Market Update – 2017 Year in Review and 2018 Outlook

Market Update – 2017 Year in Review and 2018 Outlook

At this time of year, the Toronto Real Estate Board (TREB) publishes its annual Market Year In Review and Outlook report.

We had the pleasure of attending the TREB Brokers Update, with a wide variety of members and stakeholders from the Real Estate industry present and on hand to deliver a summary of the report’s findings.

Far from being a dry report, there are some really interesting conclusions and projections based on the work conducted by TREB and IPSOS Reid.

To read the complete report, we have included links to both the PDF Desktop Version (click to download) and a Mobile Version (click to download).

We have also provided a summary based on the commentary provided during the Market Update Sessions conducted in the first week of February. This years report pays particular attention to the impact of Housing and Transportation Diversity in the Golden Horseshoe.

If you or anyone you know has any questions about this update or the market in general, our team is here and happy to assist!

Warmest regards,
Lisa + Andrew

Summary notes provided from the presentation highlights as shared by Jason Mercer (TREB Director of Market Analysis) and Sean Simpson (VP – Ipsos Reid)

Fast facts:

Of all current Home Owners:

98% live in their own homes, while only 2% had investment properties

In a questionnaire to consumers, people were asked, why don’t they move?

The majority simply liked their home and didn’t want to move at present

5% don’t like upfront costs associated with moving – such as Land Transfer Taxes

Of those who had recently contemplated buying/selling a property but have now deferred – the major reason cited was changes in government policies such as mortgage rule changes and restrictions on investors to increase their rents in the face of potentially rising operating costs due to inflation/utilities/lending costs etc.

Fast fact – the average home sale creates $68,275 in spin-off expenditures in the GTA

In 2017 there was $2.9 Billion created in combined government revenue through TREB MLS sales

Jobs – 142,000+ jobs in annual employment is generated as a direct or indirect result of real estate related activity in the GTA

Market review snapshot:

2017 – 5th best year on record in terms of sales volumes

There were over 92,000+ sales conducted through the TREB MLS (down from 116,000 in 2016 – the highest year on record in terms of sales volumes)

Nine Major changes in 2017:

Government intervention introduced a 15% foreign buyers tax in April; new rent controls were introduced; new Mortgage qualification rules were brought in for January 1st, 2018 leading to a late in year rally for home sales prior to this new criterion being introduced

So how many foreign buyers are actually active in the GTA market?

The estimated range of foreign buying activity based on research from IPSOS was surprisingly small:

Only 4.9% of all transaction were conducted by parties who were based overseas as per TREB / Ipsos Reid

A report commissioned independently by the Ontario Government between April and May 2017 found only 6.2% of sales were conducted by foreigners

Stats Canada’s estimate for foreign ownership in Dec 2017 was 3.2%

The takeaway is that the numbers broadly lined up, and foreign buyers do not make up a significant component of the GTA housing market

As a result of the perceived impact of a foreign buyers tax on sales, combined with a significant introduction of additional housing inventory for sale in April of 2017 as temperatures climbed, we witnessed sales drop substantially in 2017 after April and on through the Summer into mid-Fall, just as inventory levels rose to meet demand. The result – the market corrected from a Seller’s market to a Buyers market

Annual price growth moderated and then retreated from its early year peaks in many markets as buyers deferred acquisitions and sellers readjusted their prices to be more competitive in a changing market.

Additional fast facts:

New vs resale – 32% of buyers last year bought a new home. 68% bought resale properties

Mortgage rate preferences – 65% of Canadian’s currently have a fixed product, while 35% have variable rate mortgages

Average mortgage rates to consumers actually dropped in 2017 vs 2016 due to increased lending competition between the banks

84% of home owners are confident that they could withstand a 2% increase in interest rates.

79% of home owners are confident that they’d still qualify for a mortgage at higher rates

The desire to purchase a home has remained pretty flat despite recent market changes and policy changes

84% of people are buying a home to live in it

Future thoughts and considerations:

Will Toronto see a vacant home tax similar to what Vancouver enacted? What impact would it have if the city of Toronto brought this in?  Of investors surveyed who were looking to buy properties, 46% said they would plan to have tenants to assist them with carrying costs. 14% of buyers shared that they would not buy a home if they were forced to take on a tenant/did not have to option to hold a property vacant. 38% said it will not impact their decision.

First time home buyers represented 41% of the active Buyers looking for properties in November 2017. This compares with nearly 50% of the market being fuelled by first time home buyers in the years prior.

This means fewer new home buyers are entering the market. Why? Higher interest rates and difficulty in qualifying under the new lender criteria was cited as the biggest concerns holding back first time home buyers.

Market drivers:

Despite higher borrowing costs and tighter regulations on accessing funding, the market drivers of very low unemployment rates continued high immigration levels, and a very tight rental market are all still contributing to making buying a home an attractive proposal.

As a closing thought, buying activity is already picking up in Q1 2018, and at present, there are only 2 months of inventory left if all of the active buyers purchased a home within 60 days and no more homes were added. That’s not very much!

If you’d like to dig into the report further, please click on the desktop or mobile link above. We are happy to offer insights to any questions you may have regarding these reports or any other data related the GTA real estate market.

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