The Canadian real estate market has been hot over the past few years. Real estate is, first and foremost, about location. It is, therefore, important to select the right location that best meets your needs before taking the plunge and investing your hard earned money is a specific area. Once invested make sure that you take a longer term view and that you are not just there to flip a property in the short term.
Toronto and Vancouver are the two market areas that are almost always in the news. Toronto is a city of more than 2.7 million people (actual number 2,731,571) according to the latest 2016 census numbers. This represents an increase of 6.2% in growth since the previous 2011 census. This number grows to close to 6 million (actual figure 5,928,040) when you add in the census metropolitan area that includes all of the city’s suburban areas. Toronto ranks number 1 among the country’s 35 census metropolitan areas.
In contrast the city of Vancouver is home to 631,486 people in the metro area and the Greater Vancouver area is home to a population of nearly 2.5 million (actual number 2,463,431) people. The most recent population census confirmed that population growth in the metro Vancouver area outpaced the national average by about 5%.
Both cities are quite diverse in many different ways. Toronto sits on the shore of Lake Ontario in the Province of Ontario just north of the state of New York. Vancouver is a bustling sea port on Canada’s West Coast and it is situated about 4 hours north of the similar sized city of Seattle in the State of Washington.
The BC government introduced a 15% surtax on foreign homebuyers on the 2nd of August 2016 as part of a plan announced to tackle the city’s affordability crisis for the average person. Although home prices dipped for a while after the introduction of the tax, they started bouncing back in early 2017. Shortly after the introduction of the tax Toronto home prices started skyrocketing – an effect linked to the Vancouver foreign buyer tax. The new BC government announced a review of this tax.
Home prices in Toronto soared in early 2017 and the average home price was up about 25% in April compared to the 2016. Amid fears of a housing bubble the Ontario government announced a package on the 20th of April that was called the Fair Housing Plan that included a 15% tax on foreign buyers. The tax had an immediate cooling effect on the market.
What about other markets? Home sales across Canada in October were up by a seasonally adjusted modest increase of 0.9% over September according to the Canadian Real Estate Association. The increase was led by the Greater Toronto Area and the Fraser Valley on the West Coast. CREA added that Greater Vancouver prices were up about 12.4% and the Fraser Valley was up by more than 17%.
Starting in October 2015 the newly elected Liberal government began to tighten mortgage lending rules. Additional changes were announced in October 2016 and again in October 2017. The most recently announced rules will take effect on the 1st of January 2018.
On one hand the provincial governments of BC and Ontario introduced foreign buyer taxes to make housing more affordable in their respective largest cities. On the other hand the federal government continued to tighten and change mortgage rules that will continue to make it harder for the average person to get a mortgage. The foreign buyer taxes had nothing more than a temporary effect on sales. The federal mortgage changes will make it harder for may people to get mortgages and the changes may push some people to consider riskier financing options.
The Ontario Real Estate Association, commenting on the new changes coming for 2018, said that the Liberal Federal Government changes are overkill and that they “will hurt middle class families and punish careful savers most”.
The federal government claims to be helping the middle class but their actions are not helpful. In fact, the impact of things like the federal government’s tax changes, according to the Financial Post, will have the middle class paying more under Trudeau. It is difficult to see how Trudeau is helping the middle class when he has increased taxes (with more such as the Carbon Tax to come) and made it harder for people to get mortgages. At the same time, the BC NDP government has also already announced income tax increases. Let’s hope that no more increases are forthcoming.
Locally, the Comox Valley continues to see increased prices and lower supply in its housing market. While it remains to be seen what the real impact of these federal changes will be, most experts do not expect positive results. If house prices continue to rise as mainland residents look towards Vancouver Island for more reasonably priced home options, and the Trudeau government continues to make it harder for people to get mortgages, local residents may find it harder to afford local homes. Tax increases at the federal and provincial levels will only exacerbate the problem of affordable homes. Stay tuned for a market update in the new year.