A lot of attention has been placed in the media recently that paints a scenario of doom and gloom for the Canadian housing market. While prices have seen steady increases for a number of years, there is little hard evidence to suggest that we are in for a nosedive of home prices going into 2013.
Let's be clear: despite what some in the media would have you believe, Canada's housing market is not at the edge of a cliff, ready to plunge into free fall. "There are articles saying we're going to have the same kind of crash we had in the United States, but that's not going to happen," says Jane Londerville, a real estate and housing adviser at the University of Guelph. (Moneysense Magazine, December 2012/January 2013)
While the gains that have been seen over the last number of years have often been consistently strong, a recent pulling back on the momentum can be attributed to a number of factors. First, in the Toronto market, the introduction of municipal land transfer tax has had a substantial effect on the closing costs for buyers in the city. With an extra $5,000 or more of typical up-front costs ($5,750 on a $500,000 house), many prospective homebuyers had to make substantial adjustments to the price range of homes in the city that they could afford. Secondly, recent changes to mortgage rules have made it more difficult to qualify for mortgages. While these changes ultimately can be beneficial in forcing people to live on less mortgage debt, they also invariably have had an impact on price gains in the marketplace. As I have written in my last article, some areas have actually continued to post strong gains in the resale home market. Part of this can be attributed to those in the city looking beyond the boundaries of the city to find a home within their budget, especially when the land transfer tax is factored in. If you would like to discuss how to best approach this complex situation for your home buying or selling decision, I would be happy to sit down with you and explore all the options.