GTA Home Pricing is far better than most reports imply.
From a pricing standpoint, the spring GTA Housing Market is better than many publications imply. To understand why, we need to put the current market in context. It’s a unique time in the history of housing in the Greater Toronto Area (GTA) as a result of the previous three successive years (2016, 2015 and 2014) in which we saw unprecedented annual price increases, first 10% then 20% and then a 35% jump! That three year backdrop makes it easy to misunderstand, and easy to be misled by, current announcements of real estate market statistics. Most year-over-year reports on PRICE are indicating a 15% drop March 2018 over March 2017, along with speculation about the reasons (government intervention, mortgage qualification rules and interest rate fears). But if you’ve owned a home for the last four years, even with this latest 15% price drop, you’ve made a spectacular and rare return on investment, and its tax free for most people. Home equity has increased dramatically in that time.
Is a 15% PRICE DROP good or bad? Obviously if you’re planning to sell soon, a small portion of your recent equity growth has been eroded. But the price drop is also a good thing in some ways. Market speculators are leaving the housing market since flipping a home is no longer a safe bet. Speculators represent a false element of home demand, so it’s a good thing that the market is now less driven by their activity. Also, the price drop over the last twelve months is a long-expected correction of a previously unsustainable price surge. The market is now returning to a balanced position, where neither the buyer nor the seller has a consistent upper hand. Balanced markets are good for all consumers, as it reduces the likelihood of catastrophic mistakes by those who cannot afford them (like the homeowners who bought not-yet-built homes at the highest price points of the market, hoping to sell their current home later at a market-peak price, only to discover that they are now in real trouble because they overpaid for the new build and cannot afford to sell their existing home at current prices.)
Click the link to read economist Derek Holt’s view, written by Sarah Niedoba
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