The legislation, which “governs real estate brokerages, brokers and salespersons” in Ontario, seeks to modernize how our real estate sector is regulated. TRESA has updated our laws in different phases. For phase one, instituted on October 1^st, 2020, the act contained updates, such as changing the rules in which advertisements can “refer to brokers and salespersons.” We are currently in phase two of implementing TRESA’s new regulations, with the latest phase set to create more ambitious changes. These changes will update the Real Estate Council of Ontario’s (“RECO”) Code of Ethics, enhance RECO’s powers, increase disclosure obligations for RECO registrants, and perhaps what has been the most newsworthy change, instituting Open-Bidding in Ontario.

Does TRESA bring Open-Bidding to Ontario? The Federal and Provincial approach to Blind-Bidding

Open-Bidding has been a hot topic for the past few years, as real estate prices have skyrocketed since the pandemic. The current Federal Government, led by Prime Minister Trudeau’s Liberal Party, ran on instituting Blind-Bidding for real estate sales. While there is currently no timetable on when the full Blind-Bidding ban will be implemented, the Canadian Real Estate Association is working on an Open-Bidding pilot. As of now, though, there is no currently detailed set of legislation proposed that would allow analysis on how the ban on Blind-Bidding would work, be implemented, or the effects on the real estate market.

Comparatively, we have more to work with regarding the new TRESA Blind-Bidding regulations. The Ontario Blind-Bidding approach is noticeably looser than the Federal Government’s approach to Blind-Bidding. The current Bidding system for real estate is blind; you are looking to buy a house from Jane, but Tom is looking to buy that house as well, and June also just decided to put in a last-minute bid. Real estate brokerages must tell June, Tom and you that there are three written Bids for Jane’s property. However, there is no obligation for Jane’s brokerage to tell each of you the dollar value of said written Bids. Under Ontario’s current regime for bidding, you can know the number of bids competing against yours, but not the dollar value.

The Ontario regulations create an “Open-Bidding option.” Blind-Bidding will still be available, but the seller can decide whether they want to engage in an Open-Bidding, or Blind-Bidding process. The new Open-Bidding Option will come into force in April 2023, along with the other recent changes from phase two of TRESA.

What is the effect of Open-Bidding on the real estate market?

That’s the billion-dollar question. In terms of a total blind-bidding ban, critics feel that such a policy is overhyped in terms of its effect on real estate prices. They propose that to truly reduce the average cost of a home, efforts to increase supply and change zoning laws would be more effective. Some proponents of Blind-Bidding bans agree that Open-Bidding isn’t sufficient to bring down housing prices but a necessary step that must be complemented by increasing supply and reforming zoning laws.

Those critiques of Blind-Bidding are better suited toward the Federal Government proposition. As the Ontario Open-Bidding Option is different, the comments vary from those of the Federal Government’s complete ban. Proponents, such as Tim Hudak, the CEO of the Ontario Real Estate Association, welcome the Open-Bidding Option, as the new regulation strikes “the right balance between adding more transparency to the offer process and protecting a homeowner’s right to sell their home how they want, instead of blanket bans on the traditional offer process.”

On the other hand, critics disagree with the new rule because of the discretion it gives to the seller. They believe that the goal is increasing transparency. Open-Bidding must be the only option to achieve that goal. Such transparency is more valuable to a functioning real estate market and society than the right to Closed-Bidding for sellers. Some critics are not necessarily proponents of Open-Bidding, but again critique the choice given to sellers, saying that either you go all-in on Open-Bidding, or maintain the current Closed-Bidding-only regime.

Perhaps Ontario’s Open-Bidding Option will impact the average price of real estate in the province. Still, if it does, it will likely not be as significant as how changing zoning laws and increasing supply can impact price. Whether you disagree or agree with the new rule, it probably depends on whether you believe sellers should have the option to engage in Open-Bidding, or whether Open-Bidding should be mandated for transparency.

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2021, like 2020, was once again a unique year for our National Real Estate Market. According to the Canadian Real Estate Association, monthly home sales were not as volatile as 2020 but still more volatile than what was seen in Canada during the 2008-09 financial crisis.[1] The high of monthly sales reached 807 250, contrasted with the low of 650 000 sales. This volatility took place in the macro situation of the COVID-19 pandemic and low-interest rates spurred by the Bank of Canada. The national average home price rose about 21% to $687 500 and is expected to increase again in 2022. The continued movement in the market made housing a top-button issue during the 2021 election, with the winning Liberal government set to implement their housing plan over the next four years. 2022, like the pandemic years before, is again looking to be a historic year for Canada’s housing market.

