The Toronto Real Estate Board (TREB) is predicting a slower year in 2018 after the rollicking roller coaster ride in the housing market over the last two years. The board also expects the number of home sales to remain flat or drop for a second consecutive year.
The year 2016 saw an extraordinary volume of sales that filtered into the first quarter of 2017. But things began to slow down when the Ontario government moved to cool off the market with the introduction of Ontario’s Fair Housing Plan last April, reports The Star.
This year, the TREB expects 85,000 to 95,000 sales across all categories from stand-alone houses to condo apartments, down from 92,394 last year. Prices are expected to range from C$800,000 to C$850,000, with the midpoint being up slightly from the C$822,681 average in 2017. Last year saw prices rise almost 13 percent.
“Sellers are looking for the money they were getting in May, and that’s not a reality, it’s not going to happen,” said Simeon Papailias, co-founder of the Real Estate Center, real-estate management company.
Housing market is further dampened
The housing market is also feeling the effects of the Bank of Canada’s interest rate hikes as well as a rise in five-year fixed mortgage rates and something really new – the Office of the Superintendent of Financial Institutions’ stress test that went into effect on Jan. 1.
Basically, the stress test requires that even people with a 20 percent down payment, who don’t need mortgage insurance, prove that they can make payments at much higher rates. In other words, the would-be uninsured home buyer must prove they can make their mortgage payments at a qualifying rate of the greater of the contractual mortgage rate plus two percentage points or the five-year benchmark rate published by the Bank of Canada.
And keep in mind those rates are going up. Bank of Canada increased its overnight interest rates three times last year, to 1.25 percent. The country’s other big banks are following suit, raising their mortgage interest rates, edging close to a four-year high.
“Federal and provincial policy decisions will act as a drag on demand for ownership housing,” said TREB in a Monday release. “In response to the stress test, many intending buyers will change the type and/or location of the home they are looking to purchase or potentially tap other down payment sources, rather than simply deciding not to purchase a home.”
