Sales in the Greater Toronto Area housing market have sagged so far in 2018 but some market watchers are optimistic that a spring rebound is coming.
The most recent numbers from the Toronto Real Estate Board look grim compared with the euphoria that swept through the market in early 2017, says Cameron Forbes, general manager of ReMax Realtron Realty Inc. “We really had an artificial market from January to April last year.”
In recent months, sales in the GTA have plunged 35 per cent or more compared with a year earlier, while the average price has fallen close to 14 per cent. Mr. Forbes expects the average price in the GTA for April to come in 15 per cent below April of 2017.
But listings and sales have both been climbing in recent weeks as the market warms up. The tightening inventory has helped to buoy prices.
In May, the year-over-year comparisons will be less grisly, Mr. Forbes predicts, with the market posting a fairly flat performance compared with May of 2017. The results should boost the confidence of buyers and sellers, he says.
“June particularly will be a strong month,” he says, as consumers will say: “ ‘oh I’d better get in there and buy.’ ”
More homeowners will be willing to list their properties for sale as lawns turn green and gardens blossom, he adds. “We’ll see a matching up of buyers and sellers in June.”
At this time last year, buyers were gripped by “fear of missing out” as prices continued their unbridled run. In mid-April, the Government of Ontario introduced a 15-per-cent tax on speculative purchases by non-residents and other policies aimed at cooling the market. Almost overnight, buyers’ fears turned to panic about overpaying.
The market gradually stabilized but, on Jan. 1, a new “stress test” for buyers seeking uninsured mortgages came into effect. The tougher guidelines spurred some buyers to sign a deal before the end of 2017, Mr. Forbes says.
Over time, stubborn sellers have lowered their asking prices but many buyers hold out to see if the market has farther to fall. That pattern is typical in a correction, he says. “The buyers act more quickly than the sellers; then the sellers react and the buyers overreact. You see this back-and-forth for a period of time.”
Mr. Forbes believes many potential buyers are still waiting on the sidelines. Listings are thin in some popular neighbourhoods because homeowners are reluctant to sell if they may not fetch top dollar.
But Mr. Forbes thinks house hunters looking for a single-family dwelling have a good chance of finding a deal. “There are still so many good fundamentals.” The price of a detached home in the GTA has fallen about 17 per cent from the peak in April of 2017. Meanwhile, the Ontario and U.S. economies remain strong and negotiations on the North American free-trade agreement are progressing, he adds.
Mr. Forbes adds that it’s a very rare homeowner who purchased in the first four months of 2017, when the market reached its maximum frenzy and might therefore stand to lose money by selling now. Anyone who purchased outside of that period is likely to realize a strong profit, he points out.
“Sellers say: ‘I can’t get the price my neighbor got in March of 2017 but I can still get 50 per cent more than I paid for my house.’ ”
Sales and prices have remained stronger in the more central 416 area code, Mr. Forbes says, while 905 communities such as Richmond Hill, Newmarket and Aurora have suffered greater declines – especially in the segment for detached homes above $1.5-million.
Still, sales are improving there even now and Mr. Forbes expects that trend to continue.
Meanwhile, the downtown condo market in Toronto continues to defy all expectations with double-digit sales and price gains.
Paul Johnston, an agent with Right at Home Realty Inc., says he long believed that the market for ground-level homes would outperform condos. Recently, the selling prices of some downtown condo units have surpassed $1,000 a square foot.
The acceleration past the prices of single-family homes marks a turning point, says Mr. Johnston.
“There’s been a shift, and I actually think that buyers are increasingly opting for condominiums - not as an alternative to ‘at grade‘ – but as a lifestyle preference.”
He is preparing to list a four-bedroom loft at 40 Westmoreland Ave. for sale this month with an asking price near the $2-million mark. The 2,500-square-foot unit is one of the largest in a former church building near Bloor Street West and Dovercourt Road.
Mr. Johnston says many buyers favour this type of “adaptive reuse” project over a traditional home with a backyard.
He points out that fairly new condos are much easier to find than new single-family homes in the city core. He sees buyers who will trade off indoor and outdoor space in order to live in a place they consider more stylish. Many people these days also prefer less upkeep, he adds.
Mr. Johnston says the trend bodes well for the city overall but he thinks it may impact the values in neighbourhoods that have been traditionally considered more stable.
At Capital Economics, economists Paul Ashworth and David Madani are forecasting that tighter regulations and higher borrowing costs will continue to weigh heavily on Canada’s housing market. As a result, they expect growth in the country’s gross domestic product to drop from three per cent in 2017 to 1.5 per cent in 2018.
The further tightening of mortgage regulations at the start of the year has triggered a renewed slump in home sales, they say in a report.
“Rather than being just a temporary blip, we suspect that the new regulations, together with the increases in mortgage borrowing costs, will mark the start of a potentially long and severe housing slowdown.”
The economists expect that the emerging weakness in housing combined with uncertainty over NAFTA will deter the Bank of Canada from raising interest rates again this year.