May 2017 Mississauga Real Estate Market Update
May 2017 Mississauga Real Estate Market Update – The Ebb & Flow
May 2017 Mississauga Real Estate Market Update is basically a quick overview of the impact of Ontario Government announcement on the Housing Market in April. While I am sharing my own personal experiences in this post, I am sure it is anecdotal for what other Realtors and consumers and feeling across the GTA market.
There is a pull back in our Mississauga Real Estate Market
GTA is behaving like Vancouver (with similar rules at the end of 2016), but in the GTA, it is somewhat much worse than Vancouver market, post such rules. The reason, mortgage melt down news by Home Trust company. Now there are more restrictions that are in the works by the lending industry.
There are many examples that showcase the ebb and flow of real estate prices pre- and post- April announcement, but here 4-5 personal examples after the April 20th announcements.
Example 1: One bedroom condos at One Park Tower were selling at an average price of $320,000 – $330,000 for a 540 sq ft unit in March (see Square One Condo market Mar 2017 report). Our buyers were bidding in two transactions at this building. There were some six bids, and there were two young Chinese buyers who were interested in both the properties. We had very confidently bid for $331,000, but our offer was the fourth highest. One of the Chinese buyers bought the first condo for a whopping $375,000! The other Chinese buyer out bid the second property on a lower floor and got it for $372,000! The buyers were most likely students whose overseas parents bought the condos for their children
So this is a typical example of what we were going through before April 20 changes.
Foreign students were buying properties with their overseas parents without doing any realistic analysis of prices, and as a results the prices were jumping by 10% in one shot. This was very unhealthy and was creating a different sort of environment as far as pricing goes. It was definitely raising expectations on part of the sellers on the price that they wanted. It was setting an unsustainable precedent.
So our May 2017 Mississauga Real Estate Market Update shows that this sort of activity has now stopped.
Example 2: My team sold a condo at Limelight Condos of around 600 sq ft in size for $307,000 in January. Prices started to jump to $330K, $340K, $350K and then suddenly there were three transactions in $370 range. Based on the accelerating prices, I listed a property for $355K, but received an offer for just $351K, post April 20th! So within a month, we are not getting offers like we used to in March and April. The seller was highly disappointed as he was expecting a prices in $370K range. We ended up suspending the listing. Sellers are living in a state of denial at this moment. Soon the expectation will become more realistic as more inventory hits the market and prices soften.
Example 3: A beautiful detached home in East Credit was listed at $990K. Our client had put in an offer for $1,050,000 as the fair market value, looking at the data of homes sold in last 6 months, not just 2 the prior two months. The seller got two offers, but he did not accept any. The next day, the price was changed to $1,188,000 as that was the seller’s expectation based on the recent sold benchmarks. This home later sold for $1,135,000 (much lower than the seller’s expectation).
Example 4: In yet another example, I sold a beautiful freehold townhome for $600,000 same time last year. A similar one sold for $800,000 exactly one year after in 2017. The price increased by 33%! Now, since April 20th, no showings are even occurring on similar townhouses that are listed for $800,000 price point.
Example 5: An then, in March of this year, a home sold in Meadowvale village for $1,240,000. As per our client’s directions, we had put in a low bid of $1,080,000, thinking that it might be worth a try. However, we felt that we did not stand a chance in the multiple bids. But we were shocked to see our offer accepted by the seller. This is almost 12% lower than March 2017 sold price of a similar model home.
May 2017 Mississauga Real Estate Market Update – Good News or Bad News?
So we have indeed witnessed a correction. Is it temporary or long-term, is hard to say. Is it a direct result of Foreign Buyers Tax or is it just regular buyer sentiment. Again hard to day. In fact, Toronto Real Estate Board (TREB) is not entirely convinced that it is on account of Foreign Buyers Tax alone. They would like to view data before ascertaining this.
