After one of the most frenzied spring home buying seasons in recent memory, sales of homes in Toronto have started to fall. Some think prices are soon to follow.
So we asked a couple of housing experts to get their perspective on what’s going on. If you’re a buyer, should you hold off on a purchase right now? Or are all the recent headlines about a housing cool down in Toronto just frightening.
Here’s what an economist and a real estate agent have to say
Here’s a real estate agent take on it as higher interest rates aren’t the only way to cool off the housing market.
Canadian governments have introduced several policies in the past couple of years designed to cool housing demand. The latest round of policies, at least temporarily, seem to have done the trick. The real estate agent continues with saying the new policies have affected both housing speculators (those buying homes solely to profit off them) and residential owners who are looking to sell. It’s believed the policies have simply put many buyers on caution, holding off on buying properties to see how the market plays out in the coming months.
So as of now bidding wars, where buyers compete with each other to win a property with increasingly higher offers, are not as hot right now. The Toronto real estate agent finishes off “You’re not going to get the 10 or 15 offers you would have. You’re going to get five, I’m not saying the demand has gone down, it’s just that the strategies and the approaches are different now.”
It is not certain to say the market is truly dropping at least not until more time has passed.
According to an economist, the lower sales-to-listings ratio points to a price decline in Toronto.
He agrees the new rules have “spooked” investors and buyers in the area and that essentially what we’re seeing is a confidence drop. Having said that, this drop in confidence could lead to something of a self-fulfilling prophecy. If people are afraid of prices dropping and continue to hold off on buying, prices will inevitably drop too.
Here’s Torontonian’s real estate agent take on this:
For those who have been trying to enter the market and have a significant down payment ready, this could be a great time to get in. “If you find a home that you like, yeah, make an offer on it. Because you won’t really have to compete with as many people. If you wait, and the market jumps back up in the fall, you’re going to kick yourself.” It’s a good time for people who want a house to live in, but those who are trying to flip homes or make a quick buck —well it’s uncertain if the current market is a good place to be doing that. It’s predicted that the condo market is going to be the hottest area of housing in the next decade as people shift attitudes towards condos as a long-term home option, since more buildings are being built close to transit and with amenities that make up for the lack of traditional perks of single-family homes like a backyard and more space.
However, the economist disagrees
He strongly believes buying a home right now isn’t a good idea. “Do you really need to buy now? Because if you don’t really need to buy now. Then wait,” he said. He has long called for a housing correction. He says the probability right now is especially high. The only question remaining is how large of a correction it will be. Be warned that in the past decade, many Canadians — especially young people — have been sucked into buying a home due to their FOMO (that’s fear of missing out), instead of actually needing a house. As a long time renter and says he’s done it because it’s less expensive for him and he prefers to invest his money in stocks rather than tying it up in a property. Expanded rent control laws will help make renting in Toronto less expensive than buying, he says. If you’re buying, one bright spot is that mortgage rates should continue to remain low.
Potential home buyers should keep in mind. That being said, Bank of Canada most likely isn’t going to raise interest rates significantly anytime, because low rates have been driving consumers to spend, which has been integral to helping the economy grow. Higher rates could make it harder for people to pay off their high amounts of debt and it would slow down housing sales.
There you have it, two different views – Which side are you on?
For more information if buying is the right choice for you, contact Noble Mortgages today at 416-241-2227, or email us at email@example.com.