No December slowdown in housing sales as search for homes expected to extend through Christmas
It won’t exactly fit under the tree but holiday shopping this year appears to include real estate in Canada’s largest housing market.
Sotheby’s International Realty Canada says the first couple of weeks of December have not seen any type of slowdown in the Toronto housing market — consumers are expected to keep searching and buying for property right up until Christmas day.
“We are continuing to see that (the housing market) doesn’t seem to be affected in any significant way by what’s going on in Vancouver or the new federal policies that have been put in place,” said Brad Henderson, the chief executive of Sotheby’s in Canada.
The British Columbia government slapped a 15% tax on foreign property transfers in September and that had some realtors suggesting overseas buyers could shift their focus to Toronto. The federal government also clamped down on credit in October by making it tougher to borrow with new rules forcing consumers with loans backed by Ottawa to qualify based on rates almost double those on their contracts.
“We are still seeing multiple offers,” said Henderson, adding there has been a modest increase in foreign buyer interest in Toronto but that includes inquiries from the United States following the presidential election.
The Toronto Real Estate Board confirmed that over the first two weeks of December, there were 3,196 sales — a +17.8% from the 2,713 a year earlier.
Normally, December is when real estate shuts down. “Buyers usually start shutting down the second or third week of December at the latest. People pull their houses off the market in December because they wouldn’t want it to linger over the holidays. Now people are just inclined to leave their houses on,” said Henderson. “We think this December will probably be a record when compared to other Decembers.”
TREB said this month that homebuyers are frustrated by the lack of listings in the city. The imbalance led to overall year-over-year price growth of 20.3% in November while detached home prices climbed 32.3 during the period in the city of Toronto to an average of $1,345,962.
Royal Bank of Canada said Wednesday that Toronto is closing the gap on Vancouver in terms of not being affordable. RBC’s affordability index shows it takes 63.7% of median pre-tax household income to carry the average home, those costs including mortgage, principal and interest, property taxes and utilities. Toronto jumped three percentage points from the previous quarter and reached a level not seen since the spring 1990.
Vancouver remains the most expensive city in the country at 92%, up 2.2 per percentage points from the previous quarter. RBC’s aggregate affordability measure for Canada was up for the sixth consecutive quarter, rising by 1.3 percentage points to 44.3% — the most stressed affordability level in eight years.
The mood across the country is not as optimistic about the market being as robust in 2017. The Canadian Real Estate Association, which represents about 110,000 realtors across the country, is calling for the first national price decrease since 2008. CREA says prices will drop 2.8% nationally in 2017, driven by a 12.2% decline in sales in British Columbia where prices will also drop 7.8%.
Geoff Willis, managing broker with Vancouver-based Origin Mortgages, said his marketplace was starting to slow even before some of the recent mortgage rule changes.
“We are still beginning to deal with that but we still have an inventory issue in Vancouver. We have no product to sell so it’s tough to tell whether buyers have cooled because there’s not much product to choose from,” said Willis.
The Real Estate Board of Greater Vancouver reported November new listings were down 20.9% from just October and were 1.2% below the 10-year average for the region for the month. Sales were off almost 37.2% from a year ago while the board’s index price for all homes decline 1.2% in one month. This month, British Columbia’s provincial government announced a program that matched the amount of down payment for first-time buyers — up to $37,500, or five per cent of a home’s purchase price.
Phil Soper, chief executive of Royal LePage Real Estate Services, thinks British Columbia will be the exception to another expansionary year for most of the country.
“I just can’t see a correction in the Ontario market, I can see it slowing down from 20% (annual prices increases) to single digit — that makes perfect sense,” said Soper, adding the economy is still expanding and interest rates remain low. “I don’t think Alberta is a good news story but I expect some growth off a very low base after two plus years of market retraction there. And Quebec continues to get stronger.”
Re/Max has also forecast an improved 2017 with the average residential sale to rise by 2% on a national basis. In Vancouver prices are forecast to rise by 2% in the coming year and 8% in Toronto.
Financial Post writer Garry Marr covers the real estate beat and personal finance.
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