Photo: James Bombales
Canadian home sales took a spill a month after Ontario’s government announced a slew of measures meant to cool supercharged real estate markets in and around the Greater Toronto Area.
The number of existing homes changing hands throughout the country declined 6.2 per cent in May compared to April, according to the Canadian Real Estate Association’s latest market data.
In the Greater Toronto Area, by far the country’s biggest market, transactions tumbled by 25.3 per cent over that same period denting national figures.
Gregory Klump, CREA’s chief economist, ties the drop directly to Ontario’s Fair Housing Plan, which the Ontario Grits unveiled on April 20th.
“[The data] provide clear evidence that the changes have resulted in more balanced housing markets throughout the Greater Golden Horseshoe region,” says Gregory Klump in a statement.
Ontario’s plan is a sweeping 16-measure policy move containing, among other things, expanded rent control throughout the province and a foreign-homebuyer tax for the Greater Golden Horseshoe, a region that includes the GTA, Hamilton and a number of other smaller markets.
“For housing markets in the region, May sales activity was down most in the GTA and Oakville. This suggests the changes have squelched speculative home purchases,” Klump continues.
CREA suggests the GTA was nearly in buyers-market territory last month. The GTA’s sales-to-new listings ratio was at 41 per cent in May, and ratios below 40 per cent are suggestive of a buyer’s market.
But in the first full month of activity after the Fair Housing Plan was announced, the benchmark price of a GTA home continued to rise, albeit at a more tepid rate on a month-over-month basis.
It reached $821,400 in May, up 1.2 per cent from April. That’s still 28.9 per cent over the same month in 2016, according to CREA’s MLS Home Price Index.
Meantime, the national benchmark price was $613,800 last month, an increase of 17.9 per cent compared to one year prior.
Greater Vancouver’s market, which had the wind taken out of its sails by BC’s foreign-homebuyer tax last year, appears to be on the rebound.
The benchmark price of a Greater Vancouver home was $967,500 in May, up 2.8 per cent from April and 10.2 per cent annually.
BMO Senior Economist Sal Guatieri suggests a similar recovery can be expected for Toronto — “if Vancouver is any guide.”
“Policy tinkering will do little to cool demand on a sustained basis,” says Guatieri.
He notes the current slowdown is the byproduct of potential buyers stepping to the sidelines due to uncertainty.
“Time to take out the heavy artillery: higher interest rates,” he adds.