Toronto housing slump intensifies as buyers retreat

By Leith van Onselen

The Toronto Real Estate Board has tried to put lipstick on a pig:

TORONTO, ONTARIO, August 3, 2017 – Toronto Real Estate Board President Tim Syrianos announced that Greater Toronto Area REALTORS® reported 5,921 residential transactions through TREB’s MLS® System in July 2017. This result was down by 40.4 per cent on a year-over-year basis, led by the detached market segment – both in the City of Toronto and surrounding regions.While sales were down, the number of new listings reported were only
slightly (+5.1 per cent) above last year’s level.

“A recent release from the Ontario government confirmed TREB’s own research which found that foreign buyers represented a small proportion of overall home buying activity in the GTA. Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” said Mr. Syrianos.

“Summer market statistics are often not the best indicators of housing market conditions. We generally see an uptick in sales following Labour Day, as a greater cross-section of would-be buyers and sellers start to consider listing and/or purchasing a home. As we move through the fall, we should start to get a better sense of the impacts of the Fair Housing Plan and higher borrowing costs,” said TREB CEO John DiMichele.

The MLS® Home Price Index (HPI) Composite Benchmark price was up by 18 per cent on a year-over-year basis. However, the Composite Benchmark was down by 4.6 per cent relative to June. Monthly MLS® HPI declines were driven more so by single-family home types. The average selling price for all home types combined was up by five per cent year-over-year to $746,218.

“Home buyers benefitted from more choice in the market this July compared to the same time last year. This was reflected in home prices and home price growth. Looking forward, if we do see some would-be home buyers move off the sidelines and back into the market without a similar increase in new listings, we could see some of this newfound choice erode. The recent changes in the sales and price trends have masked the fact that housing supply remains an issue in the GTA,” said Jason Mercer, TREB’s Director of Market Analysis.

According to The Globe & Mail, average home prices in Toronto fell a further 6% in July and have fallen 19% since the market’s peak in April:

“There’s nothing positive – there are no really great signs out there,” said realtor John Pasalis, president of Realosophy Realty Inc. in Toronto.

Mr. Pasalis said some of areas where average prices are now lower than they were a year ago – including Richmond Hill and Whitchurch-Stouffville north of Toronto – are also regions that appeared to have the highest number of speculators and foreign buyers prior to the downturn. Their withdrawal from the market has had a greater impact on prices than in more central neighbourhoods in the City of Toronto.

Meanwhile, the composite benchmark index, which tracks a typical home over time, fell by 4.6% in July according to Bloomberg:

Representing the biggest monthly decline in at least 17 years:

The slump in prices and activity follows broad rental regulations implemented in April, which included capping rent increases and introducing a foreign investor tax. It also follows the federal government in October placing restrictions on insured mortgages, and Canada’s financial regulator also proposing to restrict uninsured home loans this year.

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Comments

    • I haven’t heard of a single building being re-clad yet, even the one that already caught fire. Suspect this may end up costing tens of billions – bigger than asbestos?

  1. I love how the real estate board says downturns are just due to “psychology”. Yep! And what do you think also caused the last several months of desperate price rises?

    Psychology underpins demand in a bubble. People can see the steaming pile of wreckage now. Toronto is toast. Look out below.

    • Pfft.

      Fundamentals rise like a giant upwelling of magma pushing the earth steadily into a bulbous mountain.

      Psychology is when people get scared of their new mountainous heights and run away.

    • Oh aye, they’re desperate now! Looking for any excuse, even when the excuse is no excuse at all. I do a google search on Toronto housing and it’s almost like there’s no crash going on lol.

      Propaganda is no balm for someone with a $900k mortgage on a property that has lost $170k in 3 months.

      • 19% fall since peak is pretty significant if you bought near the peak… and likely the fun’s just getting started.

      • Sure. They are up 5% over a year because they went up hugely and then retraced nearly all of it. They are still plummeting right now.

