Collapse of Toronto home prices may force rates to hold steady

Existing home prices continued to fall over the first two weeks of July in the Greater Toronto Area, according to internal mid-month numbers from the Toronto Real Estate Board — a development expected to ratchet up pressure on Ottawa not to tighten mortgage rules.

In a notice sent to members Thursday, TREB said the average selling price across the GTA was $760,356 from July 1 to 14, another 4.4-per-cent decline in prices from just the end of June. Average prices in Canada’s largest city reached $920,791 in April, a month now seen as the peak of the market before Ontario brought in measures to cool the housing sector.

Average prices are now off 17.4 per cent from the peak — though still up 7.4 per cent from a year ago — but realtors point out some segments of the market remain noticeably stronger than others.

Shawn Zigelstein, a Royal LePage Real Estate Services representative, said average prices are dropping more rapidly on detached property, especially in the suburbs. “Your average price is going to go down more rapidly when your higher prices inventory is falling.”

The average detached home in the GTA sold for $1,105,333 over the first two weeks of July, still up 6.6 per cent from a year ago, but down about 3.8 per cent from the end of June. Detached home sales are off about 45 per cent from a year ago. Average detached home prices across the GTA reached $1,205,262 for the month of April.

In the condominium sector, the average unit in the first two weeks of July sold for $512,145 across the GTA, a 26.5-per-cent increase from a year ago but down only 1.5 per cent from June’s end. “We know the second part of this year is going to be flat,” said Zigelstein.

The pressure is expected to grow on the Office of the Superintendent of Financial Institutions to delay changes that would make it harder for consumers with loans not backed by Ottawa to borrow. The regulator has called for a change that would require those with equity of more than 20 per cent, known as low ratio borrowers, to qualify based on a rate 200 basis points above their contract.

Consumers with less than 20 per cent down must get mortgage insurance backed by Ottawa, and the government imposed tough regulations on them in 2016 to force them to qualify at a higher rate. OSFI’s announcement in July was the regulator’s first attempt to tighten the reins on the non-insured market.