One of the top 10 items listed by the Globe and Mail regarding the recent federal budget was housing. Rising home prices particularly in Toronto have prompted calls for government intervention to curb spiralling price increases. Thankfully, politicians have not jumped on this bandwagon. I have always found that government(s) can do more to screw up positive economic activity than they can to stimulate bad economic times. That is not to say that what is happening right now in the housing market is good. Frankly as a REALTOR® it somewhat scares me.
The recent federal budget, includes plans to give Statistics Canada about $40 million over five years to develop and implement a Housing Statistics Framework. The intent is to gather data that will provide information on sales, the degree of foreign ownership, buyer demographics and the impact on financing etc. which will hopefully permit some reasonable decision making to be made. In my opinion this is long overdue. Typically when it comes to reporting on residential real estate, the media's focus is on "average" home prices. This is an absolutely meaningless number. No matter what market we are talking about, the average price can be dramatically affected by the mix of sales in any given month.
In January of this year, the average MLS® residential price as reported by the Southern Georgian Bay Association of REALTORS® was $497,914. This was a 41% increase over the average residential price of January 2016. Have prices gone up since last year? Yes. By 41%? No! The mix of sales in any given month can have a major impact on moving the average price up and down. In January of this year, sales in our area for properties priced $800,000 and over amounted to over $16 million which was 29% of the total dollars sold. As such, these 11 sales had a profound impact on driving the average residential price higher. At the same time sales of lower valued properties were down stemming from a lack of inventory listed for sale.
Hopefully the government's fact finding initiatives through Statistics Canada will facilitate some qualified and quantified decisions to be made about Canada's housing market. Knee jerk reactions such as a foreign ownership tax, higher land transfer taxes and or other such measures aimed to curb escalating home prices can potentially cause more harm than good in helping Canadian realize their home ownership dreams.
In my next post I will discuss how REALTORS® may be responsible for at least some of the run up in home prices. As always I welcome your comments and feel free to Contact Me to discuss your particular real estate issues.