Following an 18% decline in Toronto residential property sales in 2017, experts estimate that the housing market will
further soften in 2018 after the government introduced new mortgage laws.

The rules, which came into full effect on January 1st, slap a 15% tax on foreigners who want to buy property in
Toronto. It also consists of a new stress test targeting uninsured mortgage borrowers, coming at a period when Bank
of Canada is further anticipated to continue hiking their lending rates throughout the year.

The stress test is aimed at ensuring that borrowers can pay off their mortgage obligations even if rates were to
increase. Lenders are now obligated to assess the viability of Toronto mortgage applicants before any loan is
approved. Furthermore, potential borrowers will have their finances mocked-up if the rates are 2% higher than the
figure they can get from a lender, and this also applies if the rates are at the 5yr average posted ratio which is
currently at 4.99%.

Anyone who fails the stress test can’t get the mortgage they are looking for, meaning they will ultimately have to
settle for a cheaper house or entirely sit out the purchase offer.

In 2018, analysts estimate that the Toronto resale market will be moderately flat overall and stay within the price
range of $700,000 to $750,000. Nevertheless, the new mortgage policies will still impact how much property
individuals can buy at a given time.

As for the condo market, pre-construction condos will continue performing well, particularly given that the purchasing
power of first-time home buyers’ who are mostly millennials will diminish following the new rules. These are the
homes they can buy easily since they are more affordable than the others.

Statistics show that prices for Toronto condos have been up by 24.5% year on year due to huge demand from
buyers. Currently, the average cost of a condo in Toronto City is $532,700, according to the city’s Real Estate Board.
It has become the starter home for people who want to own their first property.

As the new mortgage policies are absorbed into the market, it’s predicted Toronto real estate buyers and sellers will
take a wait-and-see approach to assess the full impact. Even so, the market will not stay down for long given the
city’s vibrant and healthy economic activity which strongholds demand for Toronto real estate. Continued migration
from foreigners seeking to settle in the city will put added pressure on the available housing market inventory.

Moreover, the Royal LePage in their latest House Price Survey predict that, policy measures such as the new
mortgage rules shall subdue GTA real estate inflation to an extent. Additionally, they foresee an upsurge in demand
during the latter half of 2018, as potential home buyers adapt to new realities in the Toronto real estate market.

On average, the amount of residential purchases in 2018 for condos will vary between 85,000 and 95,0000 units,
while the average selling price shall be between $649,000 and $689,000. Similarly, housing rates are expected to
end 2018 in the ratio of $800,000 and $850,000 across all types of homes.

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