November has historically been a time of some uncertainty in the real estate market. It comes after a period of high sales and purchases associated with school and university kicking off and new academic jobholders joining the workforce. It is also the time just before the holidays where money – and time – are better spent on things other than a new house or being out on the house hunt. But with uncertainty in the housing market also present in months other than just November, this year the month came with a bit of a surprise: new listings swelled in the Greater Toronto Area compared with this time last year, seeing a 34 per cent increase in freehold properties in the first week alone. While this might typically indicate a buyer’s market characteristic, it may also simply be adding to the indecision: there are other factors at play to take into consideration.
It is interesting to note that the major increase in listings occurred in the condominium property segment. While analysts aren’t fully sure why this would be the case, one speculation is that the completion of new condo projects creates a flood of these homes to the market. And realistically, that shouldn’t be very surprising: overall, residents of Toronto and the GTA are choosing condos over detached housing, due to the price increases of the latter. While the former do experience increases in prices as well, it is at a lower rate, making condos the more affordable home choice. And with more condos being purchased, more are being built, and many are being snapped up in the development stages at a lower price.
Changes in Mortgage Rules
None of this is immune to the changes in mortgage rules unveiled in October that will take effect on January 1, 2018. Under these new rules, all potential homeowners seeking a mortgage will have to undergo a stress test. In this, they will have to prove that they could continue to pay their mortgage at a higher interest rate than that which they are applying for. The tougher rules were proposed amid heightened concern over rapidly increasing housing prices in the GTA. While the implementation is expected to slow house buying and borrowing, the unknown outcome ultimately contributes further to the uncertainty of the future GTA housing economy.
It is that exact unknown impact of the 2018 rule change that has many experts speculating as being the reason behind the recent increase in listings. If buying does indeed decrease next year, listings will not move at all; listing now, despite a high number on the market and uncertainty amid buyers, at least puts the opportunity in the field.
Market doubt may always be at play when it comes to the housing game, but you can keep it to a minimum when you work with me. Reach out and we’ll work together to determine if this is the best time for you to buy or sell – or both!