What’s in store for 2022?

The consensus seems to be that while 2022 will not feature the astronomical growth rates of 2021, the market is still set to increase, albeit at lesser growth rates than previous years. This year, the average price is still set to grow to $718 000 by 5.6%, per the CREA. As a result, Canada’s major urban centres such as Toronto or Vancouver as forecasted as having an enormous amount of risk in the annual global real estate bubble index.[2] Toronto specifically has been earmarked as having the second-largest housing bubble globally by Swiss bank UBS.[3]

While the housing markets of Toronto and Vancouver tend to dominate the conversation, REMAX anticipates the markets of other areas in Canada to start generating more buzz. In Atlantic Canada, Moncton and Halifax are expected to see increased prices respectively by 20% and 16% this coming year. Western Canada is expected to remain a sellers’ market in 2022, spurred by homebuyers hailing from Ontario and British Columbia.

Regarding BC, it appears that consumers are moving to regions outside of Vancouver. This trend is expected to maintain due to tight housing supply and powerful demand. In BC, buyers are moving to suburban areas outside the Greater Vancouver areas, such as Victoria and Nanaimo offer more affordable alternatives.

Ontario and Toronto offer a parallel situation to BC and Vancouver. It is expected that areas outside of the GTA, such as North Bay, Thunder Bay, Collingwood, Ottawa, and the Durham region, are expected to have increased average sales prices. Unless meaningful regulatory action is taken, these trends are likely to hold.[4]

2022: New regulations?

With Canadians looking to their government to act on the real estate market, 2022 may bring new laws and regulations. After September’s Federal election, we saw jurisdictions looking to make changes. In British Columbia, the province wants to create a cooling-off period where consumers have a few days after a sale to back out. This is reminiscent of cooling-off periods for pre-built condominiums in BC and Ontario but is instead targeted towards newly built homes.[5] As cooling-off periods are already found across Canada, BC adopting this new measure may set off a domino effect of other jurisdictions following suit.

The government is considering changing the rules regarding down payments on investment properties on a federal level. The Ministry of Housing Diversity and Inclusion and the Canada Mortgage and Housing Corporation specifically aim to target speculative investing. The Ministry sees speculative investing as something that causes Canadians to “overbid on properties, borrow beyond what they can afford, and push home prices even higher.” While they have not yet suggested a specific amount of which to increase the current 20% down payment that investors pay, industry professionals agree that an increase can curb the speculative market. [6]

When examining the mandate letter for the Ministry of Housing and Diversity and Inclusion, it is apparent the proposed increase in the down payment is in line with what the MInistry seeks to do in 2022. The mandate letter committed to other actions that seek to curb speculative investing in the real estate market, including, but not limited to:

Housing predictions and regulation – it’s all related

Of course, predictions are rarely accurate without some aberration in real-life results. Still, based on past trends, the experts are likely correct that housing prices are likely to increase. Demand is also set to increase outside of the major areas of Toronto and Vancouver due to unaffordability in those urban centres.

The main element set to affect the predicted trends are the regulatory actions’ that provinces, municipalities, and the federal government may take. Drastic new legislation may create powerful changes in the market – although such legislation can take months or years to have a visible effect. Outside of regulatory impact, it seems that the predictions of 2022’s housing market are set to be true.

[1] CREA: Quarterly Forecasts https://www.crea.ca/housing-market-stats/quarterly-forecasts/

[2] MacLean’s – Canada’s real estate market in 2022: What to expect in the new year https://www.macleans.ca/economy/canada-real-estate-outlook-2022/

[3] REMAX: Investors Remain Active in the Hot Canadian Housing Market https://blog.remax.ca/investors-remain-active-in-the-hot-canadian-housing-market/

[4] REMAX: 2022 Canadian Housing Market Outlook http://download.remax.ca/PR/2022CanadianHousingMarketOutlookReport_FULL.pdf

[5] British Columbia: BC working to strengthen protection for home buyers https://news.gov.bc.ca/releases/2021FIN0070-002097

[6] Financial Post: CMHC to review down payments on investment properties as part of federal strategy to tackle housings risks https://financialpost.com/real-estate/mortgages/cmhc-to-review-down-payments-on-investment-properties-as-part-of-federal-strategy-to-tackle-housing-risks

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