"Soft Landing" for our real estate

Posted On: Wednesday, July 19, 2017

Market affected by government initiatives

We have had 3 recent changes brought on by government actions.
The mortage rules were tightened up in a move they called a "stress test".  Borrowers are required to quality for an interest rate higher than the one they will receive from the lender. 
Then the 15% penalty tax was announced on foreign buyers for purchases in the Golden Triangle area including Simcoe County (but not including Grey County).
Then the central bank announced an interest rate hike, with more hikes expected before the end of the year.
Buyers and sellers alike have taken a pause to see where this all is going.  Just a small reaction here and there can start the ripple affect. 
You can follow the MLS statistics on this blog or through my monthly emailed report, just ask.
Here is an article from today.

Foreign tax impact and soft landings

by Justin da Rosa 18 Jul 2017
Foreign tax impact and soft landings
Canada’s market may be in the midst of a soft landing, and other notable stories from the latest round of real estate stats.

“The Canadian housing market is now in its third month of what is expected to be a soft landing. The weakness was triggered by changes to provincial and federal housing policy, but it will ultimately be higher interest rates that help solidify it,” Diana Petramala, economist with TD Bank, said in her analysis of CREA’s release. “Mortgage rates have moved in tandem with the Bank of Canada rate hike last week and will likely to continue to edge higher with three additional rate increases expected by the end of next year.”

The Canadian Real Estate Association released its June housing statistics Monday, which indicated home sales fell to levels not seen since June 2010.

National home sales fell 6.7% in June.

A major reason for that decline, according to the association, was Ontario’s Fair Housing Plan.

“Changes to Ontario housing policy made in late April have clearly prompted many homebuyers in the Greater Golden Horseshoe region to take a step back and assess how the housing market absorbs the changes,” said Gregory Klump, CREA’s Chief Economist. “The recent increase in interest rates could reinforce a lack of urgency to purchase or, alternatively, move some buyers off the sidelines before their pre-approved mortgage rate expires. In the meantime, some move-up buyers who previously purchased a home before first selling may become more motivated to reduce their asking price rather than carry two mortgages.”

Toronto home prices have dropped nearly 14% since Ontario enacted that plan, which included a foreign sales tax.

Prices dropped 6.2% one month after the announcement of Ontario’s housing plan and 13.8% a month later. However, prices were up 6.3% yer-over-year in June.

Home sales in Toronto fell 15.1% month-over-month in Toronto. They were down 37.7% year-over-year.

According to the Bank of Montreal, the foreign sales tax has impacted the market in more ways than just discouraging overseas buyers from parking their money in Ontario real estate.

“With all eyes on Toronto, it’s quite clear that policy changes, regardless of the number of non-resident investor transactions they’ve impacted, have worked to alter market psychology—and that is a positive outcome given the speculative dynamics in place a few months ago,” Doug Porter, BMO chief economist, said in his latest report.

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Coral Robinson, Broker, RE/MAX four season realty Collingwood, Thornbury, Blue Mountain

Coral Robinson B.A., Broker

RE/MAX four seasons realty limited, Brokerage
67 First St., Collingwood, Ontario, L9Y 1A2

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