Buyers regain confidence as Toronto real estate market rebounds from summer sales slump

The uncertainty sparked by the introduction of Ontario's fair housing plan is starting to wane as formerly hesitant would-be buyers regain confidence that Toronto's real estate market is stabilizing again, analysts and realtors said Sunday.

While some prospectivebuyers will be hit by new mortgage rules coming into effect on Jan.1, the overall market will likely see little impact from the changes.

"Between April and July we saw a significant correction in home resale activity in the GTA and that followed the introduction of Ontario's fair housing plan," said Robert Hogue, senior economist at RBC.

• New mortgage rules include stress test for uninsured borrowers

"That plan really had an impact on the market," he explained, adding the strategy was implemented when some areas were seeing 30 per cent year-over-year increase in home prices.

"Clearly the marketwas overheated It had become quite vulnerable to any sort of shock," he told Radio-Canada.

First revealed inApril amid criticism that many people werebeing pushed out of the city by soaring house prices and the near absence of viable rental options, Ontario's 16-point plan to reign in the market included a 15 per cent tax on foreign buyers, rent controls and a review of murky realtor practices.

According to Hogue, some areas in Toronto and the surrounding region saw subsequent drops in resale activity of up to 44 per cent, largely driven by uncertainty over how the changeswould play out in the long-term.

SylviaSantarelli, sales representative withRemaxHallmark Realty, said buyer behaviour was noticeablyaltered.

"They're taking their time. Unless the house is super special, they might wait for the next one, which they weren't in the spring," she explained.

"We had such a lack of inventory in the spring that people were buying anything just to get their foot in the market because they were seeing increases on a month-to-month basis."

That being said, there's been little difference in especially trendy neighbourhoods like Riverdale, Leslieville, Roncesvalle Village and Bloor West, as well as some suburbs surrounding Toronto.

Similarly, areas that did see a drop in real estate activity are picking back up again, according to Hogue.

"We interpret this rebound as the market starting to adjust to the fair housing plan. Buyers are starting to come back into the market," he said.

"Overall I think we're pretty close to the bottom of this correction."

Neil Riach, a realtor in Toronto, echoed Hogue's analysis, telling CBC Torontothe "market is coming back quite nicely.

"Buyers are realizing that the market has not the bottom has not fallen out of itand they're back in it," he said.

There are still many wondering, though, how the new mortgage rules set to take effect on Jan.1, 2018, will impact buyers. Earlier this month, Canada's top banking regulator revealed that potential buyers with uninsured loans will have to undergo a stress testto see if they could withstand a hike in interest rates.Currently, about one in six, or 18 per cent, of mortgage loans in Canada are uninsured.

The revised test, coupled with the expectation thatthe short-term interest rate will hit twoper cent by the end of 2018, could have a short-term "cooling effect" on buyers, Hogue said, though it won't be a "large shock" on the GTA housing market.

Riachsaid there's likely buyers rushing to get into a property "under the wire," but that post-January the impact will be minimal.

"Long-term, I think that people will just adjust," he told CBC Toronto.

"The reality is that it will affect a small number of people, but it's not going to, in any way, damage the market."

New mortgage rules include stress test for all borrowers

7 years ago

Duration 2:11

New mortgage rules include a "stress test" for borrowers with uninsured loans to ensure they can withstand higher interest rates