Eric | Jan. 11, 2018
We entered 2017 with guns blazing. The market was hot and competition was fierce. Homes were selling in days, all in multiple offers and way above the listing price. Inventory was slim and there was an intense fever amongst buyers to beat everyone else no matter what the price.
Then came the Ontario Fair Housing Plan. Any foreign investor looking to buy in the Greater Golden Horseshoe got squeezed and, in the months leading up to the implementation of the plan, we saw those investors scrambling to lock in a purchase. Home prices peaked and then the market cooled immediately. It caused a lot of concern and confusion – buyers and sellers didn’t really know what the plan meant so they started to take a more cautious approach to real estate.
From the April 2017 peak average home price of $512,656 we saw a 13.5% downturn in prices to the August average low of $441,992. Prices then turned back up until the market got some more news: there was a change coming in January 2018 regarding how buyers are approved to borrow money. This change affected uninsured mortgages (buyers with 20% or more to put down) and would significantly reduce a buyer’s borrowing limit.
This caused a stir for first-time buyers and buyers in the lower price ranges as this change would not only affect the type of home they could buy, but also whether a lot of these buyers could even purchase a home. This December 31st deadline caused a scramble amongst buyers to pick up homes under $450,000 and is what likely caused the average home price in the KW area to tick back down in November and December: the number of lower priced sales was higher than usual which causes the average price to decrease. This is evidenced by looking at the median sale prices. Look at this comparison:
(The median price is the number that is right in the middle of a set. It tells you that half the sales were made above this number and half below)
The median prices in November and December indicate that homes were being bought at lower prices. (Remember that ability to borrow had not been affected in these numbers yet and people buy the best home they can in a price range rather than looking for the house and then the price. So median price is likely not caused by people buying homes for less than they can afford, but more likely because there are more buyers purchasing in lower price ranges.)
$3,061,739,723 of residential real estate was sold in 2017. That is a 19.5% increase over 2016. This number is in line with the 20.7% average home price increase for 2017 over 2016. The average 2017 sale price was $467,513 for all types of homes sold.
Detached average price in 2017: $549,046 UP 21.5%
Apartment condo average price in 2017: $271,940 UP 18.3%
Townhouse average price in 2017: $353,692 UP 23.6%
Semi-detached average price in 2017: $378,275 UP 25.9%
What can we expect for the upcoming year? Hopefully less Kathleen Wynne for starters. And let’s hope the politicians leave real estate alone and let the market work. There was a lot that happened in 2017 and the real estate market in KW needs to digest all of the new rules. I think the new mortgage rules will create demand for more rentals.
Buyers from the GTA will continue to buy into KW – both as investors and as buyers that have been squeezed out of that market by the new mortgage rules. There will be buying opportunities while the market figures things out and those who pick up houses in the first half of the year will be in a great spot by the end of summer. Unless I’m wrong of course
Happy new year peeps!
If you have any questions about buying, selling or investing, we’d LOVE to hear from you!