It seems that discussion on the market itself has been supplanted by Government involvement in trying to slow down a real estate market that is leading the general economy out of a recession. First, the Feds announced changes to CMHC lending policies in an attempt to slow down buyers. For home buyers, qualifying at the five year posted rate or the five year fixed contract rate will have minimal impact, except that it will force buyers to accept a five year fixed rate mortgage. Now the banks have jumped the gun knowing that buyers have no other option. They bumped these five year rates by 60BP even though these rates are tied to bond yields which have not moved up as yet! While most expect some increases in these yields later this year, the move by banks is simply greed with the knowledge that the Feds will do nothing.
The biggest CMHC change is with investors. After April 19, investors will need to have a 20% down payment for rental properties – read condos in our market. But how many developers have sold pre-construction condos to investors with only 10 or 15% down, two and three years ago? Now these investors won’t be able to get a mortgage unless they come up with more money down on closing. Watch as more investors try to off load their units during the Assignment window or worse, give them back to developers. The impact will be for prices to back off and actually decline for some types of units, and in some condo buildings. This could make the second half of the year far more active than many of us thought at the start of the year.
The second road block was the ruling of the Competition Bureau that consumers need more choice in selling their properties. The ruling was further complicated by poor reporting of the facts. First the public can not list their property for sale by themselves on MLS – they still need a Realtor. Imagine having a car to sell privately and you go to the GM dealer, park it on their lot, and ask them to refer you all the buyers that come by the dealership. You see the stupidity. The Competition Bureau also asked that Realtors ‘just post’ the property on MLS and do nothing more for a fee. Currently there are a number of brokerages that already do this, however the Bureau wants us to incorporate this option into our By-Laws to which we agreed. As the Industry attempted to point out, real estate is regulated on a provincial basis, and in Ontario our regulations require us to provide a certain level of agency obligations. It’s hard to serve two masters! In the end, consumers and the market place will determine the real outcome.
What is best for the market, and for buyers and sellers of properties is a reasonable level of certainty in being able to plan future transactions without having Government continually introducing new rules with new uncertainties.
That being said, the Toronto real estate market continues to move towards balance. While we continue to report record sales for March – over 10,000 units which are closer to May’s record sales numbers, the end is in sight. And it will come before July1! Our best guess is that the market will peak in late April. Multiple sales are starting to drop. And those in multiple offer situations are not bidding way over list price. In fact our Company experienced one multiple sale with four offers, only one above list price, and it was just by $4,000. Need we say more? Listings continue to accelerate, now over 19,000 on TREB and 1100 for downtown condos. The sale-to-list ratio (sales to active listings in a month) that was at one time over 80% is now down to 50% and will soon approach the 25-35% range of a balanced market. Our point is that the market would have slowed itself without the added ‘help’ of big Government.