This year has been a rollercoaster ride for real estate buyers and sellers alike. However, a strengthening Canadian economy is projected to have a positive, cascading impact on the nation’s high-end residential real estate market this fall.
From January through April, we saw four solid months of bidding wars, with many properties listed below market value, to encourage multiple offers on set offer dates. This resulted in a 25-35% year-over-year appreciation on home sales. In mid-April, Ontario’s 16-point fair housing plan was unveiled, with the aim of providing more fairness for buyers and renters. And, to cool the hot market, the plan introduced a 15% non-resident land transfer tax on the purchase of homes.
At that point, the dynamics of the market shifted dramatically. Buyers decided to wait and see what this legislation would do, while sellers rushed to put their properties up for sale, before the market changed. Sellers soon became distraught that they weren’t seeing offers as high as their neighbours had, only a month or two before. Uncertainty. Hesitation. The market became a stand-off.
Although this summer seems to have been a temporary transition period, it was an unpleasant place to be for sellers who had bought first and now found it difficult to sell. This can be attributed to declining average prices, and to buyers whose financial institutions had reassessed the amount of financing they were prepared to advance. These buyers hit the pause button and waited to see how far prices would drop before continuing the search for their new home.
In August, many frustrated sellers who had listed in May, June, and July, took their properties off the market. The result was that only 6,357 properties were reported sold in August – 35% fewer than the 9,748 properties sold in August 2016. However, the average sale price for August 2017 came in at $732,292—3% higher than the average sale price of $710,978 one year earlier.
The City of Toronto saw the steepest decline among detached properties, in sales volume and average sale price. However, while resale activity in freehold properties has pulled back since the introduction of the foreign buyer tax, the condo segment has performed better.
The average sale price for condos in Toronto’s central districts increased from $493,324 to $600,781, between August 2016 and August 2017. However, sales were down about 25%. This can be attributed to two factors: rising prices putting units out of reach for a growing group of first-time buyers, and shrinking inventories reducing the choice available to buyers who can afford to purchase.
Overall, the introduction of the 16-measure Ontario Fair Housing Plan in April 2017 created uncertainty in the GTA’s top-tier real estate market. The market correction that resulted took us from an extreme seller’s market, earlier in the year, to a more balanced market over the summer, with a brisk and active top-tier real estate market forecast for fall. Strong economic fundamentals are set to foster healthy activity in the high-end Greater Toronto Area market, even as it recedes from record highs following the introduction of the Ontario Fair Housing Plan.