        It’s like the classic bloke who climbed up the stairs and then leaped off a building – half way down he’s still higher up than when he started!

        Give him your money.

    • billygoatMEMBER

      @Arrow
      Not surprising really. Psychology for the most part is just made up stuff to creat a market for drugs – sorry psychotropic medications. Google the history or look up and watch documentary ‘The marketing of Madness’

    • Apparently the Canadian banks are buying ATMs off CBA to ensure there is no liquidity crunch.

    • And think of how these things snowball.

      So, you can’t afford the mortgage and have to sell at a loss. You’re now renting and paying off a mortgage too. What do you do? You hunt out cheaper rentals so you can pull it off. Meanwhile, you’re not saving and are removed from the pool of buyers (for potentially a long time). If you happen to get into any other financial strife as well, its bankruptcy.

      Look at the WA example where investor delinquencies are climbing much faster than OO because rents are being crushed as well. This is the reverse of what happened there during the GFC. Even still, rent is still frequently coming up as a considerable cost to WA residents and people are moving for cheaper rents is common (and why not?) – enter falling wages.

      But if people are still finding 20% lower rents a burden on their household finances, then they’re likely not saving as much as they’d like either (or paying off cars, jet-skis and all the rest, thanks Boom). The pool of buyers limited again.

      As risk increases and macro-prudential tightens (too little, too late) less people will qualify for loans. This is coupled with wages falling faster than house prices. Ouch.

      When we see drivers for growth emerge it’s time to buy. Right now, we only have lead shoes and deeper water…

      • SoMPLSBoyMEMBER

        Well phrased!
        Snowball is right. A couple ‘flakes’ working together can unleash a powerful amount of destruction.
        The red dot of the laser sight is now being aimed at the ‘investor’ crowd and it only took 55 bps of increase by the big 4 on IO loans to ‘begin’ the behavioural change program.

        A lousy 1/2 percent rise and the deal starts to stink illustrates just how dependent the deals are on borrowed money. The failure point of any stretched object always seems surprising but it shouldn’t be. In our case, when the demand for property falls ( it’s been awhile) the valuations will too- same as Canada and everywhere else.

        https://www.bloomberg.com/news/articles/2017-08-03/australia-slams-brake-on-property-investors-and-price-boom-cools

      • Lenny Hayes for PMMEMBER

        Anecdotally: a lot of OO housing stock being held onto by banks in WA rather than taking the 1990’s approach of selling it out from under the defaulter. They are being a lot more lenient in letting OO’s stay in the property by re-structuring loans, accessing super and previously rolling onto IO loans. How the new stance on IO loans impacts this will be interesting to see.

        Anecdotally our bank manager told me of a case where a couple had been paying a 1 million+ IO loan for 5 years and couldn’t understand now when they were being moved to P+I how none of their Principal had been paid down. In the interim they have suffered a $150k hit to the house value and now trying to sell into a market with no buyers. The bank is doing everything possible to keep them in the house in the interim rather than repossess.

        Whether it is wilful ignorance in this case I am not sure, but these are the type of nuff-nuffs that other buyers have been up against in the market for the past 10 odd years…..

        Also heard of a case where a relatively non-compose elderly lady had been talked into by a bank employee (or affiliate) into using her fully paid off PPOR to leverage into a mining town IP. End result is her PPOR now needs to be sold to pay off for the short-fall on the IP effectively throwing her out onto the street. Again whether this is wilful ignorance who knows, but is destined for the courts.

