We’re not out of the woods yet. While the hot Sellers’ market in Toronto finally showed its first signs of slowing down this past month, there are still many properties trading in multiple offers for well over the asking price. Downtown income properties in prime locations are still being fought for - trust me, I’ve been involved in bidding wars all week. With all the government talk about introducing measures to help slow things down, it seems that it was just a matter of time before the demand started to naturally abate.
Is this the grand correction or crash that some experts were predicting? I believe that we are going to see a soft transition to a more balanced market, like we were in a couple of years ago.
No more $400K over the asking price. Only two or three buyers at the table instead of a dozen. I don’t think there will be big drops in prices either. For many agents (including myself) this is going to be a welcome change to what we have been experiencing lately. I think we will all look back and remember the great Toronto real estate frenzy of 2017. It wasn’t pretty but we all managed to survive. Now let’s see what happens next. Will buyer’s now pull back, unsure of where things are headed? Time will tell my friends, but at least we are now headed in the right direction.
Toronto Frenetic Housing Market Finally Starts to Slow Down
Multiple sources over the past few weeks have reported that bidding wars have slowed and traffic at open houses appears to be down across the GTA and Hamilton after the province introduced new measures to cool the red-hot real estate market. Just the news of impending new legislation seemed to spark doubt in some buyers’ minds and start the first real estate slowdown Toronto has seen in years.
Former Ontario PC leader Tim Hudak, who is now president of the Ontario Real Estate Association said he’s heard from hundreds of agents since the Liberal government introduced measures to cool the market on April 20. He added while it’s too early to say what the long-term consequences of the government plan will be, buyers have become more cautious. It is not uncommon for there to be confusion following a long, hot Sellers’ market as buyers wait to see where the market and prices are going.
“The realtors I’ve heard from are telling me that there are fewer people in bidding wars,” he said. “That’s not just in Toronto, but also other parts of the Golden Horseshoe, and there are fewer people coming to open houses. Hudak said buyers appear to be taking a “breather,” but cautioned all evidence to date is anecdotal.
“There is a significant psychological effect on housing decisions,” he said. “This is the biggest purchase almost any of us make in our lives. So, people tend to be very thoughtful. I suspect a number of people, as a result of the government announcement, are waiting to see what the impacts are in the marketplace. Those who can be a little more patient, are being more patient.”
On April 20, Premier Kathleen Wynne announced a 16-point plan to address problems in the housing and rental markets. The measures included the imposition of a 15% foreign speculators tax. At the time, she stressed the changes are being made to calm the frenetic market and establish fairness for those trying buy a home. In the GTA, sale prices skyrocketed by 33% in one year.
Hudak said the changes don’t appear to have had an impact on sellers, who continue to list their homes at about the same pace as before the government’s announcement. But regardless of what the market looks like in six months, the underlying demand remains, he said. Some sellers in the GTA are still pricing their properties for several hundred thousand less than what they are prepared to accept, which may be adding further confusion to the marketplace.
“Record low mortgage rates, millennials are trying to get out of mom and dad’s house, the Toronto area is very attractive internationally and across Canada,” he said. “None of that is going to change. Scott Blodgett, spokesman for Ontario’s finance ministry, said it’s too soon to tell what impact the new measures have had on the market. Time will ultimately answer these questions as both buyers and sellers reevaluate their positions.
New Rent Control Rules
The provincial?government's announcement in April that it’s extending rent control to all units built after 1991?has left many tenants and landlords unsure of where they may stand.
If a tenant received notice that their rent was going up before April 20th of this year they would not be subject to rent control and the landlord can raise the rent as much as they want. Remember that this is only for buildings constructed after 1991. Most of the buildings in Toronto that were built before 1991 are subject only to the 1.5% increase for 2017 as stated in the Residential Tenancies Act.
If a landlord wants to evict a tenant to occupy the rental suite themselves, they may do so, but the new rules say that the tenant must be compensated. I don’t know if this has been sorted out fully yet so it is unclear how much this compensation will be.
If a landlord’s property tax or utility bills rise greater than the level of inflation they will still be able to apply to the Landlord and Tenant Board for an above-guideline increase. They will still have to wait 12 months between increases and give 90 days written notice. Landlords can apply if there are unusually high increases in property taxes or utility costs.?But under the new law, they will not be able to apply for an above-guideline increase if any work orders in their building are outstanding.
Landlords can increase the rent by any amount they wish in between tenants. There is nothing in Ontario's Fair Housing Plan that protects rental rates between leases. This is the case across the board for any tenancy regardless of when the property was built. If a tenant leaves, a landlord can charge the new in-coming tenant whatever the market will bear.