The Greater Toronto Area’s housing market is absorbing a considerable sales downturn, and it’s causing significant drag on the rest of the nation, reports the June numbers from the Canadian Real Estate Association.
Sales across Canada fell 6.7 per cent from May, and a full 11.4 per cent year over year, CREA finds. And, while the national sales price rose 0.4 per cent to $504,458, it is the smallest monthly increase recorded in seven years.
Sales were down in 70 per cent of all local markets, but it’s the GTA that “overwhelmingly” led the decline, as well as the surrounding Greater Golden Horseshoe, despite upticks in Toronto condos and Hamilton real estate.
Price growth continued to be strong in British Columbia markets, up 7.9 per cent in Greater Vancouver, 13.9 per cent in the Fraser Valley, and over 20 per cent in red-hot Victoria.
Despite slower sales, GTA saw prices were “well above year-ago levels” at 25.3 per cent in Greater Toronto, 25.4 per cent in Guelph, and 17.4 per cent in Oakville-Milton. Ottawa and Montreal continue to be up and comers, with 5.2 per cent and 4.2 per cent growth, respectively.
The prairie provinces continued to be weakest, with Calgary up just 0.6 per cent, and a 0.7 per cent decline in Regina, and -3.1 per cent in Saskatoon.
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New Rules and Higher Rates Will Be Felt by Buyers
CREA President Andrew Peck says buyers are clearly hesitating to enter the market, choosing instead to observe how changes from the Ontario Fair Housing Plan, and newly hiked interest rates, will play out.
“Canadian economic and job growth have been improving, which is good news for housing demand. However, it also means that interest rates have begun to rise, which may impact home buyer confidence – particularly in pricier markets like Toronto and Vancouver, where recent housing policies had already moved potential buyers to the sidelines,” he stated.
He adds that in lower-priced markets with already balanced affordability, the impact will be less felt.
CREA Chief Economist Gregory Klump also weighed in on market uncertainty, agreeing that higher borrowing costs will cause prospective buyers to hold off on making a move for now, regardless of entering the market for the first time, or upgrading their current housing. It may also lead them to take price cuts when listing their home for sale.
“The recent increase in interest rates could re-inforce a lack of urgency to purchase or, alternatively, move some buyers off the sidelines before their pre-approved mortgage rate expires,” he writes. “In the meantime, some move-up buyers who previously purchased a home before first selling may become motivated to reduce their asking price rather than carry two mortgages.”
GTA Now in “Buyer’s Market” Territory
CREA also reports that the number of newly-listed homes declined considerably from the flood of new inventory experienced in April and May – but it wasn’t enough to outpace slower sales. As a result, the national sales-to-new-listings ratio is ringing in at 52.8 per cent – well within balanced territory. However, that ratio has dipped below 40 per cent in the GTA and Barrie markets, signaling the first return to buyer conditions in recent memory. (A ratio between 40 and 60 per cent is considered balanced territory, with buyer’s and seller’s conditions below and above those thresholds, respectively.)
However, in terms of months of inventory (the amount of time required to fully deplete housing supply), the Greater Golden Horseshoe remains the tightest market with 2.5 months (up from an all-time low of 0.8 per cent in March). The national average inventory is 5.1 months.
Is Toronto Following Vancouver’s Lead?
Those looking for insight into whether downward pressure on Toronto’s market will continue may glean insights from Vancouver’s trajectory over the past year. While supported by different demographics and economic factors, Vancouver also absorbed the impact of a foreign buyer tax last August, which caused an immediate tumble in sales – especially in the detached and luxury segments – and slight softening on prices.
To illustrate the impact, Zoocasa has plotted the direction of the Vancouver and Toronto markets in the immediate aftermath following the implementation of both markets’ respective foreign buyer taxes. While it remains to be seen whether Toronto will follow Vancouver’s rebound trend, Toronto’s 13.8-per-cent June decline mirrors that of the west coast city.