First-time buyers feeling market shift
Toronto sales, price increases to slow in 2018
• Home sales are expected to slow and prices will edge up just slightly this year as government policy interventions continue to dampen the once- roaring Toronto real estate market, particularly among firsttime buyers.
The Toronto Real Estate Board predicted sales this year will drop just below 2017 levels, in a second- consecutive year of declines. Toronto recorded 92,394 transactions in 2017, marking a steep drop of 18 per cent from record sales volumes the year before.
Prices will nose up slightly, rising above the average selling price of $822,681 last year, the board said in its annual outlook. The softening in the market will be most noticeable over the first half of the year, with flat sales and price growth striking a stark contrast to the same period in 2017, when prices surged a record 30 per cent.
“In 2018, we’re going to see almost a reversal what happened last year,” said Jason Mercer, the board’s director of market analysis. “We’ll be off to a slow start, then see sales and price growth pick up by the summer as more buyers shake off the lingering effects of government policies.”
Toronto’s soaring market dropped dramatically in the summer months of 2017, a trend the board attributed to the “psychological impact” of the Ontario government’s Fair Housing Plan. Introduced in April, the plan includes a tax on foreign buyers and rent controls. These measures, along with higher interest rates and tougher new qualifications for mortgages introduced by the federal banking regulator earlier this year, will continue to affect home buyers — particularly those looking to purchase their first home, Mercer said.
The board’s fall survey of homeowners showed a general decline in buying intentions, with first- time buyers in particular shying away from the housing market. First- time buyers made up 41 per cent of likely buyers in the Greater Toronto Area in 2017, down from 53 per cent a year earlier according to an Ipsos poll conducted for the Toronto board. The Toronto proportion of likely firsttime buyers accounted fell to 46 per cent from 64 per cent during the same period.
Uncertain about which way the market is headed, these buyers are choosing to avail of their ability to stay longer with their parents before taking a leap, Mercer said.
“Given these buyers are entering a marketplace that is still adjusting to a variety of new rules and higher interest rates, it makes sense that first- time buying intentions are lower this year,” Mercer said. “But as we move through the year it’s certainly possible we’ll see intentions grow again as young buyers and buyers in general become more attuned to what’s going on in the marketplace and what they can afford.”
Despite slowing growth in prices, real estate markets in Toronto, Vancouver, Hamilton and Victoria all showed strong signs of overvaluation, with house prices high relative to incomes, mortgage rates and population, the Canada Mortgage and Housing Corp. said in its latest housing market assessment Tuesday.
In these cities “supply has been unresponsive to demand,” Bob Dugan, chief economist at the CMHC, said. With vacancy rates declining, particularly in the condominium market, and few new significant buildings due to be completed in Toronto and Vancouver in the next couple of years, prices have swelled.
In Calgary, Edmonton, Saskatchewan and Regina, housing prices were largely in line with fundamentals. But high vacancy rates and inventories of unsold properties suggested those markets were highly vulnerable to “overbuilding.”
Demand for Toronto property is expected to remain steady amid population growth, an increase in Canada’s immigration targets and l ow unemployment, TREB said. And while supply will remain tight, particularly in the condominium market, a board survey found that listing intentions also rose.
“More people are considering putting their home on the market,” said Sean Simpson, vice-president with Ipsos public affairs, which conducted consumer surveys for the Toronto board. “That suggests a general easing in supply over the year.”
Prices of single- family homes will show moderate growth in the second half of 2018, increasing by single digits, while the city’s condo market is expected to continue its course of doubledigit growth as supply levels remain low and buyers continue to be drawn to more affordable options. Condominium vacancy rates dropped below one per cent in 2017, while vacancies in purposebuilt apartments fell to 1.1 per cent.