Recent efforts to bring the real estate housing market under control are having the intended effect on the market as home sales in the GTA drop. The sales of home in the region declined by 20.3% in May and according to the Canadian Real Estate Board, this decline came as a result of efforts made to bring the real estate market under control.
In spite of these changes economists and real estate agents argue that the efforts made to cool the market such as the 15% tax on foreign investors will most likely have short-term effect.
Speaking on the matter, Brian Elder, a sales representative with Royal LePage Real Estate Services noted that many investors and market spectators are taking a wait and see approach to know the effects of the measures taken as they are unsure of what will happen next.
Elder went on to highlight that homes sales in the GTA will most likely increase again but the question is, to what extent will it increase again? But it is also possible that it won’t be over heated.
Sales figure for the month of May rose from $752,100 to $863,910 which is similar to the increase of the previous year, yet still it was a decrease from the figure recorded in April at $919,614 and according to the Toronto Real Estate Board, this is the first month-over-month decline experienced this year.
Last year, home prices in the GTA rose by 42.9% which prompted the government to take measures to cool the market. The increase in home prices resulted to a significant drop in home sale which down slide by 26.3% in the GTA last year as prices rose 15.6% to $1,141,041.
The figures for the month of May reflect the measure put in place by Ontario to control housing prices. Some of the measure taken by Ontario includes the 15% foreign buyers’ tax, rent controls and also the vacant home tax.
On Monday, the real estate board stated that they are yet to see the effects of the changes made by Ontario were set to motion in April, but for the time being, data proves something different.
BMO Capital Markets in a note to clients stated that there is very little argument that the efforts of the government are having effect on the market as it can be clearly seen that local investors are once again taking over the real estate market while there have been a decrease in foreign investor involvement in the Canadian real estate market.
With all these being said, Benjamin Tal of CIBC Capital Markets stated that the new changes to market might be for a short period of time even though the change is much need by the people.
Tal went on adding the current situation in Toronto is quite similar to what took place in Vancouver last year. Home prices in Vancouver for 2015 were very strong but went through a decline in 2016 and this decline was mainly as a result of doubts in foreign investments involvement in the market.
Following the introduction of the 15% tax on foreign buyers in August 2016, Vancouver is making a recovery.
Home sales in Vancouver saw an increase of 22.8% in May as opposed to April stated the real estate board.
All attention are on the Toronto and Vancouver real estate market to watch out for any related negative effects the changes will have on the national economy.
For the time being, buyers are taking a breather ton how things unfold but Elder stated that buyers now have more options to choose from which will cut down on the bidding wars which was seen during the first few months of the year.