Business page: Real Estate Market Has Moderated and It’s a Good Thing

Since a B-lender of mortgages Home Capital started experiencing problems, the real estate market in the GTA has moderated. One of the reasons is that many people, who cannot get a mortgage from a tier-1 financial institution, mostly newcoming immigrants, are turning to other B-lenders for mortgages. These lenders need time to absorb this new demand and it is slowing down the process of getting mortgages. But mostly the market is slowing down due to the psychological effect of the Home Capital's problems and the recently imposed tax on foreign buyers of real estate in Ontario.

At the beginning of 2017, the market was in a state of frenzy, it was impossible to buy anything. I had a case where my clients placed an offer on a home in Credit Woodlands, which was listed for $675 thousand, and was sold for $ 1.2 million. There were 22 offers. I advised my clients to back out because it was too much. That house needed $200 thousand worth of renovations at the least, including whole electrical wiring and plumbing. In early 2017, it was customary to place offers and go into bidding wars without doing inspections. I don’t think it’s a healthy thing to do because this is the biggest investment of your life. To buy something without inspection or without opportunity to see it is not what anyone should do.

After a tax on the foreign investors was implemented in Vancouver, they turned to Toronto to invest their money. Now it seems that they are keeping away from the Toronto area and from the Greater Horseshoe altogether. It is less known that a good portion of moderation on the part of Chinese buyers of Canadian real estate may have come from the Chinese government's new regulations of foreign purchases which came into effect at the beginning of this year.

The combination of these factors has led to the situation where open houses, which used to attract hundreds of people, now attract only dozens of people. The interest has subsided. But simultaneously there appeared more houses on sale. Homeowners are thinking that they will attract the same high prices and they would like to sell. Every day there are hundreds of new houses on the listing, while before it was just a few houses a day.

On the contrary, some buyers now want to walk away from their deposits and are not afraid to lose them hoping that they will be able to buy a property at a lower price. But the prices have not fallen that much, at least not yet. The bidding wars have stopped, but the houses still sell for the asking prices which have not gone down much. There were three houses listed on my street recently and they sold within a few days. It’s still a sellers’ market.

Going forward, the market will be supported by the fact that most homeowners, which have listed their houses, do not have to sell. They are listing hoping that they will attract a bidding war, but if and when they don’t, they just back out. This happened with a house on the same street where my clients could not buy a house. The new house was listed a couple of weeks too late and it didn’t attract a bidding war. The sellers quickly backed out. Homeowners are not yet willing to sell for less. In many cases, they need to wait just a few days longer to get a good price.

This moderation of prices and market activity is a good thing. The market seems to be back to normal – buyers again have a chance to do a proper inspection and to know what they are buying. Canada remains a good country to live in and will continue attracting new immigrants who will need housing. The market is bound to pick up again and now is a good time to buy a home.

Aneta Malinski

Share on Social Media