House sales fell 26 per cent in the Toronto region in May, 2017 following the Ontario government’s introduction of a foreign-buyer’s tax as many potential purchasers stepped back and waited to assess the market condotion.
In the 30 days after the province of Ontario announced the immediate introduction of a 15 -per-cent foreign-buyer’s excise 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 ascertained the greatest declines between April 20 and May 20, with sales falling 61 per cent in Richmond Hill, 46 per cent in Markham and 44 per cent in Newmarket. The City of Toronto recorded a 23 per-cent drop in the number of homes sold, while Brampton and Mississauga west of Toronto had sales declines of 16 per cent and 27 per cent, respectively.
The sales comparison was for freehold homes, including detached and semi-detached mansions, but did not include condominiums.
The drop in selling activity forms part of a wide-spectrum cooling in the Toronto region market which started in April as customers moved to the sidelines while home owners hastened to list their houses to try to cash in before the market peaked.
In the first 2 week of May, 2017 alone, sales of all manner of homes in the GTA fell 16 per cent compared with the same months in May last year, while the number of new listings rose 47 per cent, according to data compiled by the Toronto Real Estate Board.
The average GTA home sold for $890,284 in the first 2 week of May, a 17 per-cent grow from a year earlier, chiefly because of large-scale gains earlier this year. But the cost was down 3 per cent compared with April, when the average sale price for all manner of GTA homes 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 buyers were not a large enough part of the market to make such a significant decline, and many foreign buyers will qualify for rebates of the tax.
Instead, he believes the plunge is the consequence, in part, to a decline in demand from domestic investors who were acquiring second properties to lease or to flip. Most investors have stopped buying as they wait to see potential impacts of a slate of new measures announced by the province of Ontario in April, including the foreign-buyer’s tax, he said.
“They vanished, no one is talking about buying money-losing rental properties any more,” Mr. Pasalis said. “The whole excitement and euphoria kind of deserted right now .”
He also believes many other customers are sitting on the sidelines, feeling “buyer fatigue” after watching prices in the GTA climb rapidly.
The 33 per-cent cost increase in March may have been “the straw that broke the home buyer’s back,” after the average cost of a house rose to $917,000 in March from $688,000 a year earlier, he said.
“The whole feeling of the market has changed, and that is the bigger factor. People are frightened, investors are frightened, customers are frightened and I think that’s the huge issue.”
Mr. Pasalis said many of his firm’s buyers have been stepping back and not putting offers, hoping costs 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 bringing them offer, because the seller is freaking out because they already bought something and they need to sell their house,” he said.
One agent in his firm submitted an offer of $650,000 for a buyer’s bid on a townhouse that was selling for $750,000 a month ago, and the bid was accepted. He said the agent was not thinking the offer would be accepted, but he assumes 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 situation there.”
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Source: Globe And Mail
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