‘Correction’ to soften Toronto home prices: Report
Royal LePage predicts a soft market for the balance of 2017 to balance the strong performance in the first half.
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One of the country's biggest real estate companies is predicting an 18.5 per cent year-end price increase in the Toronto housing market this year, compared to a 13.8 per cent national year-over-year rise.
Given the significant gains of the first half of 2017, the company expects a year-end home price average of $862,264, up from $837,232 at the end of the second quarter.
Wednesday's quarter-point interest rate hike by the Bank of Canada doesn't alter Royal LePage's mid-year forecast.
Despite double-digit year-over-year increases in the second quarter, the company's mid-year report notes that buyers have been standoffish since the province introduced its fair housing tax on April 20.
CEO Phil Soper said he expects home prices will be soft for the balance of 2017.
"We are experiencing a housing correction in the GTA, no doubt about it," he said.
But that is different from the price correction that occurred in Vancouver when a similar tax was launched there last summer.
The 9 per cent of foreign buyer activity in Richmond Hill, compares to about 18 per cent in Richmond, B.C. The B.C. city is a smaller market and prices were about 50 per cent higher, he said.
"Almost half of the (Vancouver) market disappeared overnight," said Soper. "I believe what we'll see (in Toronto) is modest price increases but fewer homes being sold — not as a violent as the Vancouver correction where we saw 40 to 50 per cent of the transactions disappear."
The Royal LePage forecast is slightly more optimistic than the Toronto Real Estate Board's (TREB) revised expectation of a year-end 13- to 18-per-cent increase.
The report predicts that consumers, who have been waiting to see if sellers drop their prices substantially, will re-enter the market once they recognize that isn't going to happen.
Second quarter home prices rose 22.8 per cent year-over-year in the city of Toronto with Scarborough showing a 21.1 per cent increase as millennials moved east in search of affordability.
For that reason, that part of the city is not expected to slow as much as other areas in the coming months, said Royal Lepage.
Vaughan saw the highest price gains in Canada during the quarter with a 27.5 per cent year-over-year increase and an average $1.1 million home price.
Richmond Hill, which also grew by 26.6 per cent year-over-year to an average $1.34 million has been hard hit by the foreign buyers tax, notes the report.
Given that Toronto and Vancouver are both growing with strong economies, it’s not clear how long the foreign buyers tax and other measures will quell demand for housing, said Soper.
"Like public transit, housing policy is something which needs a persistent, long-term focus," he said.