Toronto’s housing market feels chill from provincial measures

theglobeandmail.com
By JANET MCFARLAND
June 5, 2017

Toronto’s overheated housing market has cooled rapidly since the Ontario government announced a suite of new housing measures in April, with average prices dropping 6 per cent in May while the number of homes sold fell by 12 per cent during the month.

The average sale price for all home types in the Greater Toronto Area was $863,910 in May, a drop of 6.2 per cent from $920,791 in April, according to sales data from the Toronto Real Estate Board. The price was still up 15 per cent compared to May, 2016, however, because of large price gains earlier this year.

The month-over-month price decline came as 19.4 per cent more homes were listed for sale in May, with new listings rising to 25,837 from 21,630 in April. New listings were up 49 per cent from 17,356 in May last year.

TREB said 10,196 homes were sold in May, a 12-per-cent drop from 11,630 homes sold in April and a decline of 20.3 per cent from May last year, when 12,790 homes were sold.

Jason Mercer, TREB director of market analysis, said the leap in new listings coming onto the market in May was the result of many homeowners reacting to the strong price gains earlier this year, putting their homes up for sale “to take advantage of these equity gains.”

Mr. Mercer said the Toronto market hasn’t time to absorb the impact of the Ontario government’s new housing measures, so hasn’t seen the “normalized” impact of the reforms, which included a new 15-per-cent tax on foreign buyers.

“In the past, some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which has later balanced out,” he said in a statement.

The number of active listings of homes available for sale at the end of May was up 43 per cent to 18,477 listings compared to 12,931 listings at the end of May, 2016, which was a 15-year-low at that time, TREB said.

However, TREB president Larry Cerqua said inventory levels are still low, despite the increase in listings.

“At the end of May, we had less than two months of inventory,” he said. “This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year.”

The Ontario government introduced the new foreign buyer’s tax on April 20 and announced it would give Toronto powers to tax vacant properties as part of a suite of measures aimed at cooling the region’s soaring housing prices. The measures came after average house prices climbed 33 per cent in March compared to a year earlier.

Whether due to the new reforms or to buyer fatigue with sky-high housing prices, the market has cooled considerably this spring, especially for low-rise homes.

Detached house prices dropped 5.3 per cent to an average of $1,141,041 in May compared to $1,205,262 in April.

The number of detached homes sold in May fell 17 per cent to 4,757 compared to 5,715 in April, while sales were down 26 per cent compared to May last year.

Prices for semi-detached homes fell 2.4 per cent in May to an average of $824,667 compared to April, and townhouse prices fell 6.4 per cent to an average of $656,392.

Condominium sales held up somewhat better, with prices dropping 1.8 per cent to average $531,659 in May compared to April while the number of units sold fell 5.3 per cent.