Everybody is talking about the upcoming Ontario Provincial budget, and what measures the government will take to “cool the market.”
We talked about this ad nauseam last week, so if you’re tiring of the subject, I do apologize.
But I spent the weekend pouring over data from both Toronto and Vancouver, trying to analyze both markets and see if there are similarities.
According to my data, we are approximately where Vancouver was in November of 2015…
Let me preface this blog post by saying that my crystal ball is currently in the queue at “Fix It Again, Sam.”
I can’t predict the future.
But I can look to Vancouver, a market that peaked, and is now making a comeback, and see if we can draw any similarities.
This is a hot topic, of course, because the Ontario Liberal government is rumoured to be planning a foreign buyer’s tax in Toronto, or Ontario, just like we saw last year in Vancouver.
Whether or not they follow through with this, remains to be seen.
Charles Sousa was quoted last weekend as saying that he would go after “property scalpers,” ie. those that flip pre-construction condos, but made no mention of an FBT.
We all know what happened last year when Vancouver introduced an FBT: their market dropped.
For a period of seven months, the HPI Benchmark for a detached home decreased.
March of 2017 was the first month where the HPI Benchmark increased, and many people think that we’ll see continued increases, with the market gaining back to where it was at the peak in July of 2016, and then some.
An HPI Benchmark is not an average. It’s essentially a “smoother” average, and you can read about the methodology HERE.
Let’s take a look at Vancouver’s HPI Benchmark for detached homes, going back to the start of 2012:
As you can see, the market hit the peak in mid-2016, when from May to August, the HPI was up a whopping 36-39%, year-over-year.
You might also note that Vancouver’s market dropped in 2012, whereas Toronto’s did not, and that the run-up in pricing in Vancouver was only three years, whereas Toronto’s is twenty-one. But those are other topics, which we can explore later if you’d like.
Much has been made of the average home price in Toronto this past month hitting almost 33% for detached homes.
So before I get to Toronto’s HPI Benchmark, take a look at the average detached sale price in Toronto, 416:
I’ve removed the monthly increase, since it’s an average, not an HPI, and there are far more variations.
But as you can see, from September of 2016 onwards, we’re looking at anywhere from 23%-33% in year-over-year gains.
Now let’s look at Toronto’s HPI Benchmark for detached homes, which only began tracking in February of 2012:
The first thing to note, obviously, is that the data is far “smoother” than the average.
But also note that the increases are 10% less for February and March, with the HPI versus the average sale price.
This is important because it shows the market is crazy, but not as crazy as you can make other numbers show.
Now in terms of a comparison between Vancouver and Toronto, I propose the following question: by moving the monthly averages up or down, where can we find a similar 18-month pattern between Vancouver and Toronto?
I see it here:
The similarity exists, in my opinion, if we take our recent March of 2017 numbers, and put them up against numbers dating backwards from November of 2015 in Vancouver.
As an 18-month period goes, the numbers highlighted are strikingly similar.
What does this mean?
Well, you are free to draw your own conclusions.
It could mean that the Toronto market should, could, or would start to roll off the peak in January of 2018.
But Vancouver’s peak happened, in part, because of the foreign buyer’s tax.
If Toronto doesn’t introduce a foreign buyer’s tax, you could argue that there’s truly nothing to stop this market, especially given the numbers above.
It could also mean, as some off you will undoubtedly argue, absolutely nothing.
As I said, I don’t have a crystal ball.
But I had a lot of time on my hands this past weekend (who wants to spend time with family when you can put numbers into EXCEL?), and I have a genuine interest in where our market is headed.
I welcome your thoughts…