        The issue in all of this for me as a shareholder (via super) and taxpayer (bank guarantee) is the behaviour of the banks putting us all at risk, and the CBA case shows they clearly don’t have producers in place to manage the risk or simply just don’t care. It’s a gigantic game of pass the parcel……

      • These are the kind of morons who beat me at auction… willing to go into crazy debt to win an auction so they can get featured in a Domain Article with Champagne and big smiles. Fucking idiots. 😀

      • St JacquesMEMBER

        Lenny, if those anecdotes are correct, then you’ve nailed the mystery of Perth. Perth is probably small enough and isolated enough for the banks the pull off that kind of extend and pretend bs in the hope of re-igniting the housing bubble. It could also explain the tripartisan shoulder to shoulder unity behind MT’s acceleration of the population Ponzi and the whinging from politicians and others, including trolls, about everybody piling into Sydbourne instead of going to “cheap” places like Perth (where jobs and wages are shrinking, duh!!!). Since Perth has slowed, Melbourne (especially) has gone totally off the scale, so I think its diversion of population from a bombing Perth, but at the moment their “holding the line” there, if you’re right. Something similar in Canada. Vancouver is an isolated city roughly in Perth’s league, and an even smaller part of the Canadian economy than Perth is relative to Oz, so similar bs could be happening ther. But Toronto is in a very different league, Canada’s biggest city and at the heart of Canada’s most heavily populated region and close to comparable US cities that could provide refuge for financially stressed Torontians. If Toronto goes, likely it will send out financially tsunamis that will eventually drown Canada, and trigger off the final collapse in lesser places like Toronto. Maybe this is the beginning of the end?

      • St JacquesMEMBER

        errr….triggering the final collapse of lesser places like Vancouver.
        Will be voting for you Lenny.

  2. Yay, great news for Sydney and Melbourne. Always the beacon for international investors!

  3. For Christ sake when is the retreat going to start here. Fucking cut immigration you wankers.

    • Only going to start after MPs and RBA board members dump their investment properties.

      This is the main signal I’d watch.

      • Tassie TomMEMBER

        Too true.

        There should be an index – “total number of properties owned by the 226 members of federal parliament”.

        It would be interesting to watch the trend lines and correlate them to house prices. It might be a good leading indicator.

    • Yes it looks like YOY price rises on average across GTA but about 90 days ago it would have been closer to 15-20% yoy increase, July its 5% yoy, next month likely yoy fall. For more complete context look up Garth and the Greater Fool blog. In Toronto alone prices have dropped around 25% in 90 days and sales almost halved. When will it happen here? Been waiting a looong time.

    • How many punters want to catch the falling knife? Garth’s blog has lots of reports about buyers wanting to walk away after signing and the houses being put back on the market at a lower price. I hope it long continues into the future!

    • Rational RadicalMEMBER

      Yeah the almost permanent new fixture of the MB “Bull-Bears” are now out in full force claiming the immortality of real estate prices and pretending that real world timelines don’t exist on a day to day, week to week, month to month basis.

      As if an investor who bought 4 months ago hasn’t just lost $179,000 of equity, and as though greed has not inverted to fear and revulsion, as though there are going to be an even greater stock of fools than last year who like the look of those graphs as a “buying opportunity”, as if there’s always someone to catch the falling knife. That expression would not even exist were it not a genuine phenomena of unwinding asset price excess from a position of extreme detachment from economic and investment fundamentals.

      The world has truly tipped on its head when MacroBusiness is the number one reliable source for pro-property-bubble spruiking.

      Seriously fucking LOL.

      • Reus had a few of us around for cocktails. We now understand how the property market really works.

      • The BullBear has been paying attention in the recent decades. And so he knows through bitter experience that “it ain’t over til it’s over”.

        And it ain’t over yet.

      • Rational RadicalMEMBER

        “Aint over till it’s over”…

        Sure, if you think that > 20% price falls (according to Garth Turner’s latest analysis http://www.greaterfool.ca/2017/08/01/almost-there-3/, and officially a ‘correction’ in market parlance), and sellers suing buyers left right and centre, mean that current home owners / investors should just sit back and wait for 30, 40, 50% falls before confirming that it’s over and time to sell, when the fastest price correction in Toronto’s history is underway. Cool, lets go with that if it soothes your cynicism.

