The way Toronto broker Scott Davie sees it, 2017 was a year of extremes for the GTA real estate market.
“It was a hot year and a cold year, a great year and a bad year, all at the same time,” Davie Real Estate Inc.’s president and broker of record tells Epoch Times.
“In my three decades in the industry I’ve never seen anything like it.”
Things started well for resale and new single family homes and new high-rise condos, all of which sold at record prices and at record velocity in the first quarter of 2017.
Then in April the province introduced its Fair Housing Plan, which included a 15 percent tax on some foreign buyers and a vacant homes tax, among other measures. The legislation was aimed at correcting an extreme sellers market that’s been driving up real estate prices.
Suddenly, says Davie, things got bad.
While the longer-term consequences of the Fair Housing Plan remain to be seen, news of the legislation’s introduction alone had a devastating effect on short-term consumer confidence in the resale and new single-family home markets, particularly in the 905 region, says Davie. “It created an unknown and a fear of how it would affect the market.”
Sales of resale and new single family homes “skidded to a stop” as buyers—already frustrated with chronic shortages of available properties leading to multiple offers and average sale prices as much as $300,000 over asking—opted to wait and see how the province’s Fair Housing Plan would affect prices. “Basically that segment of the market stopped dead, causing a big correction,” says Davie.
The GTA ended up having its worst year in over a decade for new single family home sales, with just 7,714 homes sold at an average price of $1.23 million, according to Altus Group.
Yet as the the low-rise market lay temporarily moribund amid a wane in short-term confidence, the GTA’s new-condo market soared. Regionwide, buildings continued to sell out, achieving record prices along the way. The condo market had its best year ever in 2017, with a record 36,429 new-condo sales and a record average price of $716,000, Altus Group reports.
“There was so little confidence in the short-term market but strong confidence in the long-term strength of the market,” Davie says. “So you saw two extremes happening all at once.”
Another Big Year
After 30 years in the real estate business—most recently serving as a senior vice president with Milborne Real Estate—Davie has struck out on his own with the launch of Davie Real Estate.
Peering into this crystal ball, he predicts big things for the new-condo market in 2018 as investors and first-time buyers continue to pursue affordability. At the same time, there’s significant pent-up demand for low-rise homes, and once people realize “the sky isn’t falling” and re-enter that market, Davie says prices should rebound in both resale and pre-construction low-rise segments. “So the next year could be a record one for sales of new single family homes and new condos. The potential is there.”
First up on Davie’s sales slate this year is the initial building at Edge Towers in Mississauga, a 35-storey tower designed by award-winning architect Roy Varacalli (E-Condos, Exhibit, 1 Yorkville). “This is setting a new standard for quality in Mississauga,” says Davie, who notes the Solmar Development project—three towers total at build-out—is luring purchasers with its central and transit-friendly location, within walking distance of Square One Shopping Centre and the future Mississauga-Brampton LRT line.
He foresees record condo sales and price increases for 2018, propelled by ongoing immigration to the GTA. And the condo market’s momentum will continue to be driven by low interest rates and a chronic shortage of developable residential land.
All of it bodes well. Still, Davie is concerned new mortgage stress test requirements will create roadblocks for aspiring buyers. Under the new rules, lenders now apply the stress test to determine if an applicant putting less than 20 percent down on a new mortgage could continue to service that debt in a higher interest rate environment. “This will make it more difficult for Canadians to qualify for the amount of mortgage that they could traditionally afford,” he says.
It won’t stop people from buying, however, Davie makes clear. “They will just buy smaller, cheaper properties than they would like, or they’ll drive to affordability by moving to places like Milton or Guelph.”
Ryan Starr is a Toronto-based freelance journalist.