Toronto real estate sales climbed in past week, but overall cooling could be coming
Early data suggests homebuyers in Canada’s largest city sat on the sidelines as they awaited new market cooling measures, but jumped backed into the market — albeit at a reduced rate — following the April 20 announcement.
The Toronto Real Estate Board is set to release its April sales figures on Wednesday, the first set of numbers since the Ontario government announcement that included a 15 per cent tax on non-residents aimed at foreign speculators in the housing market.
Data from TREB’s site indicates that between April 21 and 27 — after the provincial changes that also included tougher rent control rules and the ability to tax vacant homes in the city of Toronto — that 2,486 properties changed hands over the week, 1,702 freehold and 784 condominiums. That was up from the 2,094 properties — 1,370 freehold and 724 condominiums — that changed hands between April 14 and 20.
“It’s not a big surprise that sales were down, when the rumours were there,” said Benjamin Tal, deputy chief economist with CIBC. “Basically, you’ve got people doing nothing on rumours and then acting after the fact.”
Looking back to the week from April 7 to 13, there were 3,303 sales (2,242 freehold and 1061 condominiums) — essentially meaning the market pulled back sharply. But given such a short-period, which could be heavily influenced by even a change in weather — the preliminary statistics have to be viewed with skepticism.
Speculation of changes to regulate the market had been brewing ahead of a meeting between the federal finance minister, his Ontario counterpart and city of Toronto mayor John Tory on April 18. Ontario finance minister Charles Sousa indicated after that meeting that his government would be acting but didn’t say how at the time.
The urgency came after March data indicated resale prices had climbed 33 per cent on a year over year basis. In the new-home market, average detached home prices have climbed about 70 per cent in the last year to $1.78 million.
“I believe if you look at the next six months, overall activity will be lower than they otherwise would have been,” said Tal. “The results will be lower than otherwise just because of the uncertainty, not the tax. That’s exactly what happened in Vancouver.”
British Columbia imposed a 15 per cent tax on foreign buyers in August and sales started falling as much as 40 per cent on a year-over-year basis, although the market was seeing a decline in activity before the tax even came into existence.
“But there is no reason to believe (the changes made in Ontario) are a game-changer by any measure. They are simply not big enough,” said Tal.
Brad Henderson, chief executive of Sotheby’s Realty Canada, said the signals he’s getting from the market are mixed right now.
“I was at a meeting (Monday) morning with a large group of people from the Greater Toronto region and we were talking about the market and some have said they are still seeing multiple offers while others are saying some of their buyers are on hold to see how it falls out,” said Henderson. “Some say foreign buyers are still purchasing even with the new tax in place.”
Doug Porter, chief economist with Bank of Montreal, said weekly sales could have a lot of movement within a month. But he expects sales to still be strong, without the same impact as Vancouver.
Craig Alexander, chief economist with the Conference Board of Canada, said it’s interesting to see how sales reacted after the announcement. “But there a lot of other things that may attributed to volatility,” he said.
Source: Financial Post
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