Toronto home sales dip 18 per cent over 'psychological' effects of Fair Housing Plan: TREB
TREB is forecasting another possible decline in sales in 2018, though prices could be higher
The Toronto Real Estate Board (TREB) says the "psychological" effects of the province's fair housing strategy contributed to an 18 per cent dip in home sales last year.
In a report recapping the 2017 sales year released Tuesday, TREB said the provincial plan to improve housing affordability spiked what had been a record-setting first quarter of 2017.
The Ontario Fair Housing Plan (FHP) was announced in the spring, and included new measures such as a 15 per cent tax on foreign buyers, actions to increase the housing supply and rent controls.
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TREB statistics show a decline in sales over the second and third quarters, but the board's analysts say actual policy changes were not the primary factor.
"I think really what you're seeing is more of a psychological impact; households taking a step back, seeing where they sort of stood relative to the new legislation," said Jason Mercer, TREB's director of market analysis.
TREB found that sales rebounded toward the end of the year, suggesting a "waning" effect of the FHP.
By year's end, 92,395 homes changed hands, down from more than 113,000 transactions in 2016.
Another slowdown in 2018?
TREB is forecasting between 85,000 and 95,000 transactions in 2018, which represents a likely decrease from 2017.
However, the board is also forecasting an average selling price between $800,000 and $850,000, potentially topping the $822,000 average selling price in 2017.
The wide range of possible outcomes reflects ongoing uncertainty about how the FHP will affect the market, higher borrowing costs, as well as new "stress tests" for potential borrowers.
Mercer says those factors could act as "at least a bit of a drag on home sales."
Still, other factors such as strong economic conditions, rising wages and increased immigration will contribute to demand, according to TREB.
Mercer figures it will take a few months for the market to recalibrate, but he says that once that happens, prices will likely return to single digit year-over-year increases.
"We'll see a slower start to the year relative to what we saw in 2017, but we should see things start to pick up in terms of demand as we move through the second half," he said.
The TREB report adds that condos will likely experience the strongest price growth in 2018, while the growth rate for detached homes will be relatively slower.