        Meanwhile in the real world, real estate takes months to sell in a shit market, it is the most illiquid asset known to humankind, but somehow “it’s not over”. Sure as fuck is if you planned to cash in on that 1.2 mil peak median detached house price.

        The Bull-Bears are just as prone to ignoring evidence before their very eyes as any other “rational” commentators and analysts. We all live in a fantasy land where we want the world to exactly match our ideal scenario and prediction before declaring it a valid reflection of reality.

        Meanwhile Canadian equity is vaporising, and if as Garth Turner points out you bought a median Toronto detached house at 1.2mil back in April, you are now likely $300,000 underwater. But it’s not over, hell no it’s not over. MUCH more pain to come in all likelihood.

      • migtronixMEMBER

        “Meanwhile Canadian equity is vaporising,”

        More Lolz

        “Vancouver real estate market heating up again as sales and prices recover from buyers tax”

        http://business.financialpost.com/personal-finance/mortgages-real-estate/vancouver-real-estate-market-heating-up-again-as-sales-and-prices-rise/wcm/42b50992-194e-41ab-b3cd-450f4963f57c/amp

        I guess only the confirmation biased GTA is in Canada

        “Prices in Montreal grew by 6 per cent in May compared to the same month last year, and sales volume set a record for the month with 15-per-cent growth”

        Who is a bigger bubble booster than those who say, no need to do anything, it’ll collapse on it’s in… Sometime between now and forever…

      • Rational RadicalMEMBER

        Yes you’re a goddamned pedant, give yourself a medal Mig. I meant to type “Toronto” but you got me, which thankfully completely reverses the reality faced by Toronto buyers.

        I’m not a booster mate. Quite the opposite, I’ve always argued for multitudes of solutions and actions by regulators etc. But I seem to spend all of my time fighting those who believe that regulators despite their stated and visible actions, “would never let prices fall…” etc.

        Utter rubbish. Look at what’s in front of you, not what you claim to be the minds of our overlords and their infinite competence at never letting anything slide.

        P.S. WRT to Vancouver, that article is several months old, and there is significant evidence that their market is stil narrowing, and has the hallmarks of a bulltrap. Can’t find the recent article from Turner, but it aint black and white.

        Meanwhile, Toronto is crashing, definitely at or past the official definition of o ‘correction’. So I’m simply pointing out to the endless-bubble true-believers saying “it aint over”, that of course it’s not over, it’s just getting cracking – and that in making that statement they are actually trying to say “it hasn’t even begun”.

        If its being covered in Bloomberg, it’s probably begun folks.

        Not naming names, but some of the MB Bull-Bears were only 4 – 5 months ago claiming the exact same rubbish that prices would never fall in Toronto or Canada more widely, and some are now seeking to rewrite history. The story keeps changing.

        My story is simple: Asset bubbles that defy all economic fundamentals inevitably reach a point of terminal internal contradictions, resulting in a self-fulfilling burst that most likely causes economic and financial crisis in that at least that country. It doesn’t matter “when” it happen in any ultimate sense, when your economy will likely still be suffering the consequences 10 years later.

        I’m not betting on timing and scale of price falls, simply that asset bubbles invariably burst, and destroy economies in their wake. I’m staggered that so few around this blog can “believe their eyes” when an asset bubble bursts. Thats the LOL.

      • migtronixMEMBER

        “Asset bubbles that defy all economic fundamentals inevitably reach a point of terminal internal contradictions”

        That’s just not supported by evidence, not Tulip nor South Seas nor Louisiana nor any of the speculative bubbles down to today ended because of “internal contradictions” – I mean NIRP FFS – it’s always because of credit drying up

      • RR, you’re talking too much sense mate. Just sit back with a beer in hand and enjoy the show.

