Internal mid-month statistics for June from the Toronto Real Estate Board show average prices in the Greater Toronto Area shed almost 6.4 per cent in just two weeks with sales down about 50 per cent from a year ago.
TREB reported Monday, in a note sent to members, that the average home sold for $808,847 from June 1 to 14 — a sharp drop from the average of $863,910 for May. The decline comes on top of a 6.2 per cent drop in prices from April to May. The board no longer makes public mid-month stats.
The peak of the market in Canada's largest city now appears to be in April when the average price soared to $920,791, the same month that Ontario brought in its 16-point Fair Housing Plan, which included a 15 per cent non-resident speculation tax for buyers in the Greater Golden Horseshoe and expanded rent controls that limited annual rent increases to inflation, capped at 2.5 per cent, for all rentals across the province.
Average prices have now declined just over 12 per cent from the peak but Craig Alexander, chief economist of the Conference Board of Canada, said it might not be the measures themselves that have cooled the market as much as the perception of their impact.
“I don't think that many buyers have been pushed out of the market,” said the economist. “One of the biggest effects of tighter government regulations is that it creates a psychological response by potential sellers and potential buyers. It ends up like a wait and see approach. If everybody waits and sees what happens, you get a significant pullback.”
Economists and realtors have reported a similar response in the Greater Vancouver market last year when the provincial government there brought in a 15 per cent tax on foreign buyers. Sales were in decline before the changes but picked up speed, although prices did not drop as dramatically as what is happening in the GTA right now.
Vancouver's tax was effective August 2016 and reports now indicate the market is starting to recover to a degree. The British Columbia Real Estate Association said this week it expects prices to decline 3.6 per cent this year in Greater Vancouver, but rise by 4.2 per cent in 2018.
Alexander said the GTA might follow a similar path in terms of recovery. “You can't say (the decline in sales) is warranted by applying a tax on non-residents,” he said. “The government hit the pause button on real estate. Changes to regulations, generally speaking, have an impact for about six months and after that the market seems to figure out like a new normal and gets back to traditional prior behaviour.”
For now, the GTA is clearly cooling. On a year-over-year basis, average prices over the first two weeks of June rose by only 6.7 per cent. The 2,999 sales over the first two weeks of the month were down from 6,011 a year earlier — wiping out about $2.5 billion in market activity.
A Royal LePage Real Estate Services representative, Shawn Zigelstein, said the decline looks dramatic but that the numbers don't tell the whole story. Falling sales in more expensive detached homes are driving down overall prices, even though the condominium market, he said, remains relatively strong.
The TREB report for the first two weeks of June shows detached homes sales have slowed 56.2 per cent from a year ago while condominium sales are off 39.2 per cent during the period. On a year over year basis, average prices in the detached category are up 7.7 per cent from a year ago while condominium prices are up 25.5 per cent.
“Maybe one of the factors is condo prices are a lot lighter than the detached homes,” said Zigelstein. “I don't like using the word (correction). I think we are in a market with a ton of inventory and a ton of choice. We are definitely not in a seller's market now. It's balanced market, maybe not a buyer's market but it could become a full-out buyer's market if inventory increases.”