This article appeared in the Saturday, June 10, 2017 issue of Waterloo Region Homes.
A day rarely passes without the media reporting on our hot Canadian real estate market.
Everyone is talking, tweeting, and frankly scratching their heads over ever escalating prices in and around Toronto and what is being called the Greater Golden Horseshoe (GGH), which if you didn’t know, includes Waterloo region.
And it’s no wonder, just look at these statistics:
After the first quarter of 2017, the Kitchener-Waterloo Association of REALTORS® reported the average price of homes sold through our MLS® System in Kitchener-Waterloo and area had increased thirty-percent to $493,226 compared to March 2016.
In the previous 10 years, annual increases averaged just less of five percent in the Kitchener-Waterloo and area.
These price increases are happening throughout the GGH, and have a lot of people worried.
At its root this is simply an affordability issue – Waterloo region’s home prices remains much more affordable than the GTA, which is resulting in GTA buyers travelling down the 401 and purchasing here. This reduces the number of local homes for sale (since they are selling in the GTA and purchasing here) and while it has contributed to this thirty-percent increase, prices remain considerably more affordable than a comparable home in the GTA.
For local buyers, they are getting caught in this squeeze, and it can be especially frustrating for the first-time buyer trying to enter the market.
The Ontario government recently announced a 16-point plan, called “Ontario’s Fair Housing Plan” to address challenges many are facing when trying to purchase a home. These challenges are being driven by an imbalance between decreased supply and increased demand.
On the supply side, one of the actions promised in the plan is to increase housing in the GGH. To help achieve this, the Ontario government will be providing municipalities with the flexibility to use property tax tools to help “unlock” development opportunities. For example, municipalities could impose a higher tax rate on vacant land that has been approved for new housing. Conceivably this could help encourage developers who have been sitting on shovel-ready sites, to hurry up and build. Of course, this will only help if there is substantial shovel-ready sites not being developed, which I do not believe to be the case in our region.
The government has also promised to create a new “Housing Supply Team” to try and streamline the complicated approvals process and eliminate the red tape which delays and prevents housing supply from coming to market. I will be watching with great interest to see what if any outcomes will come from this task force. While I believe it to be a positive step, I also think the red tape and other causes for delay are already well known.
To address demand, one of the changes the government has introduced is a 15-per cent Non-Resident Speculation Tax (NRST) on the price of homes in the GGH purchased by individuals who are not citizens or permanent residents of Canada or by foreign corporations. This legislation was passed on June 1st and is effective as of April 21, 2017.
As Realtors, we’re never supportive when governments introduce new taxes on housing, however we were glad to see the government listened to Ontario’s Realtors who were fighting for exemptions and rebates to refugees, those who work in the province for a year and students enrolled in University or College for two years. While we do have some foreign buyers in our market, by no means are they the cause of our heated market. While some are investors, more are related to immigration and some of the world-class educational opportunities available in our region.
I’ve only talked about two aspects of Ontario’s Fair Housing plan here and will address additional aspects in future articles. Components of the 16-point plan were also reiterated in the recently announced 2017 Ontario Budget.
The question I am frequently asked is whether the plan will achieve its objective of making homes more affordable? Ultimately only time will tell what kind of impact these changes will have in the GGH market, but my belief is that they will have minimal if any impact on our market in Kitchener-Waterloo.
We’ve seen no evidence that this boom is related to foreign buyers, especially in our region. The demand in KW is largely fueled by migration from down the 401, which also fuels local consumers by way of “fear of missing out.”
The simply reality is that money for mortgages is extremely affordable. This decreases the gap between renting and owning, and puts the dream of home ownership within closer reach of more consumers.
One thing is for certain. It’s a tough time for many who are trying to achieve their dreams of home ownership in this market. If you are thinking of buying a home, working with a REALTOR® should be your first step. A REALTOR® has the expertise to help you navigate these complicated market conditions, and get you into a home that’s right for you.
James Craig is the current president of the Kitchener-Waterloo Association of REALTORS®.