Vancouver housing sales plummet to a three-decade low, while the Toronto real estate market is stabilizing, with approximately the same number of units sold in March 2019 compared to March 2018.
The March update on home sales indicates the difference between Toronto and Vancouver real estate. As the Toronto market holds steady, the number of transactions in Vancouver dropped 31% in comparison to March 2018. The total number of houses sold was the lowest since 1986.
A decrease in prices led industry observers and housing advocates to believe that buyers who had been priced out of the market and were waiting for an opportunity like this could finally get a chance at purchasing a home. However, Vancouver paints a different picture.
Policy Changes Responsible for The Declining Market
Ashley Smith, president of the Real Estate Board of Greater Vancouver (REBGV), links the falling market to the regulatory changes imposed in the past years. The new transfer taxes and strict lending regulations have made it harder in the short term for potential buyers to purchase a home. Smith stated in The Financial Post that housing demand isn’t aligning with the growing economy and low unemployment rates.
The president of the Toronto Real Estate Board (TREB), Garry Bhaura, agrees with Smith. He blames the stress test and other policy changes for affecting home buyers’ capacity to qualify for a mortgage. The stress test that was introduced in 2018 requires buyers to qualify at a higher rate than the one contracted. Bhaura stated for BNN Bloomberg:
“TREB is still arguing that the stress test provisions and mortgage lending guidelines generally, including allowable amortization periods for insured mortgages, should be reviewed.”
More Options and Lower Prices for Vancouver
Compared to March 2018, Vancouver registers 52% more houses listed for sale than in the previous year. The sales-to-listing ratio was 9.4% for detached homes and 13.5% for all property types.
While the options are more numerous, prices are declining. The prices of Vancouver homes for sale dropped 7.7% year-over-year, as measured by the MLS Home Price Index composite benchmark that compares prices of houses alike over time. The prices for condos in Vancouver and attached homes are down, while the benchmark prices for Vancouver detached homes at $1.43 million plummeted by 10.5% year-over-year.
Despite having more options and lower prices, the number of buyers is not as expected. With prices plummeting, the buyers observe and wait in the hope that the prices will continue to fall. Following a reduced demand, there is more downward pressure on prices resulting in even fewer sales if you look at the short-term trends.
On the other hand, the long-term trends indicate an increase in benchmark prices with a growth of 61% in five years and 102.5% over ten years. This means that prices in Vancouver might recover despite the recent fall.
Toronto Housing Market Steady with Modest Gains
The prices of Toronto homes for sale were up by 2.6% in March year-over-year according to the composite benchmark price. Although the market is not registering drops in prices, the earns are still modest. New and active listings are also down year-over-year.
The March update also points to the urban-suburban division. While in the 905 suburbs the prices were up for every type of house, sales were down for detached homes in Toronto proper. The same decrease applies to semi-detached homes and Toronto condos. The average housing prices were up for all property types in the suburbs, except detached homes that declined by 1.2% year-over-year.
Sales of homes under $400,000 registered in March accounted for only 7.5% of the transactions. This indicated that the policy changes made lending harder and reduced the number of low-priced homes sold instead of increasing it.
The housing markets in Canada are headed for recovery in 2019 but comparing Toronto’s and Vancouver’s different situations is a good reminder that it is best to focus on local rather than national trends.