The Dog Days of Summer are Upon Us
We are right in the middle of those lazy, hazy, crazy days of summer, a time when many buyers and sellers are thinking more about soda & pretzels & beer than about signing a Purchase and Sale Agreement. Prices are falling, as they always do at this time of year, but even so, July prices in the Greater Toronto area are still 7% ahead of this time last year. The graph below shows the trends in monthly average selling prices in the Greater Toronto area over the past three years (data from the Toronto Real Estate Board’s Market Watch publication).
The dreaded HST was introduced on July 1. There was a bit of a rush to get transactions closed by June 30 to avoid the extra 8% tax on commission, but other than that the impact of HST on the market has been quite modest. The most significant effect of the HST will probably be on new home construction. For new homes up to $500,000 there are significant HST rebates available for buyers. For high end new homes, however the extra 8% tax on the full value beyond $500,000 seems likely to suppress new housing starts. For example, the HST on a new home worth $1 million, even after the rebates, will be more than $65,000! Strangely enough, the HST may actually have a positive impact on high end resale prices by suppressing the supply of new homes!
All signs are pointing toward a gradually improving economy and a balanced real estate market with stable prices, healthy inventories, and few crazy bidding wars. However, we will need to wait until the summer doldrums have passed to see whether these expectations for the real estate market are fulfilled. The “fall market” usually begins in early September and continues through mid to late November. If the world unfolds as it should, expect to see modest increases in both prices and sales volumes during this period.
Written by Dave Proulx