Convergence of higher rates, government policy and new mortgage rules hit home sales. But that doesn’t mean homes are more affordable. The numbers are coming and they won’t be pretty. That’s what data-tracking realtor John Pasalis expects when the Toronto Real Estate Board issues its official February home sales statistics next week.
Although prices appear relatively flat, house sales were down about 40 per cent over the last two weeks in the Toronto area compared to the same period in 2017, while condo sales dropped about 30 per cent, said Pasalis, president of Toronto’s Realosophy brokerage.
The market has been hit by a confluence of policies: Ontario’s Fair Housing Policy, including a foreign buyers’ tax aimed at cooling the market; a new mortgage stress test targeted at protecting Canadians from dangerously high household debt levels; and the Bank of Canada’s moves to increase interest rates.
Is it a correction? Yes. Over-correction? No way, says Pasalis. He’s among those who say that the Ontario government had to act to cool the market when it peaked at more than 30 per cent year-over-year price growth last April.
But if the government’s aim was to enhance affordability, that hasn’t happened and, given the short supply of housing and the booming Toronto-area population, it’s difficult to see how government intervention will help, say analysts and economists.
Unlike those who blame the fevered real-estate market of 2016 and early 2017 on mismatched supply and demand, Pasalis thinks there was another factor in the extraordinary climb — too much speculation.