On April 20th, the Ontario government introduced new legislation in an effort to ensure that the red-hot housing market isn’t being further fuelled by speculators, non-residents and questionable real estate transaction practices. In addition to the new real estate rules, legislation was also introduced to extend rent controls, standardize rental leases and stimulate the construction of new rental apartment buildings.
Those of us across the GTA including owners of all types of homes in Markham and York Region are concerned about how the changes will affect their property values and their ability to sell and/or rent out their properties. Home buyers are also wondering if the new laws have any bearing on if and when they make an offer on a home.
Here’s a quick review of some of the regulations that most effect home owners and buyers.
1. Non-Resident Speculation Tax
In an effort to curb real-estate speculation due to home purchases by owners who are not Canadian citizens or permanent residents, the province has introduced a 15% tax for foreign buyers, similar to the one introduced by the BC government last year. Non-Canadian and non-resident buyers will pay the tax on the purchase price of the home.
2. Regulations Against ‘Paper Flipping’ and Other Speculative Practices
The heated market has attracted those looking to take advantage by buying up pre-construction homes and reselling them before the homes are built, thereby getting a quick profit and avoiding taxes.
3. Vacancy Tax
Many market watchers believe that one of the main drivers of the remarkable run-up in prices is the ongoing lack of supply of homes for sale. Some homeowners and landlords have left properties vacant and off the market waiting for prices to increase so they can get a higher price for the house. To help increase housing supply, the province introduced legislation to let Toronto and “potentially other municipalities” introduce vacancy taxes.
While most market watchers agree it’s too early to come to any conclusions about any effect the changes will have on the housing market, and no one can reliably predict any future outcomes, the initial feedback and market reaction to the new regulations seems to be mixed. Some indicators show little or no effect, while there were almost immediate shifts in other areas.
1. Average House Prices
The new regulations were only in effect for about one third of April, so it’s difficult to say what, if any, effect they had on prices. According to the Toronto Real Estate Board (TREB), average prices for homes of all types across the GTA rose by 24.5% in April 2017 versus April 2016. Here at home in York Region, where average home prices are now well over a million dollars, the increase was an even more impressive 26.6%.
Those rates of increases are in line with what we have seen recently for annual increases each month, so there’s no early sign of any impact on home prices from the new rules – yet.
While month-to-month average price changes can vary for a number of reasons, it’s interesting to note that the average price for a home in Markham increased by about 4.1% between February and March, 2017, and the increase between March and April, 2017, was 1.0%.
2. New Listings
Again, with housing supply considered to be one of the reasons for the ongoing rise in prices, many are keeping a close eye on how many homes are available for sale.
According to TREB statistics, the new listings of homes in Markham increased by 20.9% between April 2016 and April 2017, while they increased by 10.7% between March 2016 and March 2017.
3. Non-Resident Buyers
Statistics about how many homes are bought by non-residents are not regularly tracked. Reports by Sotheby’s International and Ipsos for TREB show that only about 4.9% of real estate transactions in the GTA involved foreign buyers. While that’s a relatively low number, there’s no evidence to show the effect, if any, of the 15% non-resident speculation tax on real estate markets.
No one can say how Ontario’s new rules will affect the market. Home owners and buyers who are looking to get into the market should seek out the advice of local real estate specialists. If you have any questions about buying or selling a home in York Region, Durham Region, or Toronto, please call us here at the Stephen Tar Team, we’ll be happy to help you.