Earlier in 2017, the Ontario government introduced a 15-step plan to curb rising home prices and ensure relatively affordable housing for Ontarians. That was followed by an immediate decline in sales activity and prices in many sub-markets within the GTA. Now, to the expectation of many experts, the Toronto market has started to show signs of a rebound, with a 12% increase in resale volume in October relative to September. Having said that, we’re certainly operating in a different market than we’ve had over the past 12 months, and one that requires knowledge and experience to navigate, both as a seller and a buyer.
We expect 2018 to bring further changes, most notably through changes to mortgage qualifications that come into effect in January. With it, all uninsured mortgages will be required to pass a stress test designed to ensure the buyer can withstand a 2% increase in mortgage rates (look for another post on this in the coming weeks).
Where does that leave us for 2018 and beyond? Buyers and sellers have already started to bring the market back to a stable balance following a readjustment to new conditions, and that will likely continue in 2018. As TREB’s Director of Market Analysis put it, “it appears that the psychological impact of the Fair Housing Plan, including the tax on foreign buyers, is starting to unwind.” We almost certainly won’t see the 30% annual growth rates we experienced in early 2017, nor would we want to, but we do expect modest growth inline with historical rates through the next few years.
As far as investment real estate is concerned, we believe some new entrants to the market will turn to rentals in light of high purchasing price points, as we’ve seen in 2017, and that will in turn maintain high demand for rental condos. With that, we may see a rise in rental rates, which would begin to align rent to price ratios with the city’s historical rates – they are currently at lower-than-normal rates.
2018 is going to be an exciting year for anyone in the real estate market, and we’re certainly looking forward to what it will bring to our markets!
Do you have questions? Contact us for a complimentary consultation to understand how the various moving market levers impact your area and your real estate decisions.
