Should Local Investors Be Worried?

John Pasalis, president of Realosophy Realty, a Toronto-based brokerage compiled data showing that freehold home sales in the Greater Toronto Area are down for the 30 days after the introduction of Ontario’s Fair Housing plan.

“Of course it’s cause for a bit of concern. It’s a significant decline, especially given the fact that it’s not proportional across the GTA. Certain areas are getting hit harder than others”, Pasalis told CREW sister publication, MortgageBrokerNews.ca. “And that coupled with the big surge in listings … it’s cause for some concern because especially in the short-term, the concern is sellers who have bought their homes and now have their properties in the market … are having a very hard time selling”.

Out of 10 researched markets, freehold home sales were down in 10, led by Richmond Hill (-62.1%) and followed by Stouffville (-49.3%), Markham (-46.2%), Newmarket (-44%), Vaughan (-34%), Aurora (-31.2%), Mississauga (-27.4%) and Toronto (-23.3%).

The cooling of the market isn’t a concern, according to Pasalis. He argues it was needed, it’s the rate at which it appears to be cooling that is the problem.

“You can imagine it’s stressful for sellers who need to sell their house. The worst case scenario is that if they can’t sell it, or what if they can sell it at a price they need to in order to buy their next one?” he said. “You have to imagine these people, they bought  a house assuming they’d sell their current home at a certain price and that price was based on April or March 2017 numbers. And if they’re getting 10% less now because there’s so much inventory and there are more buyers, even if they sell it they may not be able to afford their next one”,

Pasalis says the cooling in the Toronto’s real estate is mostly due to public perception as opposed to the actual policies, including a 15% foreign buyer tax.

“It certainly may have triggered people to think about the market and get anxious about it, but I don’t think the policies in and of themselves cooled demand”< he said.

Something similar was observed in Vancouver last year after the province announced its own foreign sales tax. Conditions have since shown signs of rebounding. So the question is: Should Toronto investors be worrying?