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Having worked at several real estate market research firms in my career, one of the biggest issues I heard from clients was the information wasn’t timely enough. The sales and pricing results of a new condominium project that launched in January might not be published until a quarterly report is completed in late April or early May. Many developers and brokers want the results the day after the cooling period expires. If something dramatic happens in the economy, it may take several months to get a sense of what is happening in the new housing market based on the number of transactions only.
That’s why I love working with BuzzBuzzHome and their data — they can literally track the change in the sentiment of prospective buyers in a day or two. BuzzBuzzHome sends out approximately 20,000 home-shopper inquiries across Ontario every month, and registrants on their site indicate if they are one of the following: just researching, a first-time buyer, downsizing, upsizing, buying as an investor, looking for a rental unit or “not sure yet.” BuzzBuzzHome sent me the data on the change in inquiries in the three weeks leading up to the Ontario government’s announcement of the Fair Housing Plan (16 measures designed to cool the province’s housing market) and the three weeks after the announcement. The overall result — a 35-per-cent decline! Interest from investors decreased 49 per cent. It certainly makes sense that investors, who don’t need to buy for shelter purposes, would hold off to see if the government’s housing intervention resulted in a major decline in new-home prices.
You might be wondering if it was a seasonal decline. What happened last year? Well, during the same period in 2016, inquiries increased 11 per cent, including a 30-per-cent increase in investor activity. It certainly appears that the announcement has spooked potential buyers, especially investors.
One of the theories as to why Toronto and southwestern Ontario witnessed such a tremendous upturn in house prices in late 2016 and into 2017 was that offshore buyers were turned off by Vancouver’s foreign-buyer tax and instead turned their attention to Toronto real estate. The phenomenon may be happening again as it appears that Ontario’s foreign-speculator tax is diverting investors elsewhere in Canada. BuzzBuzzHome inquiries sent to Canadian developments outside Ontario spiked 36 per cent in the three weeks following the introduction of the Fair Housing Plan.
Interestingly, the only subset of BuzzBuzzHome requests that increased in Ontario following the Fair Housing Plan announcement was a 9-per-cent increase in rental inquiries. The introduction of expanded rent control will increase the number of people interested in renting.
My firm has had a couple successful unit releases since the Fair Housing Plan was brought forward, but it appears that overall, interest is down. Only time will tell if the decline in new home inquiries in Ontario is a temporary response to the added uncertainty in the market, or if prospective buyers and investors decide to hold off making any new home purchasers in 2017. Keep in mind that even a decline of 35 per cent in inquiries means that there are still 13,000 interested buyers in Ontario new home communities every month, and that demand is likely still high enough to keep Ontario builders and developers busy.
Ben Myers is the Senior Vice President or Market Research and Analytics at Fortress Real Developments (Twitter: @benmyers29). Fortress partners with builders and developers across Canada, and Ben assists in evaluating the market and projects that Fortress engages in. Follow his blog posts and commentary on the Canadian Housing Market at www.fortressrealdevelopments.com/news.
