Greater Toronto Area home sales plunge

Slide comes amid tax on for­eign buy­ers, ex­pected mort­gage rate hikes

The Hamilton Spectator - - BUSINESS - ALEXAN­DRA POSADZKI

TORONTO — Home sales in the Greater Toronto Area plunged 37.3 per cent last month com­pared with a year ago, the city’s real es­tate board said Thurs­day as buy­ers moved to the side­lines fol­low­ing the in­tro­duc­tion of rules aimed at cool­ing one of the hottest hous­ing mar­kets in North Amer­ica.

The Toronto Real Es­tate Board said 7,974 homes changed hands in June while the num­ber of new prop­er­ties on the mar­ket climbed 15.9 per cent year-over-year to 19,614.

The av­er­age price for all prop­er­ties was $793,915, up 6.3 per cent from the same month last year, but down 8.1 per cent from May.

“There’s no doubt the mar­ket has changed,” said Christo­pher Alexan­der, re­gional di­rec­tor at Re/Max On­tario-At­lantic Canada.

The data comes after the On­tario govern­ment im­ple­mented rules in­tended to dampen Toronto’s real es­tate mar­ket, where es­ca­lat­ing prices have con­cerned pol­icy-mak­ers at the mu­nic­i­pal, pro­vin­cial and fed­eral lev­els.

On­tario’s mea­sures, which were retroac­tive to April 21, in­clude a 15 per cent tax on for­eign buy­ers in the Greater Golden Horse­shoe re­gion, ex­panded rent con­trols and leg­is­la­tion al­low­ing Toronto and other cities to tax va­cant homes.

“While we are see­ing a sub­stan­tial dip in sales over the last cou­ple of months, it doesn’t look as if for­eign buy­ing ac­tiv­ity or a pull­back in for­eign buy­ing ac­tiv­ity was at the root of this,” said Ja­son Mercer, the di­rec­tor of mar­ket analysis for the Toronto Real Es­tate Board.

“I’d ar­gue it’s more on the psy­cho­log­i­cal side of things, whereby people see a new ma­jor pol­icy pointed at the hous­ing mar­ket and take a bit of a step back, tem­po­rar­ily re­assess where they are in the mar­ket­place be­fore per­haps mov­ing back into the mar­ket.”

The drop in the num­ber of prop­erty trans­ac­tions comes on the heels of a 20.3 per cent year-overyear de­cline in sales in May. It largely mir­rors what hap­pened in Van­cou­ver after the B.C. govern­ment in­tro­duced a 15 per cent for­eign buy­ers’ tax last Au­gust.

“Any time the govern­ment in­ter­venes dras­ti­cally, you see con­sumers just kind of wait it out and see how it’s go­ing to take ef­fect,” Alexan­der said. “But the mar­ket fun­da­men­tals in Toronto are still re­ally strong. Lot of de­mand, lot of im­mi­gra­tion, low in­ter­est rates. It’s a great city to live in. All those things will start to take hold again, prob­a­bly in mid-Au­gust.”

The rise in new listings is likely due to a num­ber of fac­tors, he added, in­clud­ing the fact that in­ven­tory was at a record low last year and that soar­ing prices may have mo­ti­vated some home­own­ers to put their prop­er­ties up for sale.

“A lot of people saw prices go­ing up con­sid­er­ably and were prob­a­bly like, ‘Maybe this is my time to cash out,’” Alexan­der said. “But buy­ers have taken a big pause and they’re not will­ing to pay as much as people were back in the first quar­ter, and sellers are still ex­pect­ing those num­bers, so I think that’s why we’re see­ing a huge spike.”

There have been grow­ing wor­ries that over­heated prices in Van­cou­ver and Toronto could be a prob­lem for the broader econ­omy, es­pe­cially if there is a sud­den de­cline in hous­ing prices sparked by higher in­ter­est rates.

TORONTO STAR FILE PHOTO

The Bank of Canada is ex­pected to raise mort­gage rates at least once in the se­cond half of the year.

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