First-time homebuyers feel effects of market moves

Home sales are expected to slow and prices will edge up just slightly this year as government policy interventions continue to dampen the once-roaring Toronto real estate market, particularly among first-time buyers.

The Toronto Real Estate Board predicted sales this year will drop just below 2017 levels, in a second-consecutive year of declines. Toronto recorded 92,394 transactions in 2017, marking a steep drop of 18 per cent from record sales volumes the year before.

Prices will nose up slightly, rising above the average selling price of $822,681 last year, the board said in its annual outlook. The softening in the market will be most noticeable over the first half of the year, with flat sales and price growth striking a stark contrast to the same period in 2017, when prices surged a record 30 per cent.

“In 2018, we’re going to see almost a reversal (of ) what happened last year,” said Jason Mercer, the board’s director of market analysis. “We’ll be off to a slow start, then see sales and price growth pick up by the summer as more buyers shake off the lingering effects of government policies.”

Toronto’s soaring market dropped dramatically in the summer months of 2017, a trend the board attributed to the “psychological impact” of the Ontario government’s Fair Housing Plan. Introduced in April, the plan includes a tax on foreign buyers and rent controls. These measures, along with higher interest rates and tougher new qualifications for mortgages introduced by the federal banking regulator earlier this year, will continue to affect home buyers — particularly those looking to purchase their first home, Mercer said.

The board’s fall survey of homeowners showed a general decline in buying intentions, with first-time buyers shying away from the housing market. First-time buyers made up 41 per cent of likely buyers in the Greater Toronto Area in 2017, down from 53 per cent a year earlier, according to an Ipsos poll conducted for the Toronto board.

Despite slowing growth in prices, real estate markets in Toronto, Vancouver, Hamilton and Victoria all showed strong signs of over-valuation, with house prices high relative to incomes, mortgage rates and population, the Canada Mortgage and Housing Corporation said in its latest housing market assessment Tuesday.