Louisa Baumander's Toronto Real Estate Market Update

May 1, 2017 

Hello again: 

The big news of the day is of course the 16 measures taken by the government to try to cool down the GTA market. Prices have risen an alarming 33% in the last year and it hasn’t been uncommon to see homes selling $200-300,000.00 over asking. 




It will be a few weeks before we get a sense whether or not anyone had already noticed any changes to the market. There is definitely a decline in the number of buyers visiting open houses. A house deliberately priced under market value to garner multiple bid only got one, which the seller refused. So now we consider the possibility of pricing a home based on recent sales rather than a few hundred under, and of that house taking a bit of time to sell, whether or not the prices of the last months will hold. 

Sellers have been holding their breath and talking about cashing out since 2000. Will that happen and will we suddenly see a surge of homes coming on the market and this current situation of low supply and high demand rectified? With more homes selling than ever before each month, there is supply. 

Foreign speculators, with very deep pockets have mostly been buying up real estate priced in the $3-4,000,000.00 price range. The news coming from Vancouver is that this is where the Foreign Buyer Tax has hurt. The prices below this luxury high are in full swing and the market is buoyant again. 

These are very different times from the downturn of 1989 when mortgage rates were close to 12%...the cost: $1031.90 per $100,000.00 borrowed with $975,88 going to the lender, and $56.02 going towards the home owner’s equity. 

One big disadvantage to these price increases is the Land Transfer Tax going straight to the government to pay for our crumbling infrastructure, our schools, OHIP etc. Plus all the spin off businesses that thrive when the real estate market booms. Unlikely that the government would want to tamper with that…we have become a society built in brick facades and stucco. 

Ontario Newsroom - Ontario's Fair Housing Plan

Ontario's Fair Housing Plan introduces a comprehensive package of measures to help more people find affordable homes, increase supply, protect buyers and renters and bring stability to the real estate market. 

Actions to Address Demand for Housing:

• Introducing legislation that would, if passed, implement a new 15% Non-Resident Speculation Tax (NRST) on the price of homes in the Greater Golden Horseshoe bought by non-residents or by foreign investment corporations. 
• The proposed tax would apply to transfers of land that contain at least one and not more than six single family residences. "Single family residences" include, for example, detached and semi-detached homes, townhomes and condominiums. 
• The NRST would not apply to transfers of other types of land including multi-residential rental apartment buildings, agricultural land or commercial/industrial land. 
• The NRST would be effective as of April 21, 2017, upon passing the modified laws. 
• Refugees and nominees under the Ontario Immigrant Nominee Program would not be subject to the NRST. 
• Subject to eligibility requirements, a rebate would be available for those who obtain citizenship or permanent resident status at a later date as a well as foreign nationals working in Ontario and international students. 

Actions to Protect Renters

• Expanding rent control to all private rental units in Ontario, including those built after 1991. This will ensure increases in rental costs can only rise at the 
• rate in the annual provincial rent increase guideline. 
• For the past 10 years, the annual rent increase guideline has averaged 2%. The increase is capped at 2.5%. Under 
• these changes, landlords would still be able to apply vacancy decontrol and seek above guideline increases where permitted 
• Legislation will be introduced that, if passed, will enact this change effective April 20.?

The government plans legislation that would fortify the Residential Tenancies Act to further protect tenants.

• It will include developing a standard lease with explanatory information available in multiple languages, tightening provisions for "landlord's own use" evictions and ensuring that tenants are adequately compensated if asked to vacate under this rule. 
• Prohibiting above-guideline increases if elevator work orders have not been completed 
• Making technical changes at the Landlord-Tenant Board to make the process fairer and easier for renters and landlords. 

These changes would apply to the entire province. Ironically, after all these new regulations are put in place, the government somehow thinks that the average investor is going to buy a property to rent out, without being ever able to increase the rent to meet rising taxes, maintenance, utilities etc, and having to jump through hoops to get the tenant vacate...try under past laws to evict a non-paying or disruptive tenant... 

Actions to Increase Housing Supply

• Instituting an agenda to use the value of surplus provincial land assets across the province to develop a mix of market housing and new, permanent, sustainable and affordable housing supply. For example, the West Don Lands, 27 Grosvenor/26 Grenville Streets in Toronto, among others are sites the province is considering, ensuring a minimum of 20% of residential units within the West Don Lands are available for affordable rental, with an additional 5% of units affordable ownership. 
• Introducing laws that would enable the City to introduce a vacant homes property tax in the hopes that absent property owners/speculators will be coaxed to sell vacant units or at least rent them out. 
• Guaranteeing that property taxes on new multi-residential apartment buildings are charged at a similar rate as other residential properties. This lessening of taxation is hoped to motivate and inspire developers to build more new purpose-built rental housing and will apply to the entire province. 
• Introducing a targeted $125-million, five-year program to further encourage the construction of new rental apartment buildings by rebating a portion of development charges. 

Other Actions to Protect Homebuyers and Increase Information Sharing

• The province will work to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market such as paper flipping," a practice that includes entering into a contractual agreement to buy a residential unit and assigning it to another person prior to closing for a sheltered profit. 
• Working with the real estate profession and consumers through RECO (Real Estate Council of Ontario), the province is committing to review the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions. There are now over 80,000 real estate agents in the province...up from 20,000 when I first joined in 2000. 
• As part of the implementation of the Growth for the Greater Golden Horseshoe, 2006, enough land was set aside in municipal official plans to accommodate forecasted growth to at least 2031. The Greenbelt provides important protection of natural heritage and farmland, and neither the area of the Greenbelt or the rules about what can occur inside of it will be weakened. The upcoming Growth Plan will promote intensification around existing and planned transit stations and will promote higher densities in the suburbs to support transit. 

House prices have been rising at a robust pace in the Greater Toronto Area since the end of the 2008/2009 recession. After two consecutive years of double-digit gains, The Greater Toronto Area showed the sharpest rise in home prices in Ontario over the past two years. 
While the growth rate of prices of homes in the Greater Vancouver Area have been slowing since August 2016 after the introduction of B.C.'s foreign-buyers tax, home prices have been climbing steadily in the GTA. If the decline in Vancouver prices is due to the Foreign Buyer tax, presumably it will have a similar effect here. 

Kind regards,

Louisa