“It is not yet clear what impact the measures contained within the Ontario Government’s Fair Housing Plan have had on TREB’s market area or the broader Greater Golden Horseshoe. Despite the recent uptick in new listings on TREB’s MLS® System, we believe that we all have to be committed to a better understanding of issues affecting demand and supply dynamics in our marketplace. TREB will continue to collect and disseminate data on our marketplace and will continue to work with all levels of government as it relates to housing market policy,” says John DiMichele, TREB’s Chief Executive Officer.
What I feel is that it will take some time for the backlog in existing listing inventory to clear out. It could take 2-3 months and then things will go back to where they were, however at a slower pace of growth and price appreciation. This is because the fact of the matter is that we have no land for new construction. Resale market has to spring back to cater to growth demand just like a bounce back of real estate prices in Vancouver. THERE IS A SHORTAGE OF LAND SUPPLY. However, we will just wait and watch how things pan out in the next few months.
Conclusion and my views on May 2017 Mississauga Real Estate Market Update
GTA real estate market is behaving very similar to the Vancouver market. There is a flood of listings from two type of sellers, one is the regular seller who mostly sell in April, May, June as these months are the best for listing properties for sale. Plus the sellers who have already bought a new home or condo in February and March during the peak time and are now trying to offload their own listings. Banks have asked many people to sell as they won’t qualify for two or more mortgages. This has increased the number of listings. Buyers are now watching on the sidelines to see if there will be a further price drop or correction. Once the inventory clears out, market will become normal. Prices are on a slow rise again after 4-5 months in Vancouver too.
It is like winterization of home when you close water flow form the inside and open taps from the outside so that all the water from the pipe can drain out. That’s what is happening with real estate market. We just have to wait for the listings to slowly move out of the system before we gain see a slow price appreciation.
Prices went up by 30-33% in 1 year. I feel that it might come down to growth of 20% to 25% on a yearly basis.
My advice to the buyers is that this split in the market could be the best time to jump in and buy. There are some excellent deals both in the Square One Condo market, and in the homes around your Mississauga neighbourhood and the rest of the GTA. It is a good time to get into the market.
My 2 cents on the new rules:
The one measure that stands out the most is the Non-Resident Speculation Tax, which would require foreign nationals who buy property in the Greater Golden Horseshoe to pay a 15% surcharge on the purchase price of most types of residential properties. It is also the somewhat ambiguous and controversial. There appear to be some loopholes as permanent residents and students would be exempt. Apart from this there would be rebates for foreigners who can prove that they worked full-time in Ontario for at least a year after the purchase.
Rent control is definitely another Big One. It does make investors think twice before buying investment properties. It makes less difference for investors who have purchased properties years ago, as they are now enjoying positive cash-flow.
Coming months will be very telling as we will see how the local and international real estate consumers are reacting to the changes. The pressure is equally high on the government to come up with affordable housing that keeps up with the demand, while maintaining Canada’s image as a country providing a safe & lucrative real estate investment opportunity.
May 2017 Mississauga Real Estate Market Update – The 16 Proposed Measures
Here is a condensed version of the 16 proposed measures from the Ontario government announced in April 2017. The government calls it a comprehensive housing package aimed at cooling a hot real estate market.
- A 15% non-resident speculation tax to be imposed on foreign buyers
- Expanded rent control to apply on all private rental units in Ontario
- Updates to the Residential Tenancies Act to make the process fairer
- A program to develop market-price housing and affordable housing
- Introduction of a vacant home property tax
- Property tax for new apartment buildings to be similar rate as other residential properties
- Construction of new rental apartment buildings
- Municipalities to use property tax to encourage development
- The creation of a new Housing Supply Team
- Tackle practices that could be contributing towards tax avoidance and speculation
- A review of the rules to ensure that consumers are fairly represented in real estate transactions
- Housing advisory group to provide the government with ongoing advice about the state of the housing market
- Education for consumers on their rights
- Canada Revenue Agency to explore more comprehensive reporting requirements
- Set timelines for elevator repairs
- Consideration of the range of unit sizes in higher density residential buildings.
