'More than half of intending buyers will be first-time buyers in 2017': Jason Mercer

We recently had the opportunity to hear Jason Mercer’s thoughts on the different strategies being proposed to cool the Greater Toronto Area’s (GTA) housing market. As Director Market Analysis for the Toronto Real Estate Board (TREB), Jason is the spokesperson for TREB regarding market reporting and statistics.

Newinhomes.com (NIH): Is a foreign buyers tax a good idea? Why or why not?

Jason Mercer (JM): A recent Ipsos survey of TREB Members suggested that the level of foreign buying was quite low in the GTA – 4.9% for the GTA as a whole. Given the strong level of demand versus the constrained level of listings, a sales dip of 4.9% would not likely result in a substantial change in the rate of price growth. Our most recent Year in Review and Outlook Report covers our foreign buyer survey as well as other consumer-related surveys that touch upon both the demand for and supply of listings in the GTA.

NIH: How about a capital gains tax hike?

JM: TREB has been urging policymakers to base their policy decisions on empirical evidence and analysis that could support various policy initiatives. To date, we have not been presented with evidence or scenarios as to whether or not changes to capital gains taxes would impact the housing market in the GTA. It is worth pointing out that the recent federal budget did not contain any such changes despite calls for such changes from the Province of Ontario.

NIH: How involved do you think the government (all levels) should be when it comes to cooling the market?

JM: TREB has been involved and will continue to take part in government consultations at all levels. We are urging policymakers to look at both the supply and demand sides of the market when making policy decisions.

NIH: Is the rapid price growth driven primarily by a supply and demand issue or is there more at play?

JM: The accelerating pace of price growth has been driven by strong demand up against a flat to down ward trend in listings.

NIH: What would a larger required down payment do to the market?

JM: Right now the minimum down payment for homes sold over $1 million is 20% in order to qualify for federal government backed mortgage insurance. Interestingly, TREB’s recent Ipsos surveys (results found in the report sourced above) point to average down payments well above 20%, even for first-time buyers.

NIH: Do you have any advice for first-time buyers?

JM: Ipsos survey results suggest that more than half of intending buyers will be first-time buyers in 2017. Each of these buyers’ needs and situations will be different, so it is difficult to provide broad-based advice. Would-be first-time buyers are certainly encouraged to work with a REALTOR® who can help narrow down their housing requirements and introduce them to other professionals (legal, financial, etc.) within their network.

NIH: Do you think it’s time to give up the dream of owning a detached home?

JM: The Ipsos survey undertaken for TREB suggests that intending homebuyers in 2017 are still very much pointed at low-rise market segments, including detached homes. The issue is that the supply of these listings types is constrained.

NIH: What needs to happen for the market to gently cool?

JM: If we experience a sustained period of time (i.e. one-to-two years) where annual growth in new listings outstrips annual growth in sales on a monthly basis, we will have a much more balanced market characterized by more moderate rates of price growth.

Thank you Jason Mercer for taking the time to share your expertise with us and our readers! Stay tuned for another upcoming Q&A regarding housing market cooling strategies.