- Clean up the real estate industry to protect consumers by reviewing Realtor rules and educating consumers on their rights
- Increase affordable housing supply
- Create a team to identify and address obstacles to development
- Create a team to advise the provincial government on the housing market and the impact of the above changes
- Update the Ontario Growth Plan with municipalities to review density measures and unit sizes.
- Update the Residential Tenancies Act and standardize rental lease language
- Create more equity among property tax rates for multi-unit apartments vs other residential properties
- Invest $125M over 5 years to encourage the development of rental apartment buildings
- Give more flexibility for municipalities to fund development through property taxes
So what does this mean for Oakville property owners? For most, it means nothing. The fundamentals of the economy are the same, we still have high levels of immigration, a diverse economy, low interest rates and low unemployment. Oakville’s schools continue to rank some of the highest in all of Ontario, we are a hot spot for executives and Millenials looking to grow their family and we are centrally located to accommodate two income families commuting to different parts of the Golden Horseshoe.
However…it is easy to see how these regulations have a large and immediate impact on buyers and sellers currently looking to trade real estate:
1. Buyers and Sellers perception of the market has changed - Newspapers are now talking about “crashes”, economists are discussing “what-if” scenarios if housing declines further. People are generally feeling uneasy and some are completely spooked depending on their risk tolerance.
2. Local Investors are more likely to sell now - If you are an investor, it is easy to understand why you may feel like now is the best time to sell, especially before tax reporting loopholes are cut off. Vacant taxes are a concern (Oakville’s mayor, Rob Burton has been a vocal supporter of a vacancy tax). Rent control measures are also concerning to investors
3. Foreign Investors are also more likely to sell – again to potentially evade new tax reporting measures or perhaps because they are seeing other more lucrative investments.
4. Local and Foreign Investors Not Incentivised to buy - If you are an investor, you are likely waiting on the sidelines to see if further regulations are made and see if the market drops further before buying. If you are a foreign investor your profits just got cut way down and you are also likely sitting on the sidelines.
5. More Home Owners Looking to Cash Out – Some baby boomers feel that the market has hit it’s peak and it is now time to cash out of Oakville
6. General Market Forces Impacting Current Market - Buyers certainly don’t feel the same level of pressure to buy now before prices go up. We also have a timing situation where many buyers who normally would have waited longer to buy, pushed their timing up to the winter/early spring market as they worried they would get outpriced if they waited further. Unlike more balanced markets, where some people buy first, others sell first, for the first 3 months of 2017, almost all chose to buy before selling. We are left with a market where there are many motivated sellers (they need to sell to close on the home they bought in March/April) and not so motivated buyers.
All these market forces combined are putting downward pressure on prices in the near term.
Buyers do not like the uncertainty in the market. The incentive to "buy quickly" before prices rise has more or less evaporated in the past two months. Buyers are taking their time and enjoying the higher level of inventory as the wave of incentivised baby boomers and investors cash out of the market.
This does not spell disaster but it does make for a quick swing in home values. Bear in mind that from January-March, housing values went up 34.6% in Oakville. While a 6 week price decrease of 5.4% seems drastic in isolation, it still puts values up 28.4% year to date. The only people who are being unfairly punished in the short term are the relatively tiny pocket of home buyers who purchased in late February to early April of this year. Remember, Oakville home values increased roughly 27% in 2016 and have been up year over year for most of the past TWO DECADES so the overwhelming majority of homeowners have made ridiculously handsome profits on their homes. Heck, we're still up 28.4% Year to Date. Yes, it is horrible for those who bought at the height of the market but underlying market conditions (interest rates, centralized location, supply limitations, high levels of immigration, high ranked schools and diversified economy) are more or less unaffected by the government changes. Once the market responds and absorbs the impact of the housing measures, the market should stabilize once again.
The question remains is now a good time to buy? This depends on how long you think the impact of the government measures will take to work their way through the system. Buying a home is also very dependent on your goals, the type of home you are looking for and the particular neighbourhood you like. Hearing what happened to your friend in Thornhill who is selling her condo is very different than what you will encounter trying to buy a detached home in South Oakville. While friend's experiences and the anecdotal newspaper story or overall GTA statistics may give some directional evidence of what the market is doing, it should never be your primary source of deciding when to buy. For that you need local statistics which I will be exploring in my next blog post. Stay tuned...