Toronto house sales and prices plunge as new lending rules bite

By Leith van Onselen

It looks like the wheels are well a truly falling off Toronto’s housing market. From the Financial Post:

Home sales in the Greater Toronto Area plunged 34.9 per cent in February compared to the same month a year ago as buyers adjusted to new mortgage rules and government policy interventions, the Toronto Real Estate Board (TREB) said.

Prices tumbled too, with the average sales price for all housing types falling 12.4 per cent to $767,818.

TREB said the declines had been expected due to market-cooling measures brought in by the Ontario government last April and tougher new mortgage rules introduced in January. The board had also warned that figures would be particularly stark in comparison to the opening months of 2017, when a booming market sent sales and prices skyrocketing. The market slowed considerably in the second half of last year following the implementation of the Ontario measures – which included a 15 per cent foreign buyers’ tax…

Prices for single detached family homes fell 17.2 per cent in the GTA to just over $1 million – weighed down by an 18.6 per cent decline to $1.28 million in the city of Toronto, and a 17.8 per cent drop to $911,065 in the 905 region. The number of single detached houses sold in the GTA fell by 41.2 per cent…

TREB president Tim Syrianos said prospective homebuyers are still coming to terms with the “psychological impact” of the Ontario housing market measures and some have had to re-evaluate their home buying plans due to higher interest rates and new mortgage stress testing guidelines brought in by the Office of the Superintendent of Financial Institutions in January.

The below charts from TREB provide further context:

New listings strong, sales down, prices down. Those are some bearish indicators right there.

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Unconventional Economist

Comments

    • Make sure you buy one of those pictures of a guy who looks older than Methuselah and the caption ‘The young man who waited for property prices to fall’.

    • They’re working on the immigration a bit, juicing the numbers. Although it’s still not at the same rate that Aus is doing.

  1. Sames signs in Auckland in terms of listings and prices not surging anymore.
    Sydney, prices down, volumes up. Melbourne bucking the trend for now.
    Things to follow with a bit more tightening?. Hopefully this is the end of the bubble and families and people wanting to live in homes becomes the norm – rather than speculators using property as a form of investment. Food (basic food), Clothing (basic clothing) and Shelter should never be turned into speculation. It is a wrong that it ever go to this. Maybe more places are built that are actually habitable? No more poorly built dog box dumps please.

  2. Nasty! A lot of people underwater with those types of figures/duration, especially if they bought at the top back in Apr 17.

    Not liking that little monthly uptick in price action though, would like to see that head down again in March.

    • It’s a lag from demand dragged forward. the FOMO crowd got sucked in before stress-test rates were implemented.

  3. It is said that bull markets climb the wall of worries and bear markets slide the slope of hopes – and it is an accurate description of market dynamics.

    Look at the monthly graph and you know what it means.

  4. Check out this new initiative in British Columbia — if this doesn’t detonate the entire housing market there, nothing will:

    From the Globe and Mail:

    “On Tuesday, one of the primary measures in the B.C. budget was the introduction of what the government is calling a speculation tax. It is aimed at foreign and domestic property owners who are parking capital in real estate and driving up prices in the province. It would apply to owners who do not pay income tax in British Columbia. Principal residences are exempt, as are properties with long-term renters.

    The tax in 2018 will be 0.5 per cent of a property’s assessed value, a rate that rises to 2 per cent for 2019 and thereafter. It will be charged annually, separate from regular property taxes. B.C. predicts it will generate $200-million in revenue a year.”

    That’s 2% per ANNUM on the assessed value of the property (on top of all the other regular taxes / rates etc). Kaboom!

    • The flood of Chinese money which is driving up BC real estate is so insane that it might not make any difference.
      In Hong Kong (which is ground zero for China capital outflow into RE) the government has given up after 8 rounds of new taxes and restrictions.

      The territory’s property boom is officially out of control. Carrie Lam, the chief executive, said eight rounds of mortgage controls have failed to stop the speculation, and may even have been counter-productive. “The government really has no way to curb property prices,” she said.
      https://www.smh.com.au/business/the-economy/warnings-of-financial-blow-up-in-hong-kong-20180305-p4z2ts.html

      THAT is what China capital outflows into RE are capable of.

      • Thing is, it’s not real wealth that’s escaping — it’s a mixture of black money and borrowed money. This is about ludicrously loose monetary policy and rampant corruption.

        My understanding is that the hot money going into the BC housing market is really only a small portion Chinese, there is a lot of Indian and domestic money going in as well. Even if this initiative only kills that portion it will do big damage. Who is going to want to sit on a stagnating (or even falling) asset that is costing them 2% in hard cash every single year (on top of all the regular taxes)? 2% on a $2-$3m home is serious moolah.

  5. RBC Chief Sounds Alarm on Flood of Foreign Cash in Canadian Real Estate
    https://www.bloomberg.com/news/articles/2018-03-06/rbc-chief-warns-foreigners-using-canadian-homes-as-piggy-banks

    “We do not need foreign capital using Canadian real estate as a piggy bank,” David McKay, said Tuesday at a bank conference in New York hosted by the Toronto-based lender. “If capital is coming in to sit in a home, unproductively, and is distorting your marketplace and the livelihood of your residents — no thank you.”

    Ummm. 10 years too late????

    • Better late than never.

      Our morons either haven’t got it yet, or haven’t got the courage to utter the words.

  6. So it looks like a good house in Toronto went from $200k in 1995 to $1000k last year. That is a shocking rise.
    Sydney went from about $200k in 1988 to $1200k now for a decent house.

    I am delighted to hear of the 17.2% drop in price in Toronto. We need several of those in a row here in Sydney.

  7. Rational RadicalMEMBER

    Paging Peachy et al for bog-standard “Not over until we see year-on-year falls”…

    You got what you asked for, now what? Is this global real estate bubble really any different to the last one in anything other than scale (orders of magnitude worse on nearly all indicators)??

    In the 90s it was Japan and parts of SE Asia.
    In the 00s it was US and Southern and Western Europe.
    In the 10s it is now Aus, Can, NZ, UK, Northern Europe, HK, and China.

    Worse in scale, and breadth, but not fundamentally different in nature, other than the extreme methods employed to get it to this stage.

    We all need to read more Michael Hudson to understand that debts that can’t be paid, never will be.

    • Here I am, mate!

      Posting to confirm that this makes me happy. I will be happier still when something like this happens closer to hone (Victoria).