Dip below $1M sparks optimism

DETACHED HOMES

Prices had been rising rapidly in Toronto over the last year and appear to have peaked in April, just after the Ontario provincial government introduced measures to cool the market, including a 15 per cent tax on foreign buyers in the Greater Golden Horseshoe which is home to about nine million people in southern Ontario.

Detached prices had been rising rapidly before the measures — some say they have had more of a psychological impact on buyers — with the average detached home sale price for the GTA soaring past $1 million in October, 2016. Detached home prices are now off almost 20 per cent since the peak.

“You look at the average price numbers and they are plunging,” said Porter, who says even on a seasonally adjusted basis house prices are down 13 per cent from the peak. “The issue is whether average is down because a lot of the high-end houses are not selling?”

One senior real estate source, who asked not to be named, said the impact of dropping prices is only at the margins. “There’s no swath of affordable new homes entering the marketplace,” he said.

There also doesn’t appear to be a massive decline in prices happening in the new homes market although Toronto builders do report sales dropping. The Building Industry and Land Development Association said this week the average price for an available new low-rise single-family homes was $1,316,693, a 45 per cent increase from a year ago but also up substantially from up from $1,250,262 price in June.

Phil Soper, chief executive of Royal LePage Real Estate Services, said it comes down to how much product under $1 million is actually making onto the market to really see what the impact on sales will be in the GTA market which is now witnessing 40 per cent year over year declines. “Whenever there is a market correction, there are winners and losers,” he said.

Ted Tsiakopoulos, regional economist for Ontario, said there has been a reset in the GTA market that is mostly driven by psychological perception of prices as opposed to a change in fundamentals. “We should remember the entire market isn’t cooling off, there is compositional shifts going on,” he said. “High-end single (detached units) have cooled off dramatically. Most of the imbalance has been in the single market. There might be more product under $1-million qualifying for insurance, but that’s one of many factors going to drive the decision.”