House sales fell 26 per cent in the Toronto region in May, 2017 after the Ontario government’s introduction of a foreign-buyer’s tax as many potential purchasers stepped back and waited to assess the market impact.
In the 30 days after the province of Ontario announced the immediate introduction of a 15 -per-cent foreign-buyer’s tax on April 20, 2017, the number of houses sold in the Greater Toronto Area fell 26 per cent compared with the same period last year, according to data compiled by Toronto realtor John Pasalis.
Communities north of Toronto find the greatest declines between April 20 and May 20, with sales falling 61 per cent of the numbers in Richmond Hill, 46 per cent of the numbers in Markham and 44 per cent of the numbers in Newmarket. The City of Toronto recorded a 23 -per-cent drop in the number of houses sold, while Brampton and Mississauga west of Toronto had sales declines of 16 per cent of the numbers and 27 per cent of the numbers, respectively.
The sales comparison review only for freehold houses, including detached and semi-detached houses, but did not include condominiums.
The drop in selling activity is part of a large chill in the Toronto region marketplace that began in April as purchasers moved to the sidelines while home owners rushed to list their houses to try to cash in before the market peaked.
In the first two weeks of May, 2017 alone, sale of all types of dwellings in the GTA fell 16 per cent of the members compared with the same months in May last year, while the number of new listings soared 47 per cent of the numbers, according to data compiled by the Toronto Real Estate Board.
The median GTA home sold for $890,284 in the first two weeks of May, a 17 per-cent growth from a year earlier, chiefly because of big gains earlier this year. But the price was down 3 per cent compared against April, when the average sale price for all types of GTA dwellings was $920,791.
Mr. Pasalis said he does not believe the new foreign-buyer’s tax is directly responsible for much of the decline in sales since April 20, 2017 because foreign purchasers were not a large enough part of the market to cause such a significant decline, and many foreign purchasers will qualify for rebates of the tax.
Instead, he believes the plummet is the consequence, in part, to a decline in demand from domestic investors who were purchasing second properties to lease or flip-flop. Most investors have stopped buying as they wait to see the impact of a suite of new measures announced by the province of Ontario in April, including the foreign-buyer’s tax, he said.
“They faded – no one is talking about buying money-losing rental properties any more,” Mr. Pasalis said. “The whole excitement and euphoria is kind of diminished right now.”
He also believes many other purchasers are sitting on the sidelines, experiencing “buyer fatigue” after watching prices in the GTA climb rapidly.
The 33 per-cent price increases of March may have been “the straw that broke the home buyer’s back,” after the average cost of a home was increased to $917,000 in March from $688,000 a year earlier, he said.
“The whole perception of the market has changed, and that is the bigger part. People are scared – investors are scared, purchasers are scared – and I think that’s the huge issue.”
Mr. Pasalis said many of his firm’s buyers have been stepping back and not preparing offers, hoping prices will fall from the crest, while many sellers are growing desperate for offers, especially if they’ve already bought another house and need to sell quickly.
“Our agents are getting calls from listing agents asking them for offers, just asking them, because the seller is freaking out because they already bought something and they need to sell their home ,” he said.
One agent in his firm submitted an offer of $650,000 for a client bidding on a townhouse that was selling for $750,000 a month ago, and the offer was accepted. He said the agent hadn’t expected to get accepted, but he thinks the seller had no choice.
“It’s going to screw up the market because sellers are going to be looking at February and March prices and buyers are going to be looking at these recent low-ball prices, and we’re going to have an interesting question there.”
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Source: Globe And Mail
