I’m not sure how best to describe 2017 – crazy, ridiculous, heart-wrenching, exhilarating? We started with an astronomical price increase of near 30% in the first few months of the year. In other words, a home worth $1,000,000 January 1st was worth $1,300,000 by March 30th. After that craziness, the market swiftly corrected in late April after the Ontario government implemented measures to cool off the market (namely a foreign resident tax). The shift in sentiment from extreme optimism to extreme pessimism was quick and real as many who bought and sold this year can attest.
Buying and selling is emotional for many at the best of times but emotions this year were at all time highs. First time and move-up buyers felt a lot of pressure to buy quickly or be priced out of the market, investors continued to flood the market after years of astronomical returns and downsizers were resistant to sell with prices soaring. With low interest rates, low unemployment and high levels of immigration, it was a perfect storm for rising prices. When the government announced changes in the spring, sentiment quickly reversed and all of a sudden those very buyers worried about being priced out of the market, were now worried about buying too high, investors started cashing out and baby boomers came around to the idea of moving on from their family homes. The government changes were aimed at a relatively small group of buyers and yet the perception of a market shift was enough to reverse the market literally in the span of a week. Clearly perception was the biggest influencer here.
Now, 7 months on, we see that despite a huge drop in price and sales activity from April-November, prices are still up 15.5% year to date. This is over and above the 2016 average sale price which was a phenomenal year of +26%. The market has slowed so homes are now taking longer to sell and buyers are being pickier. In August/September, prices were up slightly before falling slightly in October/November. I suspect many buyers and sellers are taking a wait and see approach as further mortgage rule changes take effect in January.
Aside from mortgage qualifications, fundamentals haven’t really changed. Oakville consistently ranks a top place to live, unemployment levels are at all time lows, immigration levels are high, interest rates are low and land is limited. I suspect January will be slower than most but I hope that in time people’s confidence levels will be restored (perhaps without quite as much exuberance as Q1 2017) and real estate will churn out sustainable positive increases.