I was discussing the market with some of my colleagues, as we're all waiting to see what impacts we'll see in 2017 from recent changes to mortgage qualification and CMHC premiums. And there was a feeling that January has seemed a bit slower. But was it actually slower or are we just enjoying a breather from more hectic seasons?
Well, now that January is done I had a look at sales reported through the local MLS® system. With 543 sales in the City of Hamilton through January 2017, it is certainly slower than the spring market when numbers were in the 1000 range, or even the fall with sales around 800.. However, when you consider that sales volume for the same month in 2016 was 476, it becomes obvious that the slowdown is just the usual seasonal effect and the market is still pretty robust. That's an increase in local sales of 14% for the same month.
There's no guarantee that this will carry forward into the spring market - I'm still on the look out for a reliable crystal ball if you know where to find one - but the market has clearly weathered [
the more significant change to mortgage qualification last fall].
[
The change to the CMHC premiums is relatively minor], with the premium amortized with the mortgage. There is an extra ding on buyers on closing because the sales tax on the premium has to be paid up front and can't be amortized. However, there is a good offset to that from the increased [
first-time buyer rebate on the provincial Land Transfer Tax] - what used to be a maximum rebate of $2000 is now $4000 as of January 1, 2017. On a $400,000 purchase, the increase in sales tax on the CMHC premium is only $128. Buyers are still quite a bit ahead on closing.
CMHC also recently made a comment that Hamilton's market has been driven largely by Toronto's hot market spilling out into surrounding areas, and suggested that a 10% decrease in prices in Toronto would affect Hamilton with a 14% loss in value. Generally, they say the price relationship between Toronto and Hamilton is [
a 1.4% change in Hamilton for every 1% change in Toronto].
I gather that the idea is that if Toronto becomes more affordable, people will go back to buying there, thus relieving some of the pressure on outlying areas.
While I agree with the principle, the flaw I see is that this is not likely to be an instantaneous effect. If Toronto's prices have dropped 5% but people expect it to drop 10%, they're going to be hesitant to invest in that marketplace. They'll continue to look outside the big city. They won't want to invest in Toronto until they feel it has bottomed out and starting to rebound.
So there is likely to be a delayed effect on Hamilton's market, and with fluctuations keeping buyers on their toes, it may never be adequate to completely eliminate interest in Hamilton as a safer place to buy. All of this is, of course, ignoring the fact that [
the Toronto Real Estate Board is predicting double digit increases].
Either way, I think Toronto will continue to be an upward influence on our local market despite any small price corrections there.
There are lots of other factors and regulatory changes, so the whole thing is a real moving target as they say. Only time will tell, but I'm not worried about any market implosions at this point.
