The fall in average peak price in the GTA in June is an even more startling indication of a cooling market than the 37.3 per cent drop in the month’s home sales over last year, says a Toronto real estate broker.
“I think the big surprise is to see average prices below $800,000, which I think a lot of people weren’t expecting, and it’s a big drop from $920,000, what it was in April,” John Pasalis, president Realosophy Realty told BNN Thursday.
He believes a 33 per cent surge in average price in March led to a sharp and strong correction, especially among domestic speculators who had been driving up prices throughout 2016 and into the first part of 2017.
“I think it spooked a lot of buyers and we had a combination of a lot of buyers pulling out and a lot of sellers trying to capitalize and time the market and sell at the peak, so listings flooded the market.”
According to the The Toronto Real Estate Board, 7,974 homes were sold in June while the number of new listings climbed 15.9 per cent year over year to 19,614.
The average price for all property types was $793,915, an increase of 6.3 per cent over the same month last year.
The results come after the Ontario government implemented new rules, retroactive to April 21, intended to cool Toronto’s hot real estate market. The measures include a 15 per cent tax on foreign buyers in the Greater Golden Horseshoe, expanded rent controls and legislation allowing Toronto and other cities to tax vacant homes.
"We are in a period of flux that often follows major government policy announcements pointed at the housing market," Tim Syrianos, president of the Toronto Real Estate Board, said in a statement.
"On one hand, consumer survey results tell us many households are very interested in purchasing a home in the near future, but some of these would-be buyers seem to be temporarily on the sidelines waiting to see the real impact of the Ontario Fair Housing Plan. On the other hand, we have existing homeowners who are listing their home because they feel price growth may have peaked. The end result has been a better supplied market and a moderating annual pace of price growth."
Pasalis says it’s likely the GTA housing bubble has burst but the province’s moves have had only a psychological effect.
“We are watching the market unwind itself. This has little to do with the provincial government’s policies. They didn’t really do anything that curbed demand significantly.”
He says many people withdraw from the real estate market in the summer. The real test will come in September.
"Any time the government intervenes drastically, you see consumers just kind of wait it out and see how it's going to take effect," said Christopher Alexander, regional director at Re/Max Ontario-Atlantic Canada..
"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 fall in house sales mirrors what happened in Vancouver after the B.C. government introduced a 15 per cent foreign buyers' tax last August. But Pasalis says Vancouver’s prices and listings stayed more steady than what’s being seen in Toronto.
He said there are areas in the GTA – York Region in particular – with 10 or 12 months’ worth of inventory, where the market is particularly vulnerable to price declines.
The TREB adjusted its yearly outlook for the year downward to between 89,000 and 100,000 transactions but is forecasted the average selling price in 2017 will be up by 13 to 18 per cent.
There is speculation that a cooling Toronto market may heat things up in Montreal. There, home sales were up 10 per cent in June, driven by a hot condo market. It was the 25th increase in sales in the last 26 months, according to the Greater Montreal Real Estate Board. The median price of single-family homes reached $328,000 in June, up 9 per cent from June 2016. Condos were up 5 per cent to a median price of $257,500.
There has been growing concern that escalating prices in the dominant markets of Vancouver and Toronto could become a national problem, especially if higher interest rates lead to a sudden decline in housing prices.
There is growing speculation the Bank of Canada will hike interest rates next week for the first time in seven years.
