Experts are already noting the possible impact of Ontario’s foreign-buyer tax on national home sales after the Canadian Real Estate Association’s latest figures showed a slowdown in activity this April.
“Ontario’s suite of measures aimed at cooling the housing market took effect with 10 days to go in the month, so we can’t get a full picture of their impact,” admits BMO Senior Economist Robert Kavcic.
“But, it’s clear that there was both a softening of demand and a rush of new supply in April, likely in response to the moves,” he continues.
Early in April, the Ontario government announced its new Fair Housing Plan, including a foreign-homebuyer tax of 15 per cent — albeit one with a number of exceptions — for the Greater Golden Horseshoe, which includes the Toronto market and a host of its environs.
The number of homes changing hands from coast to coast in Canada last month fell 1.7 per cent from a record-setting March on a seasonally adjusted basis, according to CREA.
The number of residential transactions in April was also down 7.5 per cent, compared to the same month a year ago.
In Toronto, home sales last month dropped 3.8 per cent from April 2016, or 1.7 from March (seasonally adjusted).
The month-over-month decline was only surpassed by Regina’s 25.7-per-cent free fall in activity.
Like BMO, CREA itself also suggested the Fair Housing Plan for Ontario, the most populous and therefore active housing market in the country, was having an impact on the province.
“Homebuyers and sellers both reacted to the recent Ontario government policy announcement aimed at cooling housing markets in and around Toronto,” writes Gregory Klump, CREA’s chief economist.
“The number of new listings in April spiked to record levels in the GTA, Oakville-Milton, Hamilton-Burlington and Kitchener-Waterloo, where there had been a severe supply shortage,” Klump continues.
While nationally, the number of homes listed in April surged 10 per cent over the previous month, in the GTA listings spiked by 36 per cent.
BMO’s Kavcic says it’s possible sellers figured the market was about to correct and so put their homes up for sale sooner rather than later.
“While that might put peak price growth behind us, the question is how much the market will cool from the unsustainable [30-per-cent-plus] pace, and how long the adjustment will persist,” he adds.
“If Vancouver is any guide, the answers appear to be somewhat and not too long, at least while interest rates are pegged at current levels.”
The aggregate benchmark price of a Canadian home, based on activity in 14 markets, in April was $606,000, an annual increase of about 19.8 per cent.
In the Greater Toronto Area, the benchmark price hit $811,300, up 31.7 per cent over the same period.
Greater Vancouver, which was impacted by BC’s foreign-buyer tax for Metro Vancouver in August last year, is seeing benchmark prices soar after cooling off in the period immediately after the levy took effect.
The April benchmark price for a Greater Vancouver home was $941,100, representing a one-month increase of about 2.4 per cent and annual gains of 11.4 per cent.
Ontario’s tax didn’t take effect until there were fewer than two weeks left in April but Diana Petramala, a TD Bank economist, explains how its impact may have been felt even before the Ontario government unveiled the Fair Housing Plan.
“The GTA weakness in April may have also been driven… [by] buyers moving to the sidelines due to policy uncertainty as the Ontario government plans to implement new policy measures was anticipated well before the April 20th announcement,” Petramala notes.