Guest Post by Yvette Barnes, Real Estate Salesperson at Right at Home Realty
We’ve heard a lot since the Federal and Provincial governments weighed in on the GTA housing market. Has the market cooled? It depends.
Prices soared last November because there were no listings. This April revealed 21,600 new (‘active’) listings – 33.6% more than April 2016. Our ‘active’ listing supply is 3% higher than this time last year. The May statistics verify new listings are about 47% more than the same period in 2016. In 2017, TREB reports a year-over-year growth of 20-25%; March was at 30%. This suggests the market has returned approximately 5% of the price increases gained.
Rent Control applies to all residential units effective April 20, 2017 and will have a considerable effect on landlords and tenants alike. Temporarily, tenants feel protected knowing rent increases are controlled (now 1.5% per year). Over the next few years, fewer units will be on hand to rent. Many existing condo investors will sell their units rather than rent. Owners rented their units below market to offset the large supply available then and ensure they were occupied. The strategy was to increase rents in 1-2 years. The new changes push investors to list units at market value now. Investors will turn their focus to smaller units to encourage tenant turnover and keep rents at market level. Many families are priced out of the market for detached homes. Developers were encouraged to create family-sized units. Having Rent Controls will create the exact opposite result.
Rewind to 2016: A bachelor unit rented at $1425/month. The same unit is now $1550/month. April 2017, shows one-bedroom units jumped 5% to 744 units from 700 units leased the previous year in downtown Toronto. In 2017, the average one-bedroom is $1725 –increasing 3% from last year’s rents of $1670 per month. The increase is in line with carrying costs (i.e. taxes and condo fees) but is TWICE the allowable amount under new guidelines. This is the problem.
Buyers and investors focused on pre-construction or resale condo properties in the downtown Toronto or Vaughan core transit areas for example, will see a continued and brisk pace. Condo sales in Toronto in April were 7% higher than April of last year. Downtown, condo sales were up by 6%. The Humber Bay area showed a whopping 30% rise over April of last year. In contrast to the overall market, new condo listings downtown were 5% lower than April 2016. “Active” listings were at a low one month supply. The effect is condo prices remain robust and multiple offer scenarios still exist.
The challenge for buyers or sellers is the market has become patchy across market segments. In some areas prices are down 10% while in other locations prices are flat. Again, these scenarios rely on available listing supply. Some buyers have decided to ‘wait it out’ to ascertain where the market is going. Other buyers see a real chance to find their perfect home without having to face multiple offer scenarios. Another aspect is that a large quantity of properties sold in early 2017. Presently, the best quality properties continue to hold their value. Properties in poorer condition are falling quickly in value. Whether you are considering buying or selling, this is when you need an expert agent to maneuver today’s shifting market.
Analysts predict a market ‘rebound’ in the Fall. It depends on how buyers and sellers wrap their minds around the recent changes in the next few months. It’s possible the rest of 2017 finds the cooling market remains just that… cool.