In retreospect, that sounds more than a little dramatic.
When I say the end is nigh, I don’t mean the end of the world. We all know that the lizard people don’t invade until the summer solstice that coincides with a major earthquake that drops most of the west coast into the ocean. So, we’ve got at least 20 to 30 years for that.
The end I’m talking about is the end of the seller’s market that has been going on for a number of years now.
Is it because rationality is finally settling in? Are we all collectively realizing that when home prices are unaffordable for almost all buyers, it is a bad idea?
Nope, but the government is about to step in and make some changes.
I say that with total confidence despite the fact that my invitations to the budget and policy meetings at the municipal, provincial and federal level keep getting lost in the mail.
For a few months now, I’ve been talking about how the various levels of government are being pressured to step into the fray.
- In January, I talked about how there is in fact a wolf and how certain properties are going to be negatively impacted when the market corrects.
- In February, I talked about why Realtors aren’t happy with the current market and the crazy year over year increases.
- Just a few weeks ago, I wrote about why we WILL see a foreign buyers tax in the greater Toronto area.
With every month that passes, I am seeing more writing on the wall that says the government is about to step in and make some policy changes.
With every media story about a home selling for hundreds of thousands of dollars over the asking price, with every real estate board release of monthly statistics showing insane year over year price increases, the pressure on politicians to do something grows.
On Monday (March 27th), Ontario Finance Minister Charles Sousa confirmed that he will include housing affordability measures in the upcoming provincial budget. The premier said her government is working on a “comprehensive set of plans” to deal with rising home prices in the Greater Toronto and Hamilton Area.
We don’t know exactly when the Ontario budget will be tabled but it is expected on April 27, 2017.
I’ve spoken before about how real estate markets are influenced by a number of factors – demographics, interest rates, the economy – that are largely not within the control of government. Municipal, provincial and federal governments can, however, impact real estate through the introduction or removal of policies such as tax credits, deductions and subsidies.
So what are we likely to see in the next few months as the government attempts to address the ongoing issue of real estate prices?
Here are my top three likely policies we will see implemented in the near future.
- Foreign Home Buyers Tax
I’ve spoken about this in some detail recently so I will simply say that this tax will be implemented this year. It has the irresistible mix of “doing something about the problem” and tax revenue from non-voters. It’s gonna happen.
- Vacant House and Condo Tax
Toronto Mayor John Tory was in the news yesterday (March 30, 2017) when he was musing about a tax on vacant homes. With census numbers suggesting there may be upwards of 65,000 vacant homes in Toronto in a time when people are struggling to find rental options, this is a tax the city could implement on its own. Vancouver did it earlier this year and charges 1% of the assessed value in vacancy tax if the property isn’t occupied at least six months of the year. I think we will see this implemented as a sop to frustrated tenants as it won’t alienate anyone except those who are holding onto vacant properties.
- CMHC Rate and Qualifying Adjustments
The Canada Mortgage and Housing Corporation has been making a lot of changes recently. Last fall (October and November, 2016) we saw two changes to qualifying rates as well as who and what is insurable under the CMHC. Just a few weeks ago on March 17, 2017, they increased mortgage insurance premiums. This was basically aimed at those putting less than 35% down on a purchase, with premiums more than doubling for those in the 65% to 80% loan to value ratio. CMHC changes are perhaps the most focused of tools the government has available, as it can target buyers at specific risk levels (as measured by loan to value ratio). It has very limited ability to impact those buyers that don’t need mortgages, however, such as all-cash foreign buyers.
My prediction is that we will see a cocktail of changes over the next couple of months.
The Foreign Buyers Tax and the Vacancy Tax will be implemented unless we see a drop in market prices or demand. I don’t see either happening based on the economy right now so expect these two to be coming soon. The government will fiddle with CMHC again as a more focused way to deal with the effects of these two taxes, which means changes over the summer and fall as we see the repercussions of these new taxes.
While we did hear about a proposed change to the capital gains exemption tax rate, I predict that won’t happen before the above policies. It impacts too many other sectors of the economy for the government to make changes without facing strong opposition from small business and innovation groups.
I am sceptical about whether the introduction, change or removal of government policies will do what they are intended to do, but I do believe they will have an impact. In the past 7 years that I’ve been a Realtor, I have seen a number of such government policy changes. In each case, there are changes to the market, with slow downs as people react to the new uncertainty of what will happen.
If you or someone you like have been on the fence about selling your home, please give me a call for us to talk about your specific situation. Selling doesn’t make sense in every situation and you need to have a Realtor who understands how these policy changes will likely impact you and your home value.
Timing the sale of your home is a difficult thing to do right and requires the assistance of a knowledgeable professional. If you’re considering selling, I’d love to be responsible for what comes next.
SOLID DOORS WITH GLASS
As often as possible build doors with glazing in them, so that the upper half at least, allows you to see through them. At the same time, build the doors solid enough, so that give acoustic isolation and make a comfortable “thunk” when they are closed.
I think that most homes could benefit greatly from a small amount of funding put towards practical improvements that render the house much more livable. I love this rule because I’ve lived in homes with low quality (or “standard”) doors and I’ve lived in places with solid doors.
Adding a solid door with a frosted glass that still provides acoustic privacy is a huge improvement, particularly in open concept homes. When a family member calls down to ask you to turn down the TV, it’s because the door to the bedroom isn’t solid enough. Consider where in your home investing in better doors would mean a better living experience.