Toronto Home Demand Slides as Sales Drop Most in Eight Years
Toronto’s housing market is losing steam.
A series of government measures and the prospect of higher interest rates boosted listings and sparked the biggest sales decline in more than eight years last month, the Toronto Real Estate Board reported Thursday. Average home prices rose just 6.3 percent to C$793,915 ($612,000), the smallest annual increase since January 2015.
Toronto’s real estate market, mostly known for bidding wars and 20 percent price gains, is beginning to feel the effects of government rule changes that make it harder to get a mortgage. A liquidity crisis at one of the country’s largest alternative lenders is also reducing confidence that home values will continue their upward march.
“We are in a period of flux that often follows major government policy announcements pointed at the housing market,” said board President Tim Syrianos in the statement.
Home sales in Canada’s largest city slid 37 percent to 7,974 in June from the prior year, the third straight decline and the most since January 2009, the board said. Owners flooded the market with properties, with listings up 16 percent to 19,614.
Average prices dropped 14 percent in the last three months across the Toronto region to C$793,915, reflecting fewer sales of large homes. That compares with a 1 percent rise over the same period last year. Deals for single-family homes in Toronto and its surrounding regions fell 45 percent and average prices dropped 12 percent from April to C$1.06 million.
Even with the slowdown, the average detached home is still above C$1 million in the city and surrounding region, with prices up 7.8 percent in June. The composite benchmark price, which reflects the cost of a typical home, rose 25 percent in June from a year earlier, though it declined 1.3 percent on the month, the first drop since August 2014.
“We could see a bit of a whipsaw like we saw in Vancouver where we’re experiencing a pullback now and a lot of those buyers move back into the marketplace over the next year or so,” Jason Mercer, director of market analysis at the real estate board, said Thursday at a briefing in Toronto. “If there’s not as much movement as we’d like to see on the listings front and the supply front, that could have implications for an accelerated pace of price growth.”
Investors are assigning about a 90 percent chance of a rise in the Bank of Canada’s 0.5 percent policy rate at next week’s meeting. Recent statements by Governor Stephen Poloz and his deputies indicate the central bank is considering removing stimulus.
Authorities continue to weigh in with potential cooling measures. The Office of the Superintendent of Financial Institutions issued draft mortgage underwriting rules Thursday that would require stress tests for all uninsured home loans.
Ontario’s government published data this week showing overseas buyers accounted for just 4.7 percent of home purchases in the Toronto area over a recent one-month period.
“While we are seeing a substantial dip in sales over the last couple of months, it doesn’t look as if a pullback in foreign buying activity was at the root of this,.” Mercer said. “I’d argue it’s more on the psychological side of things.”
The real estate board cut its sales forecast for this year. It now sees transactions in the range of 89,000 to 100,000 units, down from a January forecast for as many as 115,500. The new forecast represents a decline of as much as 21 percent from last year.
It expects listings to range from 175,000 to 190,000, an increase of 14 percent to 23 percent. Average prices are forecast to moderate in the second half, for an annual increase of 13 percent to 18 percent, down from the 21 percent jump in the first half of 2017.