you say domino? We are looking at a forced increase of supply in a market that already suffers from over supply.
The June 12th announcement regarding a pending Air B&B ban followed by yesterdays interest rate hike news simply adds to the existing concerns. The Air B&B ban will increase supply further and remove an investment option for potential purchasers while the rate hike will make it harder for people to qualify for mortgages. On the plus side rental stock will likely increase as not all investors will choose to sell the properties they were using for Air B&B.
It’s not all doom and gloom.
If you’re looking to sell a portion of your portfolio prices are still up 29% year to date. If you’re planning to sell in order to upgrade your primary residence then I suggest selling now and waiting to see what the late fall/early winter market brings. Sell first then buy.
At this time I don’t believe we are looking at a crash but a correction is in the works which is completely understandable considering the annual price increases over the last two years.
Ontario’s population is set to grow by 60% in the next quarter century. As prices drop new purchasers will be able to enter the market and the cycle will repeat.
If you’d like to review recent listings and sales for your immediate neighbourhood let me know via email or call me directly.
If you have any questions or would like to discuss your options feel free to cal me directly.
Tags: Income properties, Jimmy Vlachos, Jimmy Vlachos Income Properties, Real Estate Sold Statistics, RLP, Royal LePage Signature, sold statistics, Toronto, Toronto real estate
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