James Hughes Salesperson, REALTOR®

James Hughes Salesperson, REALTOR®

What Will Doug Ford Mean To The Real Estate Market?

What Will Doug Ford Mean To The Real Estate Market?

 

       It shouldn't be a surprise that the Progressive Conservative Party is the front runner in the 2018 Provincial Election. With Doug Ford now leading the party, there is a good chance he will be the the next Ontario Premier. He believes that government intervention will only disrupt the market and the market should take care of itself. Ford's plan is let supply and demand be the driving force behind the market correcting itself and is considering scrapping the 15% foreign buyers tax.

 “I just don’t like the government getting involved,” Ford told the Globe and Mail. “I believe in the market dictating. The market, no matter whether it’s the stock market or anything, it will always take care of itself—supply and demand.”

        I said this from the beginning. A foreign buyers tax will not have a significant impact in cooling the market. Last spring, when the Ontario Fair Housing Plan came in to effect in April of 2017, foreign buyers represented just 4.7% of all real estate transactions in the Greater Golden Horseshoe. Between August and November, non-residents represented just 1.9% of transactions. You can absolutely make the argument that the tax did influence the cooling of the market but in my opinion, it was largely the psychological effect of the government intervention rather than the policies themselves.

       I believe supply and demand was the main culprit of the inflated prices -there were far too many buyers vying for the same house. This causes bidding war and once a house sells significantly over asking, the next comparable house will use the previous sale price to set their own list price. Another bidding war, an over asking sale price and a new inflated list price for the next comparable property. This is how we reached the 30% increase in house prices from 2016-2017.

       I'm not saying that it is healthy. But when the government stepped in, all it really did was spread confusion and fear. Everyone tried to sell their house as fast as possible while the buyers were waiting for the crash to buy. This swung supply and demand in the exact opposite direction and brought the market to a screeching halt. The policies changes themselves weren't really enough to cause such a lull, but the constant talk of the foreign buyers tax and the "impending market crash" was all that was needed for a significant impact.

       Back to Ford, he says he doesn't like government stepping in but his plan is to do the opposite. Right now, prices in the GTA  have dropped around 12% since last year, but up around 12% from 2 yeas ago. We are approaching the spring market where things are set to really pick back up again. It's almost been a year with the tax and other measures of the Fair Housing Plan in place and the market has finally adjusted. Scrapping the tax now is essentially government intervention! We have seen huge changes since last year. Prices have bottomed out and are trending back up but at a much more stable pace. Why interfere again? His way of addressing the affordability crisis is to build more homes to increase supply to meet the demand. I agree with that in principle but I feel the damage from the tax is essentially done. The market has already been affected and is recovering. Any more intervention could throw the market for another loop if we bring foreign money back into play.

        Ford's belief in letting the market dictate all is flawed in that it fails to mention that government has had a hand in helping support the market for a number of years. The Home Buyers Plan has been in place for a while now and it serves to help first time home buyers enter the market. Some of the benefits of the HBP are an allowance to use up to $25,000 from RRSP's towards a down payment (with a 15-year grace period to pay back) as well as a discount of up to $4000 on Land Transfer Tax. This is government intervention but works to support the market rather than cool it. CMHC (Canadian Mortgage and Housing Company) currently insures $434 Billion worth of Canadian mortgages and without this, loans would be significantly more expensive.

        This is already going to be an interesting year as it is. We have seen interest rates increase 3 times in the last 6 months- a trend rumoured to continue. My main concern is that we have yet to see the true effect of the January 1st stress test. This is going to have an impact on the market in relation to prices. Buying a home is now even more difficult for Canadians as the stress test slashed affordabilty up to 20%. If we reintroduce foreign money back in, it could elevate prices and make the dream of homeownership even that more unrealistic for many Canadians.

 

 

Other Great Articles:

March 2018 Market Update

What's In Store For 2018?

Are You REALLY Pre-Approved?

 

 

 

Comments

“Doug Ford” is a great

“Doug Ford” is a great politician of Canada and he’ll always be so humble to the residents of Canada that he always gets residents a better price and check top dissertations reviews for the useful task. So I really like the article because this article has some major points described properly. Thus the article found very informative too.

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