02 May The market has officially cooled…
It is like a tap has been switched off. That’s how realtor Louise Sabino describes the housing market in the wake of the Liberal government’s provincial plan aimed at cooling Toronto’s scorching property prices.
“I think it’s shocking that it did make the impact so fast,” the Royal LePage Signature Realty agent said.
In a city where few topics draw as much interest as real estate, it’s not an exaggeration to say that the Liberal government’s 16-point Fair Housing Plan is undergoing intense, immediate scrutiny.
Some realtors say they have already noticed a shift in the market. But other industry experts say it’s too soon to know if the plan, particularly its centrepiece — a Vancouver-style, 15-per-cent tax on non-resident foreign buyers — will have the desired effect of making housing more affordable and available by dousing property speculation.
Although Ontario’s tax hasn’t delivered the same shock as the Vancouver version, it will undoubtedly make a difference to some buyers and sellers, said Brad Henderson, CEO of Sotheby’s International Realty Canada.
“It definitely has postponed or put on hold a number of (Toronto-area) trades where people have said they aren’t going to buy and sell because of that foreign tax,” Henderson said.
But other sales will go ahead because they’ve watched Vancouver, believed to have a far higher level of foreign investment, survive the shock.
“Their belief is they can still take advantage of this particular marketplace,” he said, citing low interest rates, political stability, low unemployment and Toronto’s place as the country’s economic heartland.
Agents like Sabino are already advising their clients on selling in a market that is far different from the frenzy that was making headlines even three weeks ago.
The pause may be welcome for buyers. But it’s frustrating for sellers, who have, for months, been primed for bidding wars and over-asking-price offers, Sabino said.
She cited an offer presentation on Tuesday that drew a single bid. Although it was higher than the property’s listed price, it came with conditions for financing and a home inspection.
“We haven’t seen that for months,” Sabino said.
She tries to help clients understand that the real estate market is always a moving target.
“Maybe we price our homes to be bang on and welcome offers as they come so you’re not setting the stage of offer presentation dates. That is something I’m talking to my sellers about,” she said.
But the selling strategy depends on the price point, too.
“If I have a $2.8-million house coming on the market next week we’re going to welcome offers as they come simply because the number of buyers for that price point will be less than those who are looking to spend $800,000,” Sabino said.
Not all agents agree that there’s a lull as consumers and sellers absorb the new policy implications.
“I haven’t seen a slowdown at all,” said April Williams at Royal LePage Terrequity Reality.
Some agents may be reporting fewer showings, but buyers are still making strong offers, she said.
“They may not have got as many as they did a month ago, but they’re still getting really strong offers,” Williams said.
In the last week, she has been involved in two sales — a townhouse that drew nine offers and a condo with 13.
“Some of my buyer clients, when the (provincial) announcement was made, said they need a day or two to re-evaluate,” she said. “Then they came back and said, ‘This doesn’t affect us. We’re good to go.’”
If the pre-construction condo market is more vulnerable to anti-speculation taxes, realtor Andrew la Fleur said he hasn’t seen any evidence.
The supply of listings picked up around April 1. But demand hasn’t slowed at all, said the agent with Re/Max Condos Plus Brokerage.
“The demand was spread out further so maybe it felt like things were slowing down,” he said.
There was nothing slow about the reception to the first development that launched after Wynne’s announcement. The press conference had barely ended when 1,000 agents turned up for a preview of the east tower of Daniels Lighthouse Waterfront development near Sugar Beach, said Dominic Tompa, president of City Life Realty, Daniels’ in-house brokerage.
Those agents have since submitted about 2,500 forms with their clients’ preferences for about 250 available units.
On April 22, Daniels held what it calls its “inner circle” for buyers, who aren’t working with agents, who want to deposit $500 for an advance crack at a limited number of units.
“We sold 110 of the 129 suites that were available,” Tompa said.
Foreign buyers represent less than half a per cent of Daniels’ business, he said.
“We have enough business locally that we’ve never set up offices or gone to trade shows overseas,” he said.
Foreign buyers play a role, but they are far from the largest producer of any froth in the region’s property market, said Henderson, who believes Toronto’s situation is a matter of demand outstripping supply and a city well positioned to attract investment.
He points to a study his company published in conjunction with online Chinese property hub Juwai.com. It showed that Asian buyers aren’t necessarily the luxury mavens some Canadians imagine.
Online property shoppers on Juwai.com were looking for a base from which to access Canadian schools and potential home for themselves or family.
Many times they searched for properties that were below the average Canadian market price, said Henderson.
On the other hand, he said, a 15-per-cent tax isn’t a major deterrent for many overseas buyers.
“If they’re coming here because they want to eventually migrate here or if they’re looking to take money out of a conflict country for safekeeping in some other location and, if they have family ties here, all those things are much more powerful inducements to invest in Canada,” he said.