Photo: James Bombales
As Toronto housing prices reached record highs last April, the Ontario government introduced its Fair Housing Plan in an effort to cool things down. But nine months on, how is the policy affecting the market today?
“The Ontario government’s introduction of the Fair Housing Plan in April 2017 precipitated the squeezing out of speculative demand which had previously been driving exorbitant price gains in Toronto and surrounding markets,” write TD economist Michael Dolega and Rishi Sondhi, in a recent note.
The pair note that the new policy helped to soften the market, leading to a 11 per cent decline in average home prices, concentrated in the single-family home market.
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But, they also note that the correction is likely to be “short-and-sharp” — while national home sales declined in January, they increased for five-straight months between July and December.
“The recovery in activity comes amid a firming labour market, accelerating population growth and a drop in the share of housing transactions undertaken by non-residents,” write the pair. “These factors suggest that strong underlying fundamentals are driving the resurgence of housing demand.”
And, according to BMO chief economist Douglas Porter, the GTA condo market has stayed strong, despite the policy.
“The [Toronto] condo market stayed hot deep into 2017, as it did in most other cities,” he writes in a recent note. “The strongest population growth in 25 years and the surprisingly hot economy both paced housing activity.”
But as RBC senior economist Robert Hogue points out in a recent note, the average price of a single-detached home has fallen since the plan was introduced in April.
“At this stage, prices are still under downward pressure, especially in the pricier single-detached segment,” he writes. “The aggregate benchmark price fell month-over-month for an eighth-straight month in January, which has brought the annual rate of increase down to a four-year low of 5.2 per cent.”