        3 month story:
        -19% price
        -40.4% sales
        +70.1% active listings

        lol, everything’s right as rain in Toronto! Boom times! Someone get me the fucking popcorn! Not sure about you mate, but I like to watch my Bear porn to the backtrack of BullBear’s crying.

      • Rational RadicalMEMBER

        It’s alright Mig, I know deep down at heart you and PFH are supply-side true-believers, with an unshakeable belief in the ability of central bankers to create demand by creating supply. Never mind the infallible history of terminal household debts causing credit crisis and debt deflation – as long as they are printing, the punters gonna take. Right.

        I’ll take my bets with Steve Keen over you guys, as much as many like to discredit his whole theoretical platform based on a single bad call extracted out of him by a bullying financial press and real estate establishment.

        There are two ways that credit can “dry up” as I see it, one is through supply, in which demand for it is destroyed by its price. And the second is through demand, in which debt saturation destroys demand regardless of its price. Either or both will lead to asset price reversal, yet some still believe that all of the power is in the hands of our central bankers to prevent the second scenario. If that were true, why is the global economy still fucked 10 years after the GFC. You guys give them too much “credit” (pun intended).

      • You’ve fought the good fight here, RR. Just get the popcorn and watch the show. GTA is fucking cactus. And you’re getting a glimpse of Melbourne’s future.

        This had nothing to do with the government trying to “cool” prices. Sentiment turned. Then came the rate rise. It will only get worse from here as they pretty much follow the Fed when it comes to rates and the US will play naughty with Canada if their exchange rate gets too low given the volume of trade. The only “not over” is how far down the market will go, how far it spreads and how much is does to the Canadian macroeconomy.

  4. Now imagine they had negative gearing to amplify the crash. A 20% fall plus ongoing monthly losses. This is going to be SPECTACULAR.

      • Gavin, with all due respect, you’re missing fundamental rules of investment. In Australia, because we’re upside down, the laws of mathematics are suspended. Back to school for you!

      • LOL my manager at work recently moved to another Rental in North / West Sydney. The place had gas disconnected for a while (was apparently vacant a month or 2) and the hot water boiler stopped working. Anyway plumber came around and said “yeah mate, you need a new 1”. That’s about $3,000 worth of equipment. At that time I said, geez glad I’m not a landlord. He said that’s what negative gearing is for, think of the discount off your tax bill… he was of course joking. But I told him the same thing as above, I’d rather a positive cashflow property. He said that’s not how it works in Australia. 😀

        The only place where losing money each month makes you sexy, ask Reusa he knows!

  5. Toronto’s house price fall makes me sad. Yes, you read that right, makes me sad. Sad for the fact that because Toronto’s house prices are in free fall, now I am 100% sure that there is no, absolute no political will to correct the mistakes or make any amendments to tax-laws or other laws here because the polity here can see the carnage it is doing and they dont want it on their watch.

    • Jumping jack flash

      Not sure how it works over there, but have their banks began the equivalent of lobbying their government for bailouts or stimulus yet?

      That’s usually the best indicator that something is wrong: when the pigs start squealing.
      A couple of markets can implode under the weight of their debt mountains, but if the general trajectory for the debt is still up and the banks are still happy, then, no worries.

  6. Jumping jack flash

    “Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” said Mr. Syrianos”

    yes, that’s how markets generally work when they’re in a state of rapid change, everything stops and everyone stands around agape. Vacantly staring at each other as it burns.

    But it’ll never happen here. We have far too many foreigners arriving who are just looking for someone to hand millions of dollars to for a fibro shack with no parking spaces. Anyone. The first person they see after climbing off the plane, hammering in a for sale sign in front of a house… “here take my money! Prease!” they will cry, awkwardly thrusting it at them.

    No risk here. Keep borrowing.

  7. I know a English language teacher in a English as a foreign language college. She said they had some Chinese 5 to 10 years olds come and learn English for 3 weeks from China and they came with their parents all of whom disappeared to a real estate agents office after leaving the kids at the institute.