Toronto buyer’s are finally getting their wish: Choice! After several years of a tight seller’s market in which there were many buyers for only a few properties, the number of listings in Toronto is rising. The number of listings in April 2017 was up 33.6% over April 2016. And yet, used to stiff competition and crushing heart break, buyers are slow to act to this encouraging change, suddenly afraid that too many listings means that the market is crashing. Although this is the best time to buy in Toronto, it is easy to see why people would think the bubble might be popping with the media frenzy and headlines such as: “Toronto’s Runaway Market Headed for Paralysis”
However, this slight market change is due, we believe, mostly to fear rather than market fundamentals. The provincial government introduced sixteen potential changes to the Toronto real estate market. Significant among these changes is a tax on transactions made by foreign buyers. There is very little data on foreign buyers in Toronto but one study estimates that only 4.9% of all transactions in the GTA in 2016 were completed by buyers who did not reside in the country. So, while the actual tax likely won’t cool the market, the announcement of tax, and the alarmist news coverage of same, is making buyers and sellers nervous that a big market crash is just around the corner.
If we can learn any lesson from Vancouver, which introduced a similar tax in 2015, it is that this is the absolutely best time to buy in Toronto. After the dust settled, the market in Vancouver picked right back up and is getting steep again. The number of units sold in March 2017 was up by 48% compared with February 2017. Some analysts are predicting a market “whiplash” in Vancouver.
The same will likely happen in Toronto when it becomes clear that the foreign buyer tax has no real effect on the market. This is the best time to buy in Toronto because there is plenty of choice and prices aren’t going up at the same rate.
As always, you should make sure you are protected from a market correction. Don’t buy at the edge of your budget, make sure you have plenty of equity in your property and get yourself approved at a higher interest rate just in case